How Can We Plan For the Long Term?
|George Friedman, CEO of STRATFOR and author of The Next 100 Years|
Q: And when you are looking at bigger trends?
Well, the geopolitical situation can only be understood through a myriad number of facts. Without the facts, geopolitical forecasting is meaningless. And if the facts don't add up to a vision of what's going to unfold, they're pretty useless. So intelligence is the art of both gathering facts and making forecasts. In my book, I describe the development of space-based solar energy. That didn't come to me one night in a flash. It was the result of extended work trying to understand the constraints on the energy industry, the likelihood of rising demand, and the limits of current technologies. It involved a tremendous amount of fieldwork to draw that conclusion.
Q: Climate change, limited freshwater, and a whole string of other environmental issues are raised as very pressing. Why don't you give more attention to environmental or natural resource issues in the book?
Because these are all one problem: energy. We don't have a water problem if we have sufficient energy to do conversion of salt water. And our core energy problem is that energy consumption is going to rise. As the population ages, the workforce will contract. We will be using more and more robots to take the place of human labor. Robots are massive consumers of energy, as are computers.
The possibility of conservation isn't there. It's an impossibility. If we go to China and India and say we want you to remain poor, third-world countries so that the environment isn't screwed up, they're going to say no, right? And there is no possible political coalition that can exist in any advanced industrial country that is possibly going to get people to agree to, if you will, impoverishment in order for future generations to survive. The environmental movement tries to make conservation appear to be the acceptance of inconveniences. You ride your bicycle to work. That's not the solution. You have to have a massive willingness to accept a massive decline in the standard of living, for which there is no political will, which is why Copenhagen turned out to be such a farce. Nobody's prepared to do that.
Therefore the question is, how do we get energy at lower cost that's not polluting? And that has to do, as most technologies in the United States have to do, with the military. That's where technologies start, whether it's the microchip or the internet. The military is interested in controlling space, where energy is free. From space you can beam solar energy down to earth. The United States is beginning to want private companies to get into the business of lifting satellites; we are moving in a certain direction.
So I spend very little time on it because the environmental arguments are uninteresting. They have no political weight. I'm far more interested in the manner in which technological solutions will be found. If you talk about water sources, you're talking about energy. If you talk about global warming, you're talking about energy. The center of gravity of the problem is to find low-cost, non-polluting energy. And that's why I go to space-based solar power.
Q: How important is business in shaping the future?
Business of course is important, but it rarely dominates. There were periods in which business decisions dominated, like in the 1990s. But businesses are political events. A corporation is based on the concept of the limited liability corporation, where I will be able to invest in a company but my liability is limited to what I put in. The risk is based essentially on a political and legal decision, not a business decision. There is no such thing as a free market, so long as it's built around the idea of a corporation, because you already have a government-defined structure of risk, and therefore all businesses live within an environment that's constrained by the two other major variables, politics and the military.
As we can see with the financial system today, the major decisions about the financial system are going to be made by the politicians. The politicians, in turn, may be trumped by war. You have a highly interactive system, in which every part depends on every other part. But businesses who fantasize that they are free from these processes, or should be free, are bound to be disappointed.
Q: Are there major pools of capital that will be particularly important to the world economy going forward?
Countries like China will throw off money because they can't absorb it themselves, but the major pool of investment capital remains the United States on a global basis, both as a consumer and a source of capital. We have to remember, the United States is 25% of the world economy. That's a huge amount.
Certainly the U.S. borrows money. But foreigners desperately want to invest here. It's fascinating to watch the urgency with which they buy government paper that pays almost no interest. To understand this, you really have to understand why the United States is so attractive to foreigners and why a lot of money that comes into the United States gets recirculated as foreign direct investment out of the United States. We're kind of the grand engine of the system—again, it's possible to take a very short-run view of a couple of years and think that this is changing, but it is the long-run safe haven.
Q: China is described in the book as a paper tiger. Why do you come to this conclusion?
China is 1.3 billion people. According to Chinese government statistics, 600 million of those people have a total household income of $3 a day or less. Another 440 million earn between $3 and $6 a day. What we would call middle class, people with a household income of $20,000 and above, account for only 60 million people in China. That's still comparable to a large country, like France, but it represents less than 5% of the Chinese population. China is an extraordinarily poor country. Most business people travel to that small part of China that contains the tiny middle class. And they extrapolate from that.
You always have to remember that China can't sell electronics or toys to people earning $2 or $3 a day. They have to sell those goods to the advanced industrial world. And if the advanced industrial world isn't buying, China is in tremendous trouble. When the United States or Europe stops consuming as much as they did before, you’re dealing with unemployment in a country where unemployment can yield malnutrition. What we're seeing right now is China introducing a massive security crackdown to try to control a situation of enormous unhappiness in China.
- Ambiguous Problems Demand Guiding Rules, Not Rigid Plans
- Which Global Conflicts Will Dominate in 2014?
- George Friedman: Libya Is an Indulgence by the Political Classes
- Obama and Xi: Leaders of a Turbulent World
- Eastern outlook: Can Asia sustain the world?