On Demographics and Chaos

Waste Management Corporation, the folks with the green trucks that collect your garbage, host the Phoenix Open golf tournament, “the greenest show on grass”. Along with that green, they also host an Executive Sustainability Forum. I was fortunate to be one of several hundred in attendance, along with about 48,000 on-line viewers.

Peter Zeihan was the keynote speaker at this year’s Forum. That surprised me, since I had never heard of Peter Zeihan. In previous years, the keynote speaker has been somebody well known in the Green world – like Amory Lovins, last year’s keynote. Instead, Zeihan is an expert in geopolitics. As such, he uses global demographics and related trends to provide insights as to how the remainder of the 21st century may unfold, particularly for Americans.

Demographics and Trends

Four Change DriversZeihan sees the current world geopolitical situation as a consequence of the post – World War II economic recovery plan formulated at Bretton Woods in 1944. In his view, the U.S. policies formulated there, especially free trade policies and military security guarantees, have, in essence, endured for seven decades. Now, he sees these policies unraveling, with chaotic implications for most of the world.

Here are a few of the factors that Zeihan regards as important for the geopolitics of the coming years:

>> Geography: North America, especially the U.S., enjoys a unique and advantageous geography. The U.S. is capable of producing enough food to feed itself. The U.S. has vast natural resources and the capital necessary to develop them. And the U.S. is well isolated from potential military adversaries.

>> “Fracking”: The advent of new technology for petroleum production makes the U.S. the world’s largest petroleum producer, significantly reducing America’s need to import petroleum. This dramatically reduces America’s geopolitical need to provide military protection in much of the world.

>> Aging Populations: In my personal opinion, practical contraception is the most significant technical innovation of the 20th century – not rocket ships, polio vaccine, automobiles, penicillin, air conditioning or cell phones – practical contraception. One consequence of this is that the world may yet prove Malthus wrong. A more immediate consequence is that the populations of most economically developed nations are aging.

Zeihan divides national populations into generations. Young adults engage in family building, they consume most, if not all (or more than all) of their income. Mature adults reach their peak earning years after their family obligations subside. They invest much of their earnings for their retirement years. Retirees and consume much and invest little.

In Europe, Japan and elsewhere, successive generations are becoming smaller and smaller. The economic and social implications of this over the coming decades are dramatic and chaotic.

In the U.S., the baby boom generation, the largest in history, is in the process of retiring. Generation X, which is much smaller than the boomer generation, is becoming the mature adult portion of the population. So, fewer mature adults are available to provide for more retirees. Fortunately for the Americans, Generation Y (the boomers’ children), is bigger than Generation X, so America can expect some relief from this demographic vise around 2030.

In summary, Zeihan sees a strong possibility for increasing global economic stagnation in the coming years, with increasing social turmoil. Since the problem begins with the developed countries, it is difficult to imagine how the less developed countries will find the investment needed for increased, or even continued economic development. All in all, Zeihan sees that America, by sheer luck, is in the best position to continue to grow in the coming decades.

For Smaller Manufacturers

Demographics do provide insights. However, apart from death and taxes, the future is notoriously difficult to predict. Zeihan’s views are worth considering, but they aren’t sure bets. Peter Zeihan did succeed in convincing me to buy his book. [1] I suggest that you do likewise. Then develop a process for continuously surveying global trends and events as input for operating your business.

Chuck - VancouverThoughtful comments are always appreciated.

…  Chuck Harrington (Chuck@JeraSustainableDevelopment.com)

P.S: Contact me when your organization is serious about prospering in the 21st century … CH

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New blog posts are published weekly.

[1] Peter Zeihan, The Accidental Superpower, Hachette Book Group (November 2014)