Book review: The Accidental Superpower: The Next Generation of American Preeminence and the Coming Global Disorder, by Peter Zeihan.
Are you looking for an entertaining set of geopolitical forecasts that will nudge you out of the frameworks of mainstream pundits? This might be just the right book for you.
Zeihan often sounds more like a real estate salesman than a scholar: The US has more miles of internal waterways than the rest of the world combined! US mountain ranges have passes that are easy enough to use that the mountains barely impede traffic. Transportation options like that guarantee sufficient political unity!
For a longer summary of the book, see this ACX book contest entry.
Global Trade
The book’s biggest and best idea involves US support for global trade since 1945. At the end of WWII, the US made the unusual unilateral decision to use its might to keep most global trade safe and somewhat fair. Goods can be transported to many parts of the world with negligible risk of theft or violence.
This policy promoted unusual peace and prosperity.
Zeihan correctly predicted that US support for global trade was ending (the book was published in 2014).
The US has enough internal trade that it’s not too dependent on global trade. Promoting global trade among non-communist countries helped to contain Communism during the Cold War. US support for free trade weakened when the Soviet Union collapsed. It has weakened further in the past decade due to the US becoming largely self-sufficient in energy.
The decline in support for global trade was a prediction that I wouldn’t have taken very seriously if I’d read it in 2014, so I give Zeihan high marks for predicting it. But I’m unsure how much weight to give to his reasoning.
It seems quite likely that the end of the Cold War contributed to the initial US drift away from global trade evangelicism. But I doubt that had much to do with seeing that the US had less to gain from global trade. I’d frame it more along the lines talked about in Where Is My Flying Car?: in the absence of a major external enemy, Americans shifted away from the goal of making America great, more toward internal ideological conflicts, and toward getting a bigger share of the pie.
Shale
Zeihan emphasizes the importance of the US becoming an oil exporter, due to increased production from fracking.
Crude oil prices suddenly dropped by about half in under a year, right about when the book was published. They stayed fairly low until the 2022 boycott of Russian oil. The US became a net oil exporter around 2020. Zeihan deserves a fair amount of credit for implicitly predicting that decline, even though he focused on self-sufficiency, not price.
I’m somewhat confused by the claim that US oil self-sufficiency contributes to deglobalization. Oil prices are still determined by global supply and demand. I don’t see that changing by 2030, which is the time frame that the book tries to predict.
There seem to be a fair number of pundits who believe that the US global police activity is about oil. Maybe that has more influence on policy than makes any sense.
I see plenty of preparations for a new cold(?) war, but I see few signs that the US will lose interest in Saudi oil before 2030. Maybe solar power will cause the US to lose interest in global oil in the 2030s, but that’s a different prediction from Zeihan’s model.
One surprising claim in the chapter on shale is that the US is a leader in shale in part because of property rights. Most of the land in the US is owned privately, by people who are willing to sell the relevant rights to oil companies. Pretty much everywhere else, subsoil rights are owned by the government, where no single decision-maker has much incentive to agree with an oil company.
Demographic Trouble
One of Zeihan’s largest concerns is the consequences of aging populations in the developed world.
Most industrialized nations have retirement systems that depend on some ratio of workers to retirees. Those systems are becoming increasing burdens on taxpayers as declining fertility rates leave countries with too few workers to cope.
The demographic effects will also affect capital markets. Retiring boomers will take their savings out of risky stocks, and put them more in government bonds. The declining number of workers will also mean fewer people putting their savings into capital markets. That means widespread financial bubbles will implode.
But there isn’t a sector large or small, at home or abroad, that hasn’t benefited from the wash of Boomer money. And so there won’t be a sector large or small, at home or abroad, that will not be hurt when that money retreats.
The US will struggle with this problem, and will probably manage to muddle through. Most other developed countries have more serious demographic situations, causing some of them to collapse.
I’m glad that Zeihan analyzed these issues. But I don’t like the way he uses words such as “inevitability” to describe the problems.
I don’t see these allegedly widespread bubbles. Presumably Zeihan would say that’s because they haven’t popped yet.
The major bubble that popped since the book was written was the government bond bubble that peaked in 2020. It’s a bit hard to say how much credit Zeihan deserves for predicting that. He did predict that interest rates would soar to the teens after the global financial wave crests sometime between 2020 and 2024. But he also says US government bonds “will become ever more popular”. That leaves me with contradictory impressions about what he expected for bonds. Most of Zeihan’s bubble talk implied that bonds were relatively less bubbly than most other financial sectors.
I’ve seen a fair amount of bubble-like volatility since 2020, but a lot of that seems mostly related to pandemic-induced changes which appear to be stabilizing.
I won’t be able to classify Zeihan’s bubble predictions as misleading until sometime in 2025. My guess is I’ll classify them as much less than half right.
The demographic effects on markets seem real, but somewhat overstated. I pushed back a bit on their importance to interest rates here. But I’m getting a bit nervous about this year’s rise in long-term rates, and I became a bit more cautious this fall about investing.
I see some important risks to government budgets.
I see a potential reprieve from those risks in the form of AI and robotics. Those don’t need to reach human levels of competence in order to impact productivity. AI is making rapid enough progress that AIs are partially functioning as employees. That means the effective population of workers will start growing any year now.
I’d say AI has a 75% chance of offsetting the demographic effects of aging by 2030.
Russia / Ukraine
Russia has at most eight years of relative strength to act. If it fails, it will have lost the capacity to man a military. … Russia’s single largest concern is Ukraine.
Eight years after that was written, Russia demonstrated, to the surprise of most analysts, that it was barely able to match Ukraine’s military capacity.
Zeihan seems surprisingly right here.
China
And China dare not risk tangling with even a mid-powered navy out of range of its land-based aircraft because it lacks meaningful blue-water capabilities.
Unfortunately for the Chinese, the Americans will be the least of their worries. Ultimately, the Americans will not be worried about China because it is a non-naval power in a post-free trade world.
The “not be worried” part of that prediction seems to have been falsified by the building tension over Taiwan. The US restrictions on semiconductor sales to China also suggest a good deal of worry.
Zeihan says that China’s geography will prevent it from becoming a unified country. He expects further weakening of central control. I agree that China is less unified than most people think, but as far as I can tell there’s a modest trend toward increased central control.
The struggle over Taiwan is looking like it could easily become the big geopolitical problem of the decade. Zeihan seems to imply that China is too weak to do much there. I distrust his opinion here enough that I’m carefully avoiding investments in Taiwanese companies.
Zeihan’s predictions about China seem much less than half right.
The Breakup of Canada
Zeihan expects some sort of breakup of Canada soon. Most likely with Alberta seceding first, and that triggering pressure on more provinces to leave. Something about oil-rich Albertans not wanting to support poorer provinces? Plus Canada not having the kind of cross-country transport options it would need to become a unified country like the US.
My guess is that prediction will turn out to be false. Not because Canada is particularly unified, but because too few people care enough about independence to disrupt the status quo.
The chapter on Canada looks unimpressive in part due to Zeihan’s foolish comments about currencies. He claims the Canadian dollar was rising due to Canada’s aging demographics. Also, “if it were an independent country, Alberta’s currency, driven by energy exports, would skyrocket …”.
Sigh. I wish foreign exchange rates were that easy to predict – I’d be able to make more money. Canada is still aging, and the Canadian dollar has dropped about 20% since the book was written. And it’s easy to find oil-exporting countries with non-soaring currencies. Saudi Arabia has tied its currency to the US dollar. Liberia recognizes the US dollar as a form of legal tender. Venezuela has demonstrated significant skill at reducing the value of its Bolivar.
Exaggerations and Bloopers
Output expanded well beyond the ability of the local populace to absorb it. Had the Industrial Revolution happened anywhere else on the planet, there would have been a market crash as the prices of goods would have cratered due to insufficient demand.
The current emir of Oman … cobbled together a modern state out of a mutually hostile collage of communists, militants, Islamists, and various tribal groups. … Upon his death, the various factions he has held together by force of personality will not just tear down everything he has built, but also open up on each other.
The emir died in 2020. Wikipedia mentions nothing that sounds like tearing down since then.
Conclusion
It’s good to have multiple frames with which to model the world. Zeihan helps in that way, provided you’re a fox, not a hedgehog about it.
It’s not so good to have as strong of a pessimistic bias as Zeihan apparently has.
The book is more right than wrong. But it makes enough medium-sized mistakes that I will only take its predictions as weak evidence.