Ouvrard’s experience helped loosen the purse-strings of other bankers

Monday, September 16th, 2024

Napoleon by Andrew RobertsWith renewed fighting against Austria and her allies looming, Andrew Roberts explains (in Napoleon: A Life), Napoleon needed to replenish the near-empty Treasury:

He instructed Gaudin to borrow at least 12 million francs from the fifteen or so richest bankers in Paris. The best they would offer was 3 million francs, helpfully suggesting that a national lottery be established to raise the rest. Unimpressed, on January 27, 1800 Napoleon simply arrested Gabriel Ouvrard, the most powerful banker in France and the owner of the vast navy supply contract from which he was rumoured to have made a profit of 8 million francs over the previous four years. (It cannot have helped Ouvrard that he had refused to help finance the Brumaire coup.) Ouvrard’s experience helped loosen the purse-strings of other bankers, but Napoleon wanted to place France’s finances on a far surer footing. He could not continue, in effect, to need bankers’ and contractors’ permission before he could mobilize the army.

On February 13, Gaudin opened the doors of the Banque de France, with the First Consul as its first shareholder.

[…]

In April 1803 the bank was granted the exclusive right to issue paper money in Paris for fifteen years, notes which in 1808 became French legal tender, supported by the state rather than just the bank’s collateral. In time the confidence that Napoleon’s support gave the bank in the financial world allowed it to double the amount of cash in circulation, discount private notes and loans, open regional branches, increase revenues and the shareholder base, lend more, and in short create a classic virtuous business circle. It was also given important government business, such as managing all state annuities and pensions.

The United States has more port potential than the rest of the world combined

Friday, August 30th, 2024

Accidental Superpower by Peter ZeihanThe United States has more port potential than the rest of the world combined, Peter Zeihan explains (in The Accidental Superpower):

The coast of Africa, for example, may be sixteen thousand miles long, but in reality it has only ten locations with bays of sufficient protective capacity to justify port construction, three of which are in South Africa.

Ports also require a sufficient hinterland to support them in the first place. In this, Northern Europe faced quite a few challenges in the centuries before European dominance, as much of the coastline was marsh and mud, as is northern China’s. Brazil north of the 22nd parallel south — roughly the latitude of Rio de Janeiro — isn’t much better. South of the 22nd parallel, Brazil’s coast is all cliff, as is much of southern China’s. Australia’s coast may be accessible, but it is so arid it is almost devoid of people — as is North Africa’s coast. Russia’s coast — like most of Canada’s — is (sub) arctic. What few African locations have a friendly coast are often backed up by swamp, desert, or jungle. The entire Sub-Saharan region really only has four coastal areas capable of supporting cities of significant size (two of which are still in South Africa).

[…]

Courtesy of those barrier islands, Texas alone has thirteen world-class deepwater ports, only half of which see significant use, and room for at least three times more. Why not expand port capacity? Because the United States has more port possibilities than it has ever needed, despite the fact that it has been the world’s largest producer, importer, and exporter of agricultural and manufactured goods for most of its history.

[…]

The island of Cuba and the Yucatán and Florida peninsulas limit access to the Gulf of Mexico to two straits, creatively named the Yucatán and Florida Straits. These sharply limit the ability of extrahemispheric powers to play in the Gulf of Mexico.

[…]

That means that since the Civil War the Americans have never had to worry about fortifying anything along the Gulf Coast, even when German U-boats were sinking shipping in the millions of tons off the East Coast.

[…]

In 1871, Canada first tried to solve the Saint Lawrence’s winter ice and the Great Lakes’ waterfalls problems with a series of locks on the river and construction of the Welland Canal. By the 1890s, however, the Canadians had proposed a partnership with Washington for a more extensive, binational waterway that would link the Atlantic Ocean through the Saint Lawrence to the Great Lakes. The main selling point was that the Americans would actually benefit more than the Canadians from improving the waterways on their common border. The Canadians were indeed correct: Bringing the Great Lakes online would turn places like Duluth, Milwaukee, Chicago, Cleveland, and Detroit into full-on ocean ports.

[…]

The American government knew that the Canadians were going to build the lock system anyway, because having some sort of transport system that allowed Quebec and Ontario to interact economically was a national imperative. To do otherwise risked hardening Canada’s Anglophone-Francophone divide into something truly ugly. The Americans also knew they would be able to use the fruits of Canadian labor in an unrestricted manner regardless of whether Washington helped pay for it or not: The system would be right on the border and at least some of the canals would have to be on the American side of the line.

[…]

In the end, the Canadians had to foot over 70 percent of the bill, pay almost all of the maintenance, and the Saint Lawrence Seaway wasn’t fully operational until 1959.

[…]

The United States is the only country with significant populations on both the Atlantic and Pacific coasts, with nearly 50 million people on the Pacific and twice that on the Atlantic. So only the Americans have broad-scale access to both of the world’s great trading zones.

[…]

The Americans have sufficient infrastructure to enable their Pacific citizens to trade with Europe when Asia is in recession, or to allow their Atlantic citizens to trade with Asia when Europe is in recession. Because they can easily switch dance partners, the Americans only suffer a recession caused by international factors when the entire world goes into recession.

Residents found themselves surrounded by polluted water, poisoned air, and a destroyed landscape

Tuesday, August 13th, 2024

Brian Potter explains how California turned against growth:

Residents found themselves surrounded by polluted water, poisoned air, and a destroyed landscape. Views and natural beauty were increasingly spoiled by overhead power lines, outdoor advertising, freeway overpasses, and thousands of identical houses. Infrastructure like roads, schools and sewer systems were stretched to their breaking point. Crime was rising, and neighborhoods of single-family homes with largely white residents were being encroached on by apartment buildings housing the poor and minorities. In response to this unwanted change, Californians began to create land-use restrictions that would curb growth, help stop environmental harm, and limit the influx of new residents. When this drove up property values, Californians then passed Proposition 13, which cut property taxes, reduced the government’s ability to fund services, and locked in the low-growth culture that had taken root.

[…]

Since the days of the gold rush, growth in California came at the expense of the landscape and the environment. Six years after the discovery of gold, the landscape surrounding the motherlode was “scarred and devastated” from mining operations. Following the development of hydraulic mining, which uses high-pressure water to break up rocks, entire mountains were torn apart, and the resulting silt and debris clogged the rivers. The large-scale water projects that brought water to cities and farms flooded ravines, drained lakes, and destroyed ecosystems. Diverting water from the Owens River to Los Angeles dried up the formerly-fertile Owens Valley, and large-scale water diversion caused Buena Vista Lake and Tulare Lake to dry up. Damming of the Tuolumne River to provide water for San Francisco flooded the Hetch Hetchy Valley. Conservationist John Muir, who had fought against the dam, lamented that “These temple destroyers, devotees of ravaging commercialism, seem to have a perfect contempt for Nature.” In 1905, a canal dug from the Colorado River to the Imperial Valley overflowed, causing an enormous flood which only stopped when the Southern Pacific Railroad filled the breach with 2,500 carloads of rock and gravel. The result of the flood, the Salton Sea, has today become an “environmental disaster” due to steadily increasing salinity. In 1928, the St. Francis Dam collapsed, causing a flood that killed 400 people and destroyed everything in its path as the water rushed out to sea. In 1940 the Los Angeles River, one of the city’s major amenities, was turned into a concrete channel to protect the surrounding areas from flooding.

[…]

Between 1910 and 1930, the number of salmon in the Sacramento River fell by 80%. In the mid-1930s, 750,000 tons of sardines were being caught annually off the California coast, but the industry was completely wiped out by the end of the 1960s, in part due to overfishing.

[…]

Harvests of California’s majestic redwoods rose to “unprecedented levels” to provide lumber for new housing, and by the end of the 1950s, 90% of California’s redwood belt had been chopped down. Air pollution from industry and millions of cars created a lingering “smog” in cities like Los Angeles and San Francisco that poisoned the air and blocked off views: smog attacks were so common by the 1960s that they were reported by the news along with other weather announcements. Sewage was regularly dumped into lakes and rivers: in 1961 an estimated 250 million gallons of sewage was dumped annually in the San Francisco Bay. Developers regularly made plans to fill in thousands of acres of the Bay to make more land, to the point where many worried it would be turned into a narrow shipping channel just wide enough for ships to pass. In 1969, a blowout from an offshore platform created an oil spill off the coast of Santa Barbara, killing thousands of animals and polluting more than 30 miles of beaches. Excessive pumping of groundwater for agriculture had caused the land to subside by tens of feet in some locations, and excessive irritation had deposited minerals and other pollutants in the soil.

[…]

Much of this concern was about the aesthetic effects of ongoing growth. Many people had moved to California to be surrounded by natural beauty, not billboards, neon signs, traffic congestion, and thousands of identical “ticky tacky” houses.

[…]

While California had traditionally been a bastion of single family homes, by the late 1960s construction had shifted to building large numbers of apartments, which would inevitably be occupied by low-income residents. This was “perceived as a categorical threat to the detached culture of low-density residential life.” One California housing expert noted that “one of the most cherished property rights in our ‘free enterprise system’ is not the right to do what one pleases with one’s property, but the right to live in a neighborhood in which no more multi-family housing may be constructed.”

[…]

In 1965 the U.S. removed quotas on immigration based on national origin, and subsequent immigration reforms created a path for previously illegal immigrants to become legal residents. In 1960 only 1.3 million of California’s ~16 million residents were foreign born, and only 8% of residents weren’t white. By 1970, the non-white fraction had risen to 12%, and by 1996 it had reached 51%.

[…]

California’s violent crime rate doubled between 1960 and 1970, and by 1980 had doubled again.

[…]

By 1970, 25% of the country saw pollution/ecology as an important problem, up from 1% in 1960. That same year there were over 8000 environmental bills introduced in congress.

[…]

Between 1971 and 1975, 244 CEQA lawsuits were filed alleging that projects failed to properly complete an environmental impact report, and a state study found that CEQA litigation had been “excessive and frivolous, resulting in unnecessary legal costs and costs of project delay.” An environmental organization handbook at the time noted that “the mere threat of a suit can also be an impressive political tactic… suits can be an effective delaying tactic in order to force compromises.” Between 1971 and 1975, CEQA lawsuits were used to challenge more than 28,000 units of housing construction in the San Francisco area alone.

[…]

Los Angeles had the first zoning law in the country in 1908, and California set the precedent for single-family home zoning in the 1920s. But historically, restrictions had been part of a broader plan to encourage growth by making cities appealing; now they were being used to shut it down. By the mid-1970s, most cities and counties in California had some form of growth restriction in place.

[…]

prices. In 1973, southern California homes were on average $1,000 cheaper than homes nationally. By 1979, they were, on average, $42,400 more expensive (reaching $143,000 more expensive by 1988). Between 1970 and 1977, San Francisco had the largest home price increase of any of the 16 biggest metros in the U.S., with average home prices nearly doubling. By 1977 San Francisco had the highest home prices of any large metro in the country, up from 6th highest in 1970. Los Angeles followed behind as a close second.

Increased home prices, coupled with a property tax reform that raised residential tax rates and assessment frequency, caused property taxes to skyrocket. A home purchased in Los Angeles for $45,000 in 1973 with a $1,160 property tax bill would have a $2,070 tax bill just three years later. As home prices rose throughout the state (going from an average of $34,000 in 1974 to $85,000 in 1978), average property taxes doubled, and in some cases even quadrupled.

[…]

Dissatisfaction with the taxes also came from the fact that taxes were increasingly being spent on things like welfare, healthcare, and schools in poor urban areas (a 1976 state supreme court case mandated that spending per-pupil be roughly equal across the state). In other words, in many jurisdictions taxes were being funneled to the poor and minorities rather than improving local services like police or road construction.

In response to increasing dissatisfaction with property taxes, California passed Proposition 13 in 1978. The ballot measure, which won by a 2-1 margin, rolled back assessed home values to their 1975 levels, limited assessed value to a 2% increase each year unless the house was sold, and capped property tax rates at 1% of the value of the house. Later amendments allowed a homeowner to pass on his home to his children (or even grandchildren) without triggering a reassessment, letting the low property taxes be passed from generation to generation.

Proposition 13 did exactly what it said on the tin. Homeowner property taxes immediately fell by nearly 60%, reducing government tax revenues by roughly $7 billion annually (with “losses” even higher later as property values continued to climb). City tax revenue declined by 27% on average, and county tax revenue declined by 40% on average. While government spending had risen by 4.1% per year between 1957 and 1971 in inflation-adjusted terms, after Prop 13 it began to fall. One estimate suggested that by 1988, Prop 13 had saved taxpayers $228 billion. California fell from 7th in the nation in tax revenue per $100 of personal income to 35th.

Cuts in government services quickly followed.

[…]

Perversely, Prop 13 in some ways acted directly against homeowners’ desire for more local control. The measure eliminated local control over property tax, redirecting it to the state legislature and governor. Local governments and school districts were forced to hire lobbyists to represent their interests in the state capitol in the hopes of getting a portion of reduced tax revenue.

Prop 13, along with the enormous number of growth controls passed by various jurisdictions, forced California into a vicious cycle. With reduced tax revenues (and inability to control the revenues that remained), residency became far more zero sum. Services allocated to new residents might easily come at the expense of existing residents, incentivizing jurisdictions to create further growth controls. Rising property values forced people to live farther and farther away from their jobs, exacerbating the problems of growth: longer commuting distances meant more air pollution, more traffic congestion, and more freeway.

[…]

Economist Ed Glaeser estimated that as early as 2002 land use restrictions in San Francisco add nearly half a million dollars to the cost of a typical home, and in 2009 Hseih and Moretti estimated that relaxing land use restrictions in San Francisco and New York alone could boost national GDP by 8.9%.

It is far easier for almost all of the Canadian provinces to integrate economically with the United States than with each other

Friday, August 9th, 2024

Accidental Superpower by Peter ZeihanIn The Accidental Superpower, Peter Zeihan describes America’s local buffers:

America’s southern border region is all either desert or highland or both, relatively flat on the northern side of the border, but rugged on the southern side. Aside from the border communities themselves there are only two meaningful Mexican populations within five hundred miles of the border, Chihuahua and Monterrey, and even they are five hundred mountainous miles apart from one another. As Santa Anna discovered during the Texas Independence War, there is no good staging location in (contemporary) Mexican territory that could strike at American lands. In the Mexican-American War of 1846–48, the Americans took full advantage of that lack of staging areas, that thick buffer, and their superior transport to strategically outmaneuver the larger, slower, and exhausted Mexican forces — and this in an era before the Americans had battleships and jets. At the war’s conclusion, the United States seized half of Mexico’s territory (including California) — the half that was easier to get around in.

Canada’s border with the United States is much longer, more varied, and even more successful at keeping the two countries separated. In the border’s eastern reaches mountains and thick forests so snarl transport options that infrastructure even today is thin and vulnerable. In the far west the Rockies are a great border zone in that there is nothing for hundreds of miles on either side of the border that resembles a major staging area. The sole point of potential conflict is the Strait of Georgia, the body of water between Canada’s Vancouver Island and the northwestern extremes of the U.S. state of Washington. A Canadian impingement upon the strait would block maritime access to Puget Sound, home of Seattle and Tacoma. Yet the region’s population (im)balance is heavily in the Americans’ favor: The three Pacific coast American states outpopulate British Columbia by ten to one.

In the middle portion of the border region — the Prairie provinces–Midwest border — connections are almost omnipresent. This is a bad deal not for the Americans, but rather for the Canadians. South of the border zone one encounters ever denser American populations with ever more developed land and ever better transport infrastructure, both artificial and natural. In contrast, moving north into Canada one hits an initial line of cities — Calgary, Regina, and Winnipeg — and then a whole lot of nothing. The Prairies have little choice but to be American in economic orientation and even somewhat midwestern culturally. Their physical links to both British Columbia and the core Canadian provinces of the east are weak at best and regularly disrupted every winter. Their links to the colossus to the south, however, are substantial, multimodal, multiply redundant, and almost always functional.

If the United States has one of the easiest geographies to develop, Mexico has one of the most difficult. The entirety of Mexico is in essence the southern extension of the Rocky Mountains, which is a kind way of saying that America’s worst lands are strikingly similar to Mexico’s best lands. As one would expect from a terrain that is mountain-dominated, there are no navigable rivers and no large cohesive pieces of arable land like the American Southeast or the Columbia valley, much less the Midwest. Each mountain valley is a sort of fastness where a small handful of oligarchs control local economic and political life. Mexico shouldn’t be thought of as a unified state, but instead as a collage of dozens of little Mexicos where local power brokers constantly align with and against each other (and a national government seeking — often in vain — to stitch together something more cohesive). In its regional disconnectedness Mexico is a textbook case that countries with the greatest need for capital-intensive infrastructure are typically the countries with the lowest ability to generate the capital necessary to build that infrastructure. By the time the Mexicans completed their first rail line from their sole significant (preindustrial) port at Veracruz to Mexico City in 1873, the Americans already had over fifty thousand miles of operational track.

[…]

The one thing that Canada has going for it is that it does have a navigable waterway — the Saint Lawrence — but since that waterway merges with the Great Lakes, the Saint Lawrence watercourse is shared with the United States, making most Canadian waterborne commerce subject to American proclivities. That, in fact, is the theme of Canada as a whole. It is far easier for almost all of the Canadian provinces to integrate economically with the United States than with each other.

The American system is indeed a network

Friday, August 2nd, 2024

Accidental Superpower by Peter ZeihanIn the fourth chapter of The Accidental Superpower, Peter Zeihan gets to that accidental superpower:

The Mississippi is the world’s longest navigable river, some 2,100 miles long from its mouth at the Gulf of Mexico to its head of navigation at the Twin Cities in Minnesota. That’s about one-third longer than the mighty Danube and triple the length of the Rhine. And the Mississippi is only one of twelve major navigable American rivers. Collectively, all of America’s temperate-zone rivers are 14,650 miles long. China and Germany each have about 2,000 miles, France about 1,000. The entirety of the Arab world has but 120.

[…]

The Americans benefit from a geographic feature that exists in few other places on the planet, and nowhere else in such useful arrangements: barrier islands. Chains of these low, flat, long islands parallel the American mainland for over three-quarters of the Gulf and East Coasts. The American barrier island chain turns three thousand miles of exposed coastline into dozens of connected, shielded bays. Tidal shifts are somewhat mitigated throughout the system, and the islands do an admirable job of blocking all but the most severe weather that the oceans can throw at the land, allowing for safe navigation from the Chesapeake to the Texas-Mexican border. The net effect of this Intracoastal Waterway is the equivalent of having a bonus three-thousand-mile-long river.

The most compelling feature of the American maritime system, however, is also nearly unique among the world’s waterways — the American system is indeed a network. The Mississippi has six major navigable tributaries, most of which have several of their own. The greater Mississippi system empties into the Gulf of Mexico at a point where ships have direct access to the barrier island/Intracoastal system.

All told, this Mississippi and Intracoastal system accounts for 15,500 of the United States’ 17,600 miles of internal waterways. Even leaving out the United States’ (and North America’s) other waterways, this is still a greater length of internal waterways than the rest of the planet combined.

[…]

In the American example this allows goods — whether Nebraska corn or Tennessee whiskey or Texas oil or New Jersey steel or Georgia peaches or Michigan cars — to reach anywhere in the river network at near-nominal costs without having to even leave the country.

[…]

Roads and rails do not come cheaply, so taxes need to be raised and government workforces formed. Not so in the United States. The rivers directly and indirectly eliminate many barriers to economic entry and keep development costs low. Even the early smallholders — pioneer families who owned and worked their own plots of land — found themselves able to export grain via America’s waterways within a matter of months of breaking ground.

[…]

As of 2014, that consumer base amounts to roughly $11.5 trillion. That’s triple anyone else, larger than the consumer bases of the next six countries — Japan, Germany, the United Kingdom, France, China, and Italy — combined, and double that of the combined BRICs (Brazil, Russia, India, and China).

[…]

The majority of the Lower 48 is within the temperate climate zone — warm enough for people to live and crops to grow, cool enough to limit populations of deadly, disease-carrying insects. The Rockies are a very serious mountain chain, but unlike the world’s other great mountains — the Alps, Himalayas, and Andes — they have six major passes with minimal avalanche dangers (so they can be kept open year round). Three of those passes are sufficiently wide to house major metropolitan regions — Salt Lake City, Las Vegas, and Phoenix — within them.

[…]

In all, roughly two-thirds (including nearly everything east of the Rocky Mountains) of the Lower 48 can be reached easily, with some 90 percent of it within 150 miles of some sort of navigable waterway.

[…]

The greater Midwest is absolutely massive: With 139 million hectares under till, it is the largest contiguous stretch of high-quality farmland in the world. The central portions of the plain are humid yet temperate, making them perfect for corn and soybean production. The western sections are considerably drier as they lie in the rain shadow of the Rocky Mountains, making them ideal for several varietals of wheat. In bad years the Midwest produces a billion bushels of wheat, 2.5 billion bushels of soybeans, and an astounding 9 billion bushels of corn.

[…]

Of the United States’ 314 million people, some 250 million of them live within 150 miles of one of the country’s navigable waterways.

[…]

The wealth of internal distribution options the United States enjoys means that for the bulk of its history American dependence upon the international trade system has been less than 15 percent of GDP.

Berlin is perhaps the best-located city on the planet from a purely economic point of view

Friday, July 26th, 2024

Accidental Superpower by Peter ZeihanGreat Britain was better suited to leverage deepwater navigation than Iberia, Peter Zeihan notes (in The Accidental Superpower), but it was not the ultimate European geography for industrialization:

By 1850, it was Germany’s time to rise.

Berlin is perhaps the best-located city on the planet from a purely economic point of view. It sits at the junction of the Spree and Havel Rivers, both navigable tributaries of the Elbe. Berlin is only sixty miles from the Oder, and the Havel reaches so far to the east as to almost connect the two river basins. This grants Berlin access to one of the world’s very few maritime systems that taps into more than one river.

And those are just the rivers immediately proximate to Berlin. Close to the west is the Rhine, Northern Europe’s financial-industrial powerhouse, navigable all the way south to the Swiss city of Basel, and possessing tributaries and distributaries that spiderweb through German, French, and Dutch lands. Close to the east is the Vistula—the last major navigable river before the Eurasian Hordelands. Close to the south is the Danube—the longest river in Europe as a whole, one of the very few that flows southward, and the only one mighty enough to punch through the Alps and Carpathians. Any economic hub centered at Berlin is uniquely situated to reach almost anywhere in Europe where wealth can be created. Berlin’s waterways dictate that Germany emerge as the heart of a massive empire with economic links to the North, Baltic, and Black Seas, so long as Berlin is left to develop.

But Germany has almost never been left to develop.

Germany’s location saddles it with three critical weaknesses that make it an insecure — and often poor — country, despite what ostensibly seems like the geography that most peoples could only dream of.

First, Germans don’t live at the western end of the continent like the Spanish or on an island like the English; they are in the very middle of the North European Plain. While Germany’s wealth potential is massive, German lands are inherently vulnerable. To the east is a nigh indefensible border with Poland, whose own eastern border is even less defensible. Germany’s western border is similarly difficult: Opposite it is France, typically the most consolidated European power. Balkan upstarts often seethe on the other side of the Vienna Gap, while maritime powers can easily harass — and at times even hold portions of — the region’s lengthy coastline.

[…]

Second, this man-in-the-middle position means that Germany has almost never been united. German rivers lead in different directions to different seas, making different cities look to different horizons for their economic well-being. The middle of Germany — the Harz Mountains region — is akin to having Appalachia between Boston and New York. The presence of not one but six major powers in immediate proximity long denied Berlin easy control not just of its borderlands, but large tracts of its interior as well, including most of the Rhine and Oder river systems. Unlike the English, who established a centralized government in the Thames valley as early as the tenth century, the initial German proto-state of Brandenburg didn’t start stabilizing as a country in its own right until the fifteenth century.

[…]

The Germans lacked independent access to the ocean. Germany didn’t control even one of its major rivers’ delta cities until 1720, when it finally seized Stettin on the Oder from the Swedish Empire. Even then German ocean access was sharply circumscribed. The Danish island of Zealand is positioned perfectly to regulate traffic between the Baltic and North Seas. Germans only got their first full access to the ocean in 1871, when Berlin finally proved able to fold Hamburg, on the Elbe delta, into the German Empire.

[…]

For the Germans industrialization changed everything.

[…]

The endless quantities of cheap, high-quality goods decimated the Germans’ painstakingly fostered cottage and guild industries. Economic depression triggered the revolutions of 1848. Prussia only held together because of its national planning mechanisms and the strength of its military class, which derailed the revolutions and ejected vast droves of dissatisfied citizens.

[…]

First, industrialization happened everywhere. Elsewhere in Europe, the various industrial revolutions launched from the respective capital cities. Money accrued in the capital and was spent from the capital, so road and rail networks radiated from it too, metabolizing whatever resources lay beyond in a system of diminishing returns. But the Germans, down to the most remote provincial city, were uniquely skilled in economic management and had already constructed the base road infrastructure that industrialization required to take root. Each and every one of the German cities was fertile ground for the seeds of industrialization.

[…]

Second, industrialization happened much faster. Fractured fifteenth-century Brandenburg with no coastline or major port city was a very capital-poor country. Money had to be husbanded with ruthless efficiency. Imperial Germany of the 1870s, by contrast, controlled the bulk of Central Europe’s river networks and was awash in war booty from its recent string of military victories against Denmark, Austria, and France. Germany’s hypercompetent governments included industrialists on their cabinets, and the public-private pairing ensured that adequate funding reached each and every project that needed investment.

[…]

The industrialization of England took nearly 150 years. The industrialization of Germany was carried out in less than forty.

Third, German industrialization had massive military applications. Most European countries’ military application of industrial technologies focused on quantity: more guns, more uniforms, more transports. Only Germany truly embraced the fundamental newness of industrial technologies to remake how it waged war. This would have been impossible had Germany not entered the industrial age with the highest level of literacy in the world, largely due to its ongoing need to maintain a qualitative edge over its quantitatively superior competitors. The most important manifestation of this superior education system was the innovation of the General Staff, a sort of military middle management designed to disseminate information up and down the chain of command. A military commission required a college degree. Fusing the expertise of local governments with academia, industry, and finance, the General Staff achieved two things: It encouraged the development of ever larger cannons that the military thinkers redesigned their strategies around, and it pioneered new logistical methods to take advantage of the German rail system.

[…]

After three generations of fine-tuning, the world came to know the gentle German mix of technology, logistics, and force as blitzkrieg.

Finally, industrialization unified the Germans as a country and as a people to a degree unheard of elsewhere, before or since. All governments got a boost from industrialization. Industrialization brought per capita increases in wealth, health, and living standards so unprecedented that you have to go back to the domestication of animals to find a point in human history where the general populace experienced so rapid and sustained a period of improvement. With rising wealth came rising government legitimacy. For the birthplace of industrialization, England, this was merely garnish; the English were already rich from the benefits of deepwater navigation and a globe-spanning empire. In Germany, however, the legitimacy gain wasn’t so much radically different, but exponentially faster and larger.

[…]

In a single generation, industrialization took them from being some of the North European Plain’s poorest people to some of its richest, and enabled them to impose decisive defeats in four significant conflicts with powers that had preyed upon them for centuries (Poland, Denmark, Austria, and France).

[…]

Germanic cities that had been unassociated since the death of Charlemagne connected their rail networks together to discover a peer relationship, far different from when a sleepy country town became connected to mighty London. The effect, economically and culturally, was electric, and considering the era, that term is used both figuratively and literally. This was not simply a culture that had finally unified, this was a culture that was ecstatic with its identity and its government in a way that few other cultures have ever approached.

[…]

It was the first country in the world to have the majority of its population urbanized — a critical development to both foster and take advantage of skilled labor in the industrial era — and by 1900 its many regional centers had grown to the point that Germany had more major industrialized cities than the rest of Europe combined. It was the first country to develop mass universities and research labs, and then to link the two directly into local governments and corporations, giving German industry the ability to source everything from loans to staff to scientific research, and giving rise to the national economic champions model of corporate organization that pervades Europe even today. And the Germans methodically and assiduously applied every new breakthrough, whether scientific or industrial, to every aspect of their national strategy, culminating in everything from engines so efficient and small that they could propel individual vehicles (via Karl Benz, Rudolf Diesel, Gottlieb Daimler, and Emil Jellinek, whose daughter was the original Mercedes) and modern pharmaceuticals (Gregor Mendel, Robert Koch, Friedrich Bayer, and Paul Ehrlich), to cannons (Alfred Krupp) and blitzkrieg.

[…]

Simply put, neither deepwater navigation nor industrialization was done diffusing. England could make better use of deepwater navigation than Iberia, and Germany could make better use of industrialization than England, but there was another geography that could make better use of both.

Had the Industrial Revolution happened anywhere else on the planet, there would have been a market crash

Friday, July 19th, 2024

Accidental Superpower by Peter ZeihanUnlike geography, Peter Zeihan notes (in The Accidental Superpower), technology can move, and it keeps moving until it settles in a geography that can make the best use of it:

Just as agriculture didn’t remain hidden in Egypt, the deepwater technologies that allowed the Iberians to overturn Ottoman power diffused out of far western Europe.

[…]

The Thames provided all of the unification and local trade opportunities of Europe’s other rivers, but it empties into the North Sea, one of the world’s most dangerous bodies of water, frigid, tidal-extreme, and storm-wracked. There is no day where you dare bring your B game on the North Sea, as the Spanish discovered in 1588 when it wrecked over half their armada in their failed invasion of England. The severity of the North Sea is the quintessential example of why it took so long for humans to master the oceans, and it was in this crucible that the English naval tradition was forged.

[…]

England’s maritime acumen enabled it to nimbly switch trade partners at will, keeping it an economic step ahead of all competitors. Its navy let it land forces at the times and places of its choosing, keeping it a military step ahead of all competitors. And its ability to easily relocate military and economic pressure made it the ally of choice for any European power that it was not currently in conflict with.

And that was before the English learned the Iberian secrets of deepwater navigation. With deepwater technologies, England leveraged its superior maritime acumen onto the global stage.

[…]

Between 1600 and 1800, South Asia and the Far East were removed forcibly from the Portuguese sphere of influence. English colonies steadily supplanted their competitors at key locations in Gambia, Nigeria, South Africa, Diego Garcia, India, Singapore, and Hong Kong, relegating the time of Portuguese greatness to history.

The faster and more maneuverable vessels of the English allowed them to raid deep into the Caribbean while denying the Spanish treasure fleets the “safety” of the open seas, leaving the Spanish with no choice but to put their coastal colonies on security lockdown and to assign naval assets to protect convoys. It quickly became obvious that the only locations the Spanish would be able to derive long-term income from were those that they had directly colonized with populations sufficient to resist English attacks. In response, the English founded a series of their own colonies in the New World to start the ball rolling on a demographic overthrow of Spanish power in the Western Hemisphere.

[…]

Ships capable of making round-the-world voyages made every significant culture aware of the others. Those ships’ cargo capacity enabled every previously sequestered river valley to trade with all of the others. Interaction, whether peaceful or hostile, trade or war, was no longer local but global.

[…]

Unlike the Iberian monarchs, the English businessmen saw more in the wider world than just spices and precious metals. They also saw bottomless markets. The English system, therefore, didn’t seek (just) simple plunder, but also to develop a global trade system with England at the center. Unlike deepwater navigation, which developed in response to the economic need, industrialization was an outgrowth of opportunity.

[…]

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. But at the time the British (as the English became known after their union with Scotland in 1707) were masters of the oceans, ruling a vast military and commercial empire that spanned the globe. This allowed them to shove all of their (massive) excess production down the throats of any people that they could access via water, particularly within their own empire. The British were (easily) able to cover all of the administrative costs of their empire, the capital costs of their industry, and have huge additional streams left over to justify both a stronger navy and more industrial development.

Nearly all of the major, durable powers fell into one of two categories

Friday, July 12th, 2024

Accidental Superpower by Peter ZeihanBefore 1400, Peter Zeihan explains in The Accidental Superpower, true ocean transport was a rare thing:

In this era nearly all of the major, durable powers fell into one of two categories. The first were powers with navigable rivers that could easily extend their cultural reach up and down the river valley, enrich themselves with local trade, and use the resources of their larger footprint to protect themselves from — or force themselves upon — rivals. The second were powers that lived on seas sufficiently enclosed that they were difficult to get lost within. These seas didn’t work quite as well as rivers, but they certainly blunted the dangers of the open ocean and allowed for regional transport and trade. France, Poland, Russia, and a few of the Chinese empires fell into the first category, while the Swedes, Danes, Phoenicians, and Japanese fell into the second.

[…]

The Ottoman Empire originated on the shores of the Sea of Marmara, a nearly enclosed sea small enough that it functioned as a river in terms of facilitating cultural unification, but large enough that it allowed for a reasonable volume of regional trade. And Marmara didn’t exist in isolation. To its northeast was the Black Sea, while to its southeast lay the Aegean and the eastern Mediterranean — all three enclosed bodies of water that the Ottomans were able to use their naval acumen to dominate. Emptying into the western Black Sea was the Danube, by far Europe’s largest river, which allowed the Ottomans to expand as far north into Europe as Vienna. By the measures of the day, the Ottomans had within easy reach more useful land, river, and sea than any other power — and nearly more than all of their European rivals combined.

And then there was trade. From their home base at the supremely well-positioned Istanbul, the Ottomans dominated all land and sea trade between Europe and Asia and from the Black Sea to the Mediterranean.

The largest and most lucrative of those trade routes was the famous Silk Road, the source of all spices that made it to Europe. Pepper, ginger, cinnamon, cloves, nutmeg, mace, cumin, and saffron might seem like minor luxuries today, but their only sources were in South and Southeast Asia. Between the unreliable nature of ocean transport and the yet-to-be-mapped African continent, there was no reliable all-water route. The only way to access Asian spices was for the Silk Road to traverse China, Central Asia, Persia, and ultimately Ottoman-controlled lands. Between the hundreds of middlemen, the sheer distances involved, and the hefty tax the Islamic Ottomans placed on spice transfers to Christian Europe, upper-class Europeans often spent as much on spices as they did on food.

[…]

In 1529, they laid siege to Vienna at the head of the Danube valley. Had they won they would have been able to pour an empire’s worth of resources through the gap between the Alps and Carpathians onto the North European Plain, a wide highway within which the Turks would have faced no barriers to conquest.

But they failed — because the world had changed.

A handful of key technologies made all the difference:

  • Compass
  • Cross-staff
  • Carvel
  • Gunport

Nearly all of these technologies, Zeihan notes, were developed, refined, and operationalized by two countries that had almost nothing to do with the Ottomans:

Europe’s westernmost peninsula is Iberia. At the time of the Ottoman rise, the peoples of Iberia, the Portuguese and Spanish, had very little going for them. Nearly alone among the major European regions, Iberia has no rivers of meaningful length and only very narrow coastal strips, forcing most of its people to live in a series of elevated valleys. Unsurprisingly, in the 1300s Iberia was Europe’s poorest region. It also didn’t help that the two had borne the brunt of the Arab invasion, being occupied by the Moors for nearly seven centuries.

[…]

The Turks found themselves forced to divert massive resources from their Danube campaigns to an increasingly failed effort to defend their Mediterranean assets (most notably the Egyptian breadbasket).

[…]

Until Portugal’s arrival in South Asia, local oceanic shipping — including the maritime arms of the spice trade that the Ottomans controlled — was purely coastal, sailing with the monsoonal winds: east in May–June and west in August. Winds offshore may have blown year round, but they were erratic and local ships couldn’t reliably navigate or survive the turbulence. The Portuguese deepwater craft, in contrast, found navigating the Indian Ocean to be child’s play. Portuguese vessels were able to eviscerate the Ottoman connections to the Asian spice world, and then directly occupy key spice production locations, via its ships redirecting the trade in its entirety to Lisbon. Even with the military cost of maintaining a transcontinental empire and the twenty-two-thousand-mile round trips factored in, the price of spices in Portugal dropped by 90 percent. The Silk Road and its Ottoman terminus lost cohesion, and the robust income stream that had helped make the Ottoman Empire the big kid on the block simply stopped, all because of the ambitions of a country less than one-twelfth its size.

Egypt became an easily conquerable breadbasket

Friday, July 5th, 2024

Accidental Superpower by Peter ZeihanThe Nile provided two things nearly unique on earth, Peter Zeihan explains in The Accidental Superpower:

The first was perfect agricultural inputs like reliable water and high-fertility soil. It wasn’t scant desert rainfall that gave rise to the mighty Nile, but instead the seasonal torrents from the Ethiopian highlands and overflow from the African Great Lakes. The seasonal floods washed down soil of fertility far higher than what could be obtained outside the river valley. The Nile was flush with water supplies every year in a cycle so reliable that true droughts were quite literally biblical events.

Perhaps more important was the second factor: The lower Nile was safe. One could stand on the ridges above the Nile floodplain at any point within a thousand miles of the sea, look east or west, and be met with the exact same view: an endless desert waste. With the technology of transport largely limited to what you could carry yourself, it was simply impossible for any hostile force to cross the desert.

[…]

Copper sounds like a small thing, but once humans figured out how to smelt and cast it, they replaced their wood and stone implements with metal, generating staggering improvements in the productivity of each worker — and each farmer.

[…]

By 3150 BC, a single government dominated all of the useful Nile territories between the Mediterranean coast and what is today the city of Aswan.

[…]

Local deserts insulated both Mesopotamia and the Indus from multiple directions, but not all directions. Their geographies were secure enough to spawn civilizations, but outside forces were still able to reach them, and so they never had the time to consolidate as Egypt did.

[…]

To the west, it is six hundred miles from the western edge of the Nile delta to where rain falls regularly enough to support a non-nomadic population (contemporary Benghazi, Libya).

[…]

The Sinai Peninsula is just as inhospitable as the Bible suggests, and the three hundred miles between the delta and the Jordan River valley have proven to be a formidable barrier right up to (and even into) contemporary times.

A southerly approach seems better, and indeed following the Nile is certainly a less painful affair than trudging through desert. But as one moves upriver south, the Nile valley narrows — to a steep canyon in places, complete with the occasional rapids (locally known as cataracts) — and it is a long, winding nine-hundred-mile route before you reach a geography and climate that can support a meaningful population (contemporary Khartoum, Sudan). Establishing multiple defensive positions along this route is quite easy.

[…]

Every patch of land within sight of the river is under cultivation, generating the most consistent food surpluses of any land throughout the history of not just the ancient world, but also the classical, medieval, and even early industrial worlds. This food surplus created the world’s densest population footprint for most of human history (the only exception being contemporary Bangladesh).

[…]

Second, by ancient standards the interior of Egypt was remarkably easy to get around in. From Aswan downriver, the valley is flat, in the dry season turning the river into a very slow-moving lake. The lack of elevation change results in a hazy, lazy downriver ride, while Egypt’s prevailing north-to-south winds allow for fairly reliable upriver sailing. The Nile could support riverine traffic in a way that the Tigris, Euphrates, and Indus — cursed with faster currents, less reliable seasonal flows and winds, and omnipresent sandbars — never could.

[…]

For the first millennia and a half of Egyptian history, outsiders simply could not penetrate into the Egyptian core. Yet within the Nile valley, the Egyptian government had very little trouble moving manpower, resources, the tools of governance, and even giant blocks of stone around within its riverine-based system.

[…]

The pharaoh could — and often did — take a boat cruise down the river and visually inspect nearly all of his kingdom without setting foot on land. The current and accurate assessments enabled by such easy travel helped governmental policy to match and respond to reality — a concept that might not seem a major deal in a world of smart phones, but was revolutionary in the world before paper. Tax collection could reach every part of the valley, and such activity ensured that the government maintained a firm grip on every aspect of society. Food stores could be distributed quickly and easily to mitigate local famine; the population crashes and rebellions that plagued cultures well into the modern era were far less common in Egypt. Revolts could be quelled quickly because troops could be summoned with speed; fast military transport enabled the government to nip problems in the bud.

[…]

A grand canal dug from a western braid of the Nile allowed for the regulated flooding of the Faiyum Depression, bringing another five hundred square miles into Egypt’s green zone, but that is the only significant expansion of Egypt’s agricultural lands until the twentieth century, and even that expansion was only about twenty miles west of the riverbed itself.

[…]

As the Nile flows through the desert, Egypt — ancient or otherwise — lacks trees. What few were available for boat construction were largely reserved for ego projects ranging from royal barges to monument construction.

[…]

The sheer isolation limited Egyptian knowledge of the world. It was so thin its leaders were shocked when confronted with the fact that some rivers flowed south.

[…]

Every place that was within sight of the Nile was also a food-producing region, so there was never a pressing need to develop a nationwide food distribution system — that made the maritime transport system specifically, and transport in general, the province of the state. The military and the bureaucracy could move about (and did), but the common man could not (and did not), firmly entrenching the concept of central control.

[…]

Theirs was a geography destined not just to generate slavery, but slavery of the masses.

[…]

Developments in agriculture, transport, and education ended with unification. Instead of generating higher and higher food surpluses, or attempting either to advance their civilization or to expand it past the confines of the Nile, the Egyptians dedicated all spare labor to monument construction.

[…]

New technologies developed to deal with problems that Egypt was blissfully unaffected by. Writing led to literacy. Copper led to bronze. Spears led to swords. Domesticated animals led to chariots. All of these technologies that most people associate with ancient Egypt were not actually developed there, because in Egypt there was no pressure for development past their original technologies of irrigated agriculture, basic engineering, small boats, and hieroglyphics. Even the word “pharaoh” was an import.

In time two of these “new” technologies — the domesticated camel and a sailing ship that could transport meaningful volumes of cargo — proved Egypt’s undoing. Outsiders could use these techs to breach Egypt’s desert buffers, and when they did they discovered the civilization that all had assumed was mighty and impregnable was in reality languid and backward. They also discovered that Egypt’s slave-heavy population lacked motivation to fight for their country.

[…]

Instead of being the greatest of the civilizations, Egypt became an easily conquerable breadbasket for anyone seeking to rule the Mediterranean basin. Once the Nile was secured, the conquering power could redirect the population from pyramid building to food production. The excess food output could be diverted out of the Nile region to fuel the conquering power’s bid for Mediterranean control.

The Egyptians first lost their independence in 1620 BC to the Hyksos (commonly known in the West as natives of Canaan), and then were independent only intermittently until the Roman conquest in the first century BC.

[…]

And after the Roman conquest, they were not independent for a single day until the collapse of the European colonial era after World War II.

All of the global cities that we think of as epic took up less than eight square miles

Friday, June 28th, 2024

Accidental Superpower by Peter ZeihanIn The Accidental Superpower, Peter Zeihan reminds us that moving things around is hard:

Anyone who has ever rowed a boat or paddled a canoe in a place where he had to make a portage can (quite en­thusiastically) tell you how much easier it is to move stuff around on water than on land, but have you ever thought about just how much easier it is?

[…]

Modern container ships can transport goods for about net 17 cents per container-mile, compared to semi-trailer trucks that do it for net $2.40, including the cost of the locomotion mode as well as operating costs in both instances.

But even this incredible disparity in cost assumes access to an American-style multilane highway, the sort that simply doesn’t exist in some 95 percent of the planet. It also assumes that the road cargo is all transported by semi rather than less efficient vehicles, like those UPS trucks that probably brought you this book. It certainly ignores your family car. It also does not consider the cost and maintenance of the medium of transport itself. The U.S. interstate highway system, for example, responsible for “only” one-quarter of the United States’ road traffic by miles driven, has an annual maintenance cost of $160 billion. By contrast, the Army Corps of Engineers’ 2014 budget for all U.S. waterways maintenance is only $2.7 billion, while the oceans are flat-out free. Toss in associated costs — ranging from the $100 billion Americans spend annually on car insurance, to the $130 billion needed to build America’s 110,000 service stations, to the global supply chain needed to manufacture and service road vehicles — and the practical ratio of road to water transport inflates to anywhere from 40:1 in populated flatlands to in excess of 70:1 in sparsely populated highlands.

Cheap, easy transport does two things for you. First, it makes you a lot of money. Cheap transport means you can send your goods farther away in search of more profitable markets. Historically that’s been not only a primary means of capital generation, but also a method of making money wholly independent of government policy or whatever the new economic fad happens to be; it works with oil, grain, people, and widgets. In business terms, it’s a reliable perennial. Second, if it is easy to shuttle goods and people around, goods and people will get shuttled around quite a bit. Cheap riverine transport grants loads of personal exposure to the concerns of others in the system, helping to ensure that everyone on the waterway network sees themselves as all in the same boat (often literally). That constant interaction helps a country solidify its identity and political unity in a way that no other geographic feature can.

[…]

In the era before refrigeration and preservatives, hauling foodstuffs more than a few miles would have been an exercise in futility. Even armies didn’t have much in the way of self-managed supply chains right up into the eighteenth century. Instead militaries relied on the kindness — or lack of defenses — of strangers for provisions.

This kept cities small. Very small. In fact, up until the very beginning of the industrial era in the early 1600s, all of the global cities that we think of as epic — New York City, London, Paris, Berlin, Rome, Tokyo, Shanghai — took up less than eight square miles. That’s a square less than three miles on a side, about the distance that someone carrying a heavy load can cover in two hours, far smaller than most modern airports. If the cities had been any bigger, people wouldn’t have been able to get their food home and still have sufficient time to do anything else. The surrounding farms couldn’t have generated enough surplus food to keep the city from starving, even in times of peace.

[…]

This smallness is why it took humanity millennia to evolve into what we now think of as the modern world. Nearly all of the population had to be involved in agriculture simply to feed itself. The minority was nonsedentary peoples (history calls them barbarians), who discovered that one of the few ways to avoid needing to spend your entire day growing food was to spend your entire day stealing other people’s.

The root of American power is geographic

Friday, June 21st, 2024

Accidental Superpower by Peter ZeihanIn The Accidental Superpower, Peter Zeihan explains how place matters:

The first I call the balance of transport. Successful countries find it easy to move people and goods within their territories: Egypt has the Nile, France has the Seine and Loire, the Roman and Inca Empires had their roads. Such easy movement promotes internal trade and development. Trade encourages specialization and moves an economy up the value-added scale, increasing local incomes and generating capital that can be used for everything from building schools and institutions to operating a navy. Such constant interconnections are the most important factors for knitting a people into a nation. Such commonality of interests forms the bedrock of political and cultural unity. With a very, very few exceptions, every successful culture in human history has been based on a culture of robust internal economic interactions, and that almost invariably comes from easy transport.

[…]

Countries also have to be able to protect themselves. Just as internal trade requires more than a little help from geography — well-rivered plains preferably — so too does defense. Successful countries also have borders that are easy to protect.

[…]

It is this balance — easy transport within, difficult transport beyond — that is the magic ingredient for success.

[…]

In all three cases — the balance of transport, deepwater navigation, and industrialization — the United States enjoys the physical geography most favorable to their application. Two facts stand out. First, since the root of American power is geographic and not the result of any particular plan or ideology, American power is incidental. Even accidental.

Second, the United States wasn’t the point of origin for any of the respective technologies that created the modern world.

We’re not witnessing the beginning of the end of American power, but the end of its beginning

Friday, June 14th, 2024

Accidental Superpower by Peter ZeihanIn The Accidental Superpower, Peter Zeihan traces a lot back to Bretton Woods:

On July 1, 1944, 730 delegates from the forty-four Allied nations and their respective colonial outposts convened at the Mount Washington Hotel in the skiing village of Bretton Woods, New Hampshire, with a mission to do nothing less than decide the fate of the postwar world.

[…]

Many of the rooms lacked running, potable water; there wasn’t enough ice or Coca-Cola to go around; staffing was so thin that some nearby Boy Scouts had to be drafted; and the establishment’s manager locked himself in his office with a case of whiskey and refused to come out.

[…]

But despite this inauspicious beginning, the delegates set to work on the agenda White and Keynes had laid out and over the next three weeks engaged in multilateral negotiations that were responsible for creating the World Bank, the International Monetary Fund, and the International Bank for Reconstruction and Development: the institutions that helped knit devastated Europe back together and that hammered out the foundations of the free-trade-dominated global economic system that endures to this day.

[…]

The attendees had arrived in Bretton Woods knowing that they had no real leverage to negotiate or bargain with the United States; they had mainly come to hear what White and the other Americans had to say. And what the Americans had to say shocked them all.

[…]

Everything from Sicily to Saipan was in essence an American effort fought with American equipment and American fuel. Even in terms of manpower the fronts were largely American affairs, with American troops tending to outnumber all other combatants, Allied and Axis combined, by a two-to-one margin. Only grand affairs such as the Normandy landings featured the sort of multinational resolve the propaganda lauded.

[…]

Until that point there really hadn’t been a “global system” in an economic sense. Instead, various European nations maintained separate trade networks stemming from their earlier imperial ventures, in which their colonies served as resource providers and captive markets while mother countries produced finished goods. What interempire trading that occurred was largely limited to goods, whether raw materials or specific manufactures, that could not be sourced within the respective “closed” systems. Most of this cross-empire trade flowed through enterprising peoples like the Dutch who excelled at brokering deals among imperial leaders. Protecting each empire’s trade were its national naval forces, and the use of navies to guard national commerce and raid the commerce of competitors was as old an industry as the use of sail and oar.

[…]

Building a navy is one of the most expensive and time-consuming projects a nation can undertake in the best of times, and it wasn’t something that a country emerging from rubble and occupation could even consider.

[…]

There was about to be only one navy.

[…]

White and the American team didn’t let the others sweat it out for long, and they presented their two-part plan with all the kindness and amused patience that comes from a position of unassailable strength. The first part alone likely stunned the conference into baffled silence: The Americans had no intention of imposing a Pax. They didn’t plan to occupy key transshipment or distribution nodes. There would be no imperial tariff on incomes or trade or property. There would be no governors-general stationed in each of the Americans’ new imperial outposts. No clearinghouses. No customs restrictions. No quotas.

Instead, the Americans said that they would open their markets. Anyone who wanted to export goods into the United States could do so. The Americans acknowledged that devastated Europe was in no condition to compete with American industry, which hadn’t been touched by the scourge of war, so this market openness would be largely one-way. The Americans suggested ideas about a new global system to reduce tariffs, but that was to be negotiated separately and later.

As startling and unexpected as part one of the plan was, part two must have rolled the Europeans in particular back on their heels. The Americans offered to use their navy to protect all maritime trade, regardless of who was buying or selling the cargoes. Even trade that had nothing to do with the United States would be guaranteed by the overwhelming strength of the American navy. Far from proposing a Pax that would fill their coffers to overflowing with trade duties, levies, and tariffs, the Americans were instituting the opposite: a global trading system in which they would provide full security for all maritime trade at their own cost, full access to the largest consumer market in human history, and at most a limited and hedged expectation that participants might open their markets to American goods. They were promising to do nothing less than indirectly subsidize the economy of every country represented at the conference.

[…]

While American aid helped get Western Europe back on its feet, it was American markets’ absorption of every bolt, table, and car that the Western Europeans could produce that proved to be the determining factor in resuscitating their fortunes. The American economy, never touched by the bombs that devastated Europe, was larger than any that the Europeans had ever had entry to, and the ability to access that market allowed the Europeans to export their way back to affluence.

[…]

As the Cold War ended and entire swaths of the globe changed economic and political orientations, the price grew, and as years turned to decades, the system expanded ever outward, until nearly the entire world had acceded to this American-guaranteed network. In fact, the Bretton Woods agreements are the single most important factor behind the Japanese and Korean miracles, the European Economic Community and its successor the European Union, the rise of China… and the statistical monster that is the U.S. trade deficit.

[…]

At Bretton Woods the United States produced about one-quarter of global GDP, about the same proportion as it does in 2014. At Bretton Woods the United States was responsible for nearly half of global defense outlays, about the same proportion as in 2014. At Bretton Woods the American military controlled half of global naval tonnage, about the same proportion as it does in 2014. At Bretton Woods the United States was the only country that for the past eighty years had exited every decade with an economy larger than when it had entered, a record of the modern age that the Americans have since extended to 150 years.

[…]

In 2014, we’re not witnessing the beginning of the end of American power, but the end of its beginning.

China has not cracked (yet) and the European Union is still with us (for now)

Friday, June 7th, 2024

Accidental Superpower by Peter ZeihanThe version of Peter Zeihan’s Accidental Superpower that I (metaphorically) picked up was subtitled Ten Years On:

The trends of de­globalization, de­population, and American disinterest that were once on the horizon are now embedded firmly in the here and now.

[…]

There’s no way you kick out a 350-page book that is three-quarters forecast and you get it all dead-on. The biggest bitch is always timing. Inevitable is not a synonym for imminent.

[…]

It is undeniable that China has not cracked (yet) and the European Union is still with us (for now).

[…]

Two years after Accidental I published The Absent Superpower, a book that brought America’s shale revolution into focus both in terms of its transformation of the American industrial experience and its impact upon the broader global geopolitic. As part of Absent I predicted that the 2020s would serve as the backdrop of three major international wars. The first of these, the Ukraine War, is now in full swing. Two to go.

The trick is to begin with geography and see where it takes you

Friday, May 31st, 2024

Accidental Superpower by Peter ZeihanPeter Zeihan opens The Accidental Superpower with a story about his destiny:

I’ve always loved maps. My mom tells a story of how when I was five I unfolded a map of my home state of Iowa and started tracing roads away from my hometown, building up to the thickest, brightest line I could find and then connecting it to the next thickest, brightest line I could find until I had traced myself off the map’s edge. When I inquired what was on the other side of the Missouri River, my mom realized that I’d be leaving Iowa someday.

[…]

Geopolitics is the study of how place impacts… everything: the clothes you wear, the food you eat, the size and serviceability of your mortgage, how long you live, how many children you have, the stability of your job, the shape and feel of your country’s political system, what sorts of war your country wages or defends itself against, and ultimately whether your culture will withstand the test of time. The balance of rivers, mountains, oceans, plains, deserts, and jungles massively influences everything about both the human condition and national success.

Of course, you shouldn’t treat geography as deterministic. The Nazis loved geopolitics, but instead of using the study of geography to shape their policies, they used it to justify their ideology. They were hardly alone. Throughout the eighteenth and nineteenth centuries Europeans of all stripes used the subdiscipline of geographic determinism to assert their cultural and intellectual superiority over the rest of humanity. At one point, geographers as a whole realized that such concepts were, well, hugely racist and the study of political geography in most forms — particularly in the United States — was largely abandoned.

There is definitely a baby/bathwater issue here. There are good solid reasons as to why nearly every major expansionary power of the past has been based in a temperate climate zone, and why all those that have lasted have been riverine-based. This doesn’t make the people of these zones better or smarter. It simply means they have more and more sustainable resources, fewer barriers to economic development, and economic and military systems that allow for greater reach. The trick is to begin with geography and see where it takes you; don’t start with a theory and use geography to justify it.

[…]

My personal ideology is green and internationalist and libertarian, which means I’m an idealistic pragmatist who falls asleep during long meetings. Aside from a few snarky footnotes that bravely survived the editorial gauntlet, my ideology is not represented in this book. I have solar panels on my house, but I see a global future in which coal reigns supreme. I’m an unflinching supporter of free trade and the Western alliance network, seeing the pair as ushering in the greatest peace and prosperity this world has ever known. Yet geography tells me both will be abandoned. I prefer small government, believing that an unobtrusive system generates the broadest and fastest spread of wealth and liberty. But demography tells me an ever larger slice of my income will be taken to fund a system that is ever less dynamic and accountable.

Parents hate it

Saturday, May 25th, 2024

Case Against Education by Bryan CaplanA reader of Bryan Caplan’s The Case Against Education who recently caught Roland Fryer on EconTalk (Oct 2022 episode) suggested an unholy synthesis of Caplan and Fryer:

If we simply assert that it is desirable to have students master a subject, then it is at least valuable to know (if that is indeed what we know) that paying students directly to master material is much more effective than paying other people to offer free education to students who are completely unpaid in the near term for being compelled to encounter the material.

One could imagine an extreme synthesis of Caplan and Fryer that says the state is primarily interested only in teaching those skills you’ve called truly general purpose — literacy and numeracy — and to achieve student learning in these fields we have devised a system of payments to students that are contingent on reaching micro-milestones (e.g., what one might reasonably learn and demonstrate mastery of after spending 60 minutes on Khan Academy) in progress towards mastery of arithmetic, basic algebra, phonics, and reading comprehension. If students find it most cost-effective to earn those payments by subcontracting to tutors and educational coaches who help them reach these milestones (or even on-demand traditional in-class lectures if preferred), then we will primarily see the growth in supply of pedagogical methods which are most capital efficient relative to a desired learning outcome.

Caplan added that it would be better to pay periodically for continuing good scores to avoid mere cramming, and that led to this comment:

Our kids’ elementary school recently started doing cumulative testing throughout the year. Basically every week they have a test that goes back and tests on material covered earlier. I’d say maybe 80% new material, 20% old material, but that’s a pretty big test. Parents hate it, partly because they just hate having a significant test each weak, partly because they don’t have a way to help the kids prepare, and partly because kids are doing poorly on them.

In the parents defense, I think a lot of the tests are poorly constructed and have poor questions. (I think but do not know that they are mostly taking questions from prior state tests that students did poorly on, with no understanding of whether that’s because it’s a poorly phrased question or whether it was really a harder question intended to distinguish between top tier students.)

But the school administrators I think have been somewhat shocked by how little interest the parents have in what information their children have retained versus making sure their kids have good grades. In elementary school. Not even grades that will show up on a college application.

Again, in the parents defense, there has been grade inflation for so long it’s hard for 3rd or 4th grader that’s formerly a straight A student to understand suddenly routinely get B’s and C’s or worse on tests each week. And it’d be less frustrating if the people doing the testing understood something about constructing tests (if almost all of the class is failing because of the current material and not the past material, that’s almost certainly a reflection of the teacher and/or the test, not the children). But the parents weren’t really even interested in trying to continue tweaking the process. They were just worried about getting bad grades and the need to study for a test each week interfering with travel sports practices.

Parents want their children to do well, but not in the objective sense of learning and retaining more.