Peter Zeihan’s keynote at the CREDA Conference in Denver sparked plenty of questions. On the latest episode of Inside CRE, CREDA President and CEO Marc Selvitelli, CAE, invited the geopolitical strategist back to pick up where he left off.
Why is globalization ending now?
Zeihan points to three forces. First, the global trading system was built on American naval protection. “Globalization for the United States was never an economic program. It was a security paradigm,” he said, and the political appetite to sustain it is gone. Second, populations across advanced economies are aging out of the workforce. “If there’s no production and there’s no consumption, there’s no concept of trade,” he said. Third, new military technology has changed the math.
How are drones changing the picture?
Zeihan described what he calls “memory drones,” which select and strike targets on their own and cannot be jammed, only intercepted. Interception is costly, and “anything that is within about 600 miles of a hostile power now has to be defended” – a standard he says much of the world’s economic infrastructure cannot meet.
Is there a path back to global integration?
Not without a new economic model. With more 70-year-olds than teenagers in countries like Italy and Germany, any “globalization 2.0” would “have to completely reimagine the relationship between capital and labor and supply and demand.” One bright spot: the United States and Mexico have the youngest populations in the developed and developing worlds, respectively.
Why is China still a manufacturing force?
China redirected the money it would have spent raising children into industrial capacity, staffed by workers in their most productive years. “They are now in that happy moment where it works, but you can only do it once,” Zeihan said. As those workers retire over the next decade, there is no one to replace them.
Could China’s housing market tip the scale?
Zeihan says China mistook a one-time urbanization boom for long-term demand. Many condos were bought jointly by friends and relatives as investments and sit empty with unclear ownership. He estimates roughly two-thirds of the buildout over the last 15 years has never been lived in, and prices nationwide have dropped by more than half. Only three class A cities have recently seen values rise, while class B and lower cities remain “in free fall.”
What would signal China’s dominance is unraveling?
In the short term, Zeihan expects more countries to block “broad swaths of Chinese products” as subsidized exports become politically untenable. Longer term, demographics will force the issue – “and longer term is now under a decade.”
How much does the U.S. depend on Canada and Mexico?
“Every northern Mexican state is more integrated economically with the United States than with the rest of Mexico or with one another,” Zeihan said, and the same holds for all but one Canadian province. With the United States-Mexico-Canada Agreement (USMCA) now subject to annual reviews, he warned it is “not good for anyone looking to make long-term investment.”
How will U.S. demographics reshape regional demand?
Zeihan sees sharp regional differences. The Northeast and Pacific Northwest resemble Japan or China, with too few young workers to staff an industrial build-out. Texas and California have relied on immigration for growth. The South has a strong working-age population today but faces a challenge in 20 years. The Mountain West and Midwest are the youngest regions, with space, power and good schools. In the Midwest, “the land is cheaper, the power is cheaper, the water is available, and the workforce is there.”
Do we need data centers if AI falls short?
Yes. Data centers run everything from smartphones to insurance systems to grocery store inventory. Without them, Zeihan estimates the economy would need another 15 million white-collar workers. “You think we have a labor problem now? Get rid of the data centers,” he said. His advice: build them where they are wanted.
What gives you the most optimism?
America’s built-in strengths: the youngest population among rich countries, distance from the drone threats facing the Eastern Hemisphere and “large, large volumes of flat land that are largely undeveloped.”
Listen to the full episode to hear the entire conversation.
This post was created with the assistance of AI tools; all content was reviewed by the author.
