From Mackinder Forward

TUDOR PLACE:  This is a SUPERB piece of analysis by Alasdair MacLeod, perhaps the world’s foremost precious metals scholar.  But MacLeod is more, viz. a first-rate student of geopolitics, an advocate of multipolarity and an expert on the Mackinder thesis, both as originally proposed and now playing out.

Here’s the link:

The Great Game Moves on

My interest derives from the piece’s focus on some of the most vital issues facing us: 

• Geopolitics as the ultimate framework
• The Mackinder thesis as the most enduring explanation of land power vs. sea power/east vs. west
• The revival of the Anglosphere via the Five Eyes and now AUKUS
• Energy as the ultimate geopolitical reality
• The folly of premature decarbonization
• The US’s withdrawal from the Asian land mass as evidence of imperial contraction
• The weakening of NATO both internally and around the world
• And beneath it all, THOUGH ONLY BARELY REFERENCED, the fatal weaknesses inherent in Dollar hegemony and fiat currencies in general

So, let’s parse this a little.

MACLEOD:  “Following America’s withdrawal from Afghanistan, her focus has switched to the Pacific with the establishment of a joint Australian and UK naval partnership.

“The founder of modern geopolitical theory, Halford Mackinder, had something to say about this in his last paper, written for the Council on Foreign Relations in 1943. Mackinder anticipated this development, though the actors and their roles at that time were different. In particular, he foresaw the economic emergence of China and India and the importance of the Pacific region.

“This article discusses the current situation in Mackinder’s context, taking in the consequences of green energy, the importance of trade in the Pacific region, and China’s current deflationary strategy relative to that of declining western powers aggressively pursuing asset inflation.”

TUDOR PLACE: MacLeod has divided the piece into four parts: Introduction; Mackinder Vindicated; Green Obsessions and Global Trade; and Conclusions. I will outline each of them, providing quotes and comments as I go.

INTRODUCTION

• NATO has been defeated in the heart of Asia.
• The Shanghai Cooperation Organization (SCO) is now the dominant player in trade and technology.  SCO countries comprise 57% of the world’s population.
• NATO itself is fragmented as Turkey lurches Asia-ward and the EU trades increasingly with China and Russia.
• Three of the FIVE EYES have reacted to this by forming AUKUS in order to provide Australia with a nuclear submarine fleet to serve as part of a MARITIME COUNTERFORCE to protect TAIWAN and other Western allies in Southeast Asia and the Indo-Pacific region.
• MACLEOD:  “While Taiwan remains a specific problem, the objective is almost certainly to discourage China from territorial expansion and protect and give other Pacific nations on the Asian periphery the security to be independent from the SCO behemoth.”
• MACLEOD:  “AUKUS’s importance is in the signal sent to China and the whole Pacific region, following the abandonment of land-based operations in the Middle East and Afghanistan. The maritime threat to China is a line which must not be crossed. We are entering a new era in the Great Game, where the objective has changed from dominance to containment. Having lost its position of ultimate control in the Eurasian land mass America has selected its partners to retain control over the high seas.“

TUDOR PLACE: Make no mistake. What we are witnessing here is the RETREAT OF THE WEST from Asia. And it’s less like the end of an era than the END OF AN EPOCH. This isn’t Rome merely abandoning plans to conquer Germany and, instead, setting up its eastern and northern frontiers along the Rhine and Danube. This is Constantinople leaving the entire western half of the empire to the various Germanic tribes.

Yet, even as a STRATEGIC RETREAT how effective will it be? ALL WAR GAMES TO DATE have shown the US LOSING a maritime/islands war in the Pacific against China. If that’s the case, can we effectively — short of nukes — deter China in the region? OVER THE LONG RUN, I’d say NO.

MACKINDER VINDICATED

• One of the two weaknesses that the US and its maritime allies face versus Eurasian land powers is China’s OCEAN FRONTAGE.  This allows it to challenge the maritime powers’ control of the world’s sea lanes.  There’s also the trade factor as per OCEAN FRONTAGE . . . 
• MACLEOD:  “When Mackinder wrote his article the Japanese had already invaded Manchuria, but their subsequent defeat removed them from an active geopolitical role, and in place of a Soviet defeat China has entered a peaceful partnership with Russia that extends to all its old Central Asian soviet satellites. It is the focus on the ocean frontage that matters, upon which the maritime silk road depends.“
• The other weakness facing the maritime forces is their comparative LACK OF NATURAL RESOURCES . . .
• MACLEOD:  “Through its partnership with Russia all these latent resources are available to the Chinese and Russian partnership. And the real potential for industrialization, held back by communism and now by Russian corruption, has barely commenced.”
• MACLEOD:  “Both China and now India are rapidly industrializing, becoming part of a balanced globe of humanity.”
• MACLEOD:  “While the West tries to hang on to what it has got rather than progressing, China and India along with all of under-developed Asia are moving rapidly in the direction of individual freedom of economic choice and improvements in living conditions, to which Mackinder was referring.”
• Worse, here in the West — when we’re not busy parsing pronouns, assigning genders and concocting nonsensical anti-race theories — we’re raging against carbon as though it were the Anti-Christ . . .
• MACLEOD:  “But in pursuing its green agenda and eschewing carbon fuels, the West is unwittingly handing a gift to Mackinder’s Heartland, because despite diplomatic noises to the contrary China, India and all the SCO membership will continue to use cheap coal, gas, and oil which Asia has in abundance while Western manufacturers are forced by their governments to use expensive and less reliable green energy.”

TUDOR PLACE:  How can what’s happening here BE MUCH CLEARER?  The SCO has the numbers, the resources and the industrial plant to SURPASS THE MARITIME POWERS by a WIDE MARGIN.  Fifty-seven percent of the world’s population, 70% of the world’s mineral reserves and the lion’s share of the world’s productive capacity SHOUT ONE THING — EMERGING POWER.

GREEN OBSESSIONS AND GLOBAL TRADE

• As it has with social justice, gender and race issues, the West has become obsessed with the NOTION of DECARBONIZATION.  It is now almost PRIMUS INTER PARES among FIRST PRINCIPLES.  Thou shalt have no FALSE DILEMMAS before me.
• MACLEOD:  “Banning fossil fuels without there being adequate replacements must be a new definition of insanity, for which the current fuel crises in Europe attest. With over 95% of European logistics currently being shifted by diesel power, switching to battery power or hydrogen by 2030 by banning sales of new internal combustion engine vehicles is a hostage to fortune.“
• While the West thinks decarbonization will hurt Russia’s energy quasi-monopoly, in fact, it will merely create FUEL SHORTAGES in Western nations, most of which are ENERGY-RESOURCE POOR.
• MACLEOD:  “By way of contrast through its partnership with Russia, China is gifted unlimited access to all carbon fuels. She is still building coal-fired electricity power stations at an extraordinary rate — according to a BBC report there are 61 new ones being commissioned. A further 51 outside China are planned. As a sop to the West China has only said she won’t finance any more outside her territory. And India relies on coal for over two-thirds of its electrical energy. While Europe and America through their green obsessions are denying themselves the availability and technologies that go with carbon fuels, the Russian/Chinese axis will continue to reap the full benefits.“
• Though Chinese “pollution policies” will probably deny it membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), China’s own Regional Comprehensive Economic Partnership (RCEP) — currently in the works — has already been ratified by Japan, South Korea, Australia and New Zealand.  So, when it comes to the PRAGAMATICS of every day trade, “polluter China” will IN NO WISE be OSTRACIZED.  How can it be?
• Here are the world’s main trading blocs:

• OF CRITICAL NOTE is that the China-driven RCEP will be — in terms of population — two and a half times the size of the EU and the USMCA trade agreements combined.
• MACLEOD:  “With four out of five of the signatories being American allies, RCEP demonstrates that the AUKUS defense partnership is an entirely separate issue from trade. While the US may not like it, if RCEP goes ahead freer trade will almost certainly undermine a belligerent stance in due course.“
• MACLEOD:  “All being well and guaranteed by a balance of naval capabilities between AUKUS and China, a free-trading Pacific region will render the European and American trade protectionist policies an anachronism.“
• Yet, a second threat — that of financial instability — remains with China seeking to prevent financial bubbles while the US and greater West continue to rely on the expansion of BANK CREDIT for its own sake.
• MACLEOD:  “China’s policy of ensuring that the expansion of bank credit is invested in production and not speculation differs fundamentally from the US approach, which is to deliberately inflate financial assets to perpetuate a wealth effect.”
• By taking its approach, China also avoids the LIKELIHOOD of the US using financial instability to UNDERMINE CHINA’S ECONOMY, which Chinese leadership believes the US has already tried to do in Hong Kong.
• In addition, while other countries have sought to inflate their way through COVID, China has been pursuing a DEFLATIONARY monetary policy by restricting domestic credit expansion and shadow banking.
• MACLEOD:  “It is this restrictive monetary policy that has led to the current crisis in property developers, with the very public difficulties of Evergrande. Far from being a surprise event, with cautious monetary policies it could have been easily foreseen. Moreover, the government has a sensible policy of not rescuing private sector businesses in trouble, though it is likely to take steps to limit financial contagion.”
• China’s restrictive credit policies have also led ongoing fundamentals to favor the Yuan over the US Dollar . . .

• The domestic benefits of a stronger Yuan outweigh the lower margins experienced by Chinese exporters.
• Besides, as Chinese domestic consumption increases, exports matter less in the overall scheme.
• MACLEOD:  “Furthermore, with China dominating global exports of intermediate and consumer goods and while western budget deficits are increasing and leading to yet greater trade deficits, Chinese exporters should be able to secure higher prices anyway.”
• Meanwhile, the budget deficits FINANCED BY MONETARY INFLATION in the West are now undermining the purchasing power of all western currencies.
• MACLEOD:  “In terms of their purchasing powers, these currencies are now in a race to the bottom.“
• At the same time, COMMODITY AND ENERGY PRICES LOOK SET TO RISE SHARPLY . . .

• MACLEOD:  “Since global competitiveness is no longer a priority, China would be sensible to let its yuan exchange rate rise against western currencies to help keep a lid on domestic prices and costs. It is, after all, a savings driven economy, with the sustainable characteristics of a strong currency relative to the dollar.”

TUDOR PLACE:  While the West, particularly the US, continues to proceed with its UTOPIAN SOCIAL AGENDA — thereby ignoring the surplus-based foundation of maintaining ANY CIVILIZED SOCIETY, hyper-socially just or not — Eurasia continues to reposition itself as that CRTICAL LOCUS of future progress and productivity.

And this even as the West continues to try to “SCHOOL” Asia on “values.”

As Americans and Europeans have become increasingly absorbed in race, gender and climate issues — all of which have led to the most toxic identity politics — China, Russia and the rest of the SCO has taken control of manufacturing, trade, energy/minerals extraction and overall wealth production, even as China, as catalyst, has now begun restricting bank credit while increasing the value of its currency.

Who could be so blind as to not see what’s occurring here?

CONCLUSIONS

• The US’s “undeclared tariff and financial wars against China“ are being replaced by a NAVAL CONTAINMENT POLICY via the AUKUS partnership.
• MACLEOD:  “The change in geopolitical policy is not yet widely appreciated. But the parlous state of US finances, dollar market bubbles, persistent and increasing price inflation and the inevitability of interest rate increases will make a policy backstop of maritime containment the only geostrategic option left to America.”
• China’s more cautious monetary policies leave it less exposed to the effects of global monetary inflation.
• MACLEOD:  “Even though fiat currencies could be destroyed by imploding asset bubbles, these factors contribute to a set of circumstances that appear to lead to a more peaceable outcome for the world than appeared likely before America and NATO withdrew from Afghanistan.“

TUDOR PLACE:  MacLeod therein rests his case that MACKINDER WAS RIGHT, and that given the limitations facing the maritime powers, THEIR MOMENT OF DOMINATION HAS ENDED and we are now headed for a BETTER, MORE BALANCED WORLD.  What MacLeod DOESN’T DISCUSS is what exactly this might mean for the West, principally the US.  Yet, here are some questions to ponder.

• Can the US maintain its lead in tech and A-I so as to continue to dominate those sectors and thereby — via means not yet apparent — eat into China and the SCO’s growing advantages?
• Given a) the SOCIAL JUSTICE OBSESSION on the Left and b) the FOREVER-ISOLATION  QUEST on the Right, is the US public interested enough in remaining the WORLD’S HEGEMON even to care what happens vis a vis China?  Does it even understand the many ways it would be hurt, for instance, if the US Dollar were no longer the world’s reserve currency?
• Do US power elites realize that they can no longer continue to fund a CHINA/RUSSIA ENCIRCLEMENT POLICY that remains overwhelmingly WEAPONS-ORIENTED, when the US’s entire domestic infrastructure is crumbling?
• Does the West’s “GREEN FAITHFUL” realize that China and the SCO have no interest in a CLIMATE CHANGE AGENDA that will in any way restrict the PROJECTED GROWTH OF THEIR ECONOMIES?
• Do either the Left or Right realize how irrelevant a country — globally speaking — the US seems bent on becoming, absorbed as it is with race, gender, guns, religion, abortion, Woke-ness, cancel-culture, replacement theory, etc.?  Are Americans now truly horses‘ asses?
• Do even the EDUCATED CLASSES in this country realize how quickly history is moving and how rapidly the US could become an ECONOMIC CASUALTY AND FUTURE BACKWATER — a nation in decline with NUKES?

The world is REBALANCING ALL RIGHT, yet Americans haven’t accepted it, nor will they like it, once they do.

As Jim Rogers said recently . . . 

SOMETIMES, IT’S GOOD TO BE OLD.