Now letís talk about energy.
Iím going to give you some huge numbers here.
Quadrillion British Thermal Units (btuís)
Quadrillion - sort of a Dr. Evil number.
Nobody really knows what it means, it is just really big.
North America has been the number 1 the global demand center for as long
as we can remember and canít imagine a future that isnít like that. Here
comes that future in one generation. We
go up about 30% in energy requirements. Developing
Asia doubles in one generation. That
is a huge rule set shift. Letís look at that.
Asia in 2025. Break it down.
Here is your transportation. Electricity,
Electricity, Electricity. Quintupling
of cars - China. Four-fold increase
at least, in electricity. Where are
they going to need help? They have lots of coal.
They know how to turn on a nuke - donít need anybodyís help there.
Where they are going to need help either to develop resources
intra-region or to go out of region to buy those resources is gas and oil.
Already 2/3 of the oil coming out of the Persian Gulf goes to developing
Asia - 2/3. How are they going to
pay for that doubling of energy? Foreign
direct investment. This is the outflow
since the second world war - 7 trillion dollars roughly, excuse me, this
is the inflow - where the money has gone.
This is where people like to invest.
See if you canít spot my gap in the middle.
Whoís got the money - who has sent the money outward.
Tell me Middle East is connected to the outside world.
All those petro-dollars.
is why I have trouble with the Clash of Civilizations theory - because to get
all that energy, the Asians have to be friends with the Slavs, the Muslims and
increasingly the Africans. To pay
for all energy and all the infrastructure associated with it - trillions of
dollars of worth of investment. They
have to be friends with the Europeans and those crazy Americans. Which pretty much only leaves the Latinos for a clash
of civilizations. Thatís
understanding global integration. If
you think you can wage war with no understanding of that, then you really
arenít paying attention. But
letís talk security and how we export it around the planet. Another stretching
argument. Iíll go back to the
imperial heyday. In the old core
basically - in terms of its public sector exports.
It exported administration basically it kept the natives from getting too
restless while it took the raw materials out at uncompetitive rates. It was called colonization.
Jump ahead. End of WWII.
The surviving coreís first order of business, resurrect those parts of
the core that you want to resurrect - Europe and Japan - Marshall Plan, NATO,
the whole shebang. Over time, by the late 1950ís, you have a resurrected core
- much bigger than the surviving core that came out of World War II.
And you see a new public sector export emerge - we create the US Agency
for International Development, OECD - Organization for Economic Cooperation,
Coordination and Development They create this category of official
developmental aid. Foreign aid
becomes a new public sector export - end of the 1950ís and early 1960ís.
And then the Arabís get all that money with the oil and you see a big
transaction rate on arms - which we are still dealing with.
1970ís the great heyday for arms transfers.
You get to the globalization era, Iíll argue you have a surviving
superpower and partners. Japan is
sort of a head case right now, but I think they are coming out of it.
Our main public sector export right now is security. Youíll say it is technology - Iíll tell you it is private
sector. Youíll say it is mass
media content - Iíll tell you it is private sector.
The real public export is security.
Youíll say what about foreign aid?
Iíll tell you that foreign direct investment which was half of official
developmental aid at the beginning of the 1990ís is now 5 to 1 official
developmental aid. Meaning that we
send 5 times as much foreign direct investment to emerging markets and
developing markets as we send foreign aid.
Why does this matter? Let me
show you the conflicts across the 1990ís.
Here is roughly 3 dozen. Iíll
give you annual per capita GDP. Here
is the poorest countries - roughly half your conflicts. Here is your next level
of poverty - basically all the rest.
When you are talking advanced states, youíre not talking about much
violence. And frankly, those are
the two poorest neighborhoods there. So
simple guy that I am, Iíll argue - you get a country above $3,000 per capita
GDP, they tend to get out of the violence business.
How do you get them above the $3,000 per capita GDP - it is not official
developmental aid - it is foreign direct investment. Why? Foreign direct investment needs security.
Basic argument - Ray Vernonís product cycle.
Any industry over time - profits
rise, peak and then the labor gets too darn expensive and so you send the job
overseas. We had a textile industry here in the United States - that
was country A. Then it went to
Mexico - that was country B. Then
it went to China - that was country C which is turning out to be Country C for a
lot of industries - Why? They crank
out millions and millions of workers every year.
So think about the global economy. Think
about 3 big engines of job creation - EU, NAFTA and Japan which is becoming a
huge patron and mentor to the Chinese economy.
And it is the demand of China that has pulled Japan finally out of that
long term recession. Where they send jobs, technology and investment - that is the
core. Where they do not send it -
thatís basically the gap. Does
this matter in terms of development? Absolutely.
This is per capita income growth across the 1990ís.
Rich countries got richer - big surprise.
Globalizing economies got a lot richer.
Non-globalizing economies got poorer.
Youíll say that all those globalizing economies produce is garbage - it
is just manufactured raw materials. It
is not really high-end goods. Twenty
years ago, you were right. Twenty years ago the globalizing economies
manufactured goods as a percentage of the economy - only about 25% One
generation of foreign direct investment. This is the change - China is going to
start exporting pickups and SUVís under the Great Wall name within the next
couple of years. 9,000 to
18,000 cars coming from China to the United States.
So I agree with Jesse Helms on one point, official developmental aid,
plus correction equals a rat hole. But
rule sets that attract foreign direct investment that gets you real development.
Why? Because official developmental aid is an optimist - it hopes to
change human behavior. Money
is essentially a coward. If it gets
scared it runs away. Thatís what
security enables. This is why the
Middle East is screwed up I will argue. Itís
poorly connected to the global economy. Basically,
They send out oil, we send in money - Tom Friedmanís cheap gas station
trade in the Middle East is the lowest in the world.
Itís lower than sub-Saharan Africa.
The Middle East attracted a bigger percentage of global foreign direct
investment twenty years ago than it does today. It accounted for more trade
twenty years ago than it does today.
Latin America, Asia theyíve have moved off raw materials to
manufacturing. Middle East has not.
Eight of the eleven biggest economies in that region do not belong to the
World Trade Organization - they are not synchronizing their rule sets. They do
not connect their money to the outside world.
Meanwhile their population has doubled in the last twenty years.
Guess where this is going? Saudi
Arabia had a per capita income of about 28,000 twenty years ago. Itís $6,000 now. With
a huge chunk of their population under the age of 15, it will be below 3,000
very soon and I guarantee you, you will see mass violence there.