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Arctic sea ice melting

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Editorial note: This article was first published at Arctic Progress in February 2011. In the next few weeks I will be reposting the best material from there.

The Arctic to become a pole of global economic growth? Image credit – Scenic Reflections.

Behold! Far north along the shores of the Arctic a quiver of upspringing settlements fringes the coast. Boats swarm around canning factories, smoke flutters above smelters, herds of reindeer dot the prairies… And here or there, on every street-corner, glimmer out the lights of theaters where moving-pictures entertain white people through the sunless weeks of the midwinter dancing-time, the singing-time, the laughing-time of Eskimo Land.

- Northward ho!: An account of the far North and its people.

In 2003, Goldman Sachs economist Jim O’Neill wrote the now famous paper Dreaming with BRIC’s, predicting that Brazil, Russia, India and China would overtake the developed G8 nations within a few decades and make astounding returns for faithful investors. The BRIC’s concept entered the conventional wisdom, spawning a host of related acronyms (BASIC, BRICSA, etc) – and if anything, realizing its promise well ahead of schedule. Last year, China’s real GDP possibly overtook America’s, and Russia’s approached Germany’s.

Yet for all their successes, the BRIC’s may not fulfill their expected roles as the stars of the global economy in the 21st century. The level of education is horrid in Brazil and atrocious in India; without the requisite human capital, these two countries will find it difficult to rapidly “converge” to developed world standards. China is much better off in this respect, but its high growth trajectory may in turn be disturbed by energy shortages and environmental degradation. China produces half the world’s coal, which is patently unsustainable given its limited reserves. But since coal accounts for 75% of China’s primary energy consumption and fuels the factories that keep its workforce employed, there is little it can do to mitigate this dependence. Meanwhile, China’s overpopulation, pollution and climate change predicament is so well known as to not require elaboration. Many other countries flirting around the edges of BRIC status – Indonesia, South Africa, Vietnam, etc. – face serious challenges in the form of low human capital, uncertain energy and food supplies and a rising incidence of AGW-induced droughts, floods and heatwaves.

There is one global region that may hold the key to resolving these intertwined problems – and even to become a major pole of global growth in its own right. For the most part, it is now an empty wilderness, but climate change is opening it up as potential living space. Its exploitation has the potential to halve the length of global freight transport routes while increasing their security, uncover sizable to gigantic new sources of hydrocarbons and minerals, and stabilize global food prices through the expansion of arable land. Its experience of management and conflict resolution may inspire a global model of cooperation – or it may degenerate into an economic, legal, or even military battlefield over shipping routes and sub-sea resources.

This global region is the Arctic Rim, and its adjoining ARCS: Alaska, Russia, Canada, and Scandinavia. The ARCS of Progress in the 21st century.

Arctic sea ice extent on September 1, 2010 – both the Northern Sea Route and the Northwest Passage are clearly open. Image credit – The University of Illinois Cryosphere Today.

From North Pole to Growth Pole

The core reasons behind the Arctic Rim’s bright prospects are global macro-trends: climate change; peak oil and resource nationalism; overpopulation in the South. These “push” and “pull” factors will induce a decades-long Arctic boom, starting with shipping, energy and mining, and culminating in a fundamental northwards shift of the center of the world economy. Let’s examine each of these in turn.

Breaking Ice For Shipping

Ah, for just one time I would take the Northwest Passage
To find the hand of Franklin reaching for the Beaufort Sea
Tracing one warm line through a land so wild and savage
And make a northwest passage to the sea.

- Northwest Passage song, Stan Rogers, 1981.

Typically, the cryosphere – the frozen part of the world – remains stable, because its snow and ice reflect much of the Sun’s heat, thus cooling itself. This process is called the ice-albedo feedback.

However, when the high-albedo ice melts, it leaves behind darker-hued earth, flora or sea that absorb far more heat. Local air temperatures soar and inhibit the reformation of the ice during cold seasons. From working to keep the system stable, beyond a critical threshold the ice-albedo feedback begins to reinforce a runaway dynamic of melting and warming.

The ice-albedo feedback largely explains why the Arctic is warming about twice faster than in the world as a whole.

In summer 2007, Arctic sea ice extent fell 38% below average since records began – an area the size of six Californias. The next year saw both the Northwest Passage and the Northern Sea Route clear of ice for a short period in late summer. As of December 2010, sea ice extent was the lowest for the month on satellite record, even surpassing the 2007 melt.

While the relentless fall in sea ice extent over the past three decades is remarkable enough, what’s stunning is the 55% decline in summer sea ice volume. Once the thick, multi-year ice is gone, then it’s really gone – the low albedo of the ocean water will raise local temperatures, preventing all but a thin film of sea ice from reforming during the cold winters. It is thus a near certainty that Arctic sea ice is already deep in its death spiral.

Inland, earlier snowmelts enable the ground to absorb more heat, while dark-hued shrubs and boreal forests encroach on the tundra.

Many of the effects will be negative. The polar bears will probably go extinct, either drowning for lack of sea ice, or starving, or migrating south and merging with their grizzly cousins. Invasive species from the south will drive out Arctic flora and fauna off the top of the world. Global ocean and air currents will be interrupted as the temperature differential between the Arctic and the tropics shrinks.

But the new Arctic merchants will be making a killing.

Shipping routes during ice-free Arctic summer . Image credit – Laurence C. Smith.

In 2010, the Baltica became the first high-tonnage tanker to sail with petroleum products by the Northern Sea Route, steaming from Murmansk to China. This was followed by the voyage of the MV Nordic Barents, the the first vessel to sail from one non-Russian port to another through the Arctic, cutting 5,000km off the traditional Suez route. It carried 41,000 tons of iron ore from Kirkenes, Norway to feed the steel mills of China. One upping them all, the year ended with the first round-trip voyage without icebreaker assistance via the Northern Sea Route. The Norilsk Nickel-owned ship Monchegorsk carried the metal from the north Siberian port of Dudinka to Shanghai, taking just 41 days of steaming (the Suez route would have lasted as long as four months).

The opening of the Northern Sea Route and rising demand for metals and petroleum products from China and other emerging markets is set to continue spurring the development of Arctic shipping. In January 2011, a Sovcomflot executive said the Russian shipping company has already received 15 requests for icebreaker assistance in the Arctic for this year, compared to just four in 2010*. The governor of Murmansk, Dmitry Dmitriyenko, predicts that cargo transport through the Northern Sea Route will increase tenfold by 2020. This expansion will be sustained with private investment funding: both Sovcomflot and the Port of Murmansk are to be partially privatized in the coming years.

Similar trends are in play with the opening of the Northwest Passage across Canada. It has been conquered by cruise ship in 2006 and the commercial ship MV Camilla Desgagnés in 2008. Exploitation of the Northwest Passage will likely go slower than of its north Eurasian counterpart, because of lower demand and the (relative) underdevelopment of Canada’s icebreaker fleet. But there is still a wealth of opportunities there.

Black Gold or Fool’s Gold at the Top of the World?

Use it or lose it is the first principle of Arctic sovereignty.

- Speech by Canadian Prime Minister Stephen Harper, 2007.

Our first and main task is to turn the Arctic into a resource base for Russia in the 21st century.

- Speech by Russian President Medvedev in September 2008.

Global oil production has now either peaked or is close to peaking, and will now either continue on its present “undulating plateau” – or begin to decline at an accelerating pace. The specifics are intensely argued over and the debate is far too extensive to detail here. But suffice to say, the “cornucopian” position that technological ingenuity and market forces will always conjure more and more resources out of a finite planet is untenable.

Any number of factors – global production exceeding new discoveries since the mid-1980′s; the world’s inability to significantly ramp up oil production despite soaring prices for the commodity; the rising costs of oil production due to the falling EROEI of the remaining oil sources; massively inflated reserves numbers from OPEC members; growing resource nationalism – militate against a business-as-usual future of increasing production in the oil industry.

These mounting challenges are the reason the big oil majors are pushing into the deepwater drilling that produced the Horizon blowout in the Gulf of Mexico, and partnering with Russian state oil companies to develop offshore gas deposits in the Kara Sea, and sinking millions of US dollars on prospecting off Greenland despite no returns to date. They need to maintain their reserves numbers to prevent their stocks from tanking – but to do so, the oil majors are forced into taking escalating financial, environmental and political risks.

The Arctic’s natural resources. Image credit – Global Research.

In 2008, the US Geological Survey estimated that the Arctic may hold as much as 13% of the world’s undiscovered oil (90 billion barrels) and 30% of its undiscovered natural gas. Unsurprisingly, the Arctic is rapidly becoming central to oil exploration. That said, capitalizing on these resources – even assuming they are as big as estimated above – will be exceptionally difficult. For a start, some 84% of these sources are likely to be offshore. Second, according to more recent USGS calculations, developing them will be prohibitively expensive: “Assuming production costs of up to $100 per barrel, only 2.5 billion barrels of oil could be lifted… and only with a 50% probability.” For perspective, an average oil price of $92 per barrel broke the world economy in 2008.

Talk of the Arctic becoming the next Saudi Arabia is unrealistic. Its oil reserves are smaller, more dispersed, more remote, of worse quality, and far more challenging to exploit. But this isn’t to say that its black gold is fool’s gold. Technological progress on Arctic drilling, as well as a lack of better options elsewhere, will draw Western oil majors and National Oil Companies north.

The Arctic isn’t only of interest to shippers and oilmen. Confronted with inexorable rises in demand from China, the global mining industry is rushing to add metals and minerals production capacity wherever they can. Just to take a few Arctic examples, there are plans to start or expand iron ore production on Canada’s Baffin Island, Norway’s Kirkenes and the Kola Peninsula. Coal production is resuming at Svalbard. Just in case the whole oil thing doesn’t work out, Greenland is looking to exploit its potentially vast mineral resources. The Coeur d`Alene Mines Corporation recently opened a gold mine near Juneau, Alaska ahead of schedule. Though volumes remain small, this will change as depletion becomes as evident for minerals as it is now for oil.

Towards an Arctic Civilization?

… Before this century is over billions of us will die and the few breeding pairs of people that survive will be in the Arctic where the climate remains tolerable.

- James Lovelock, inventor of the Gaia hypothesis.

Beginning with the shipping and energy industries, the influence of the Arctic will eventually come to encompass the entire world. Assuming that efforts to quickly cut greenhouse gas emissions are unsuccessful, and that geoengineering is either not attempted or doesn’t work, then many of the middle regions will become too hot and dry for sustained agriculture (and maybe human survival), and masses of climate refugees will try to migrate north. The center of global economic growth, politics, and perhaps – in the far future – population, will come to rest within the Arctic Circle.

The North Pole may become the spatial center of the world. Image source – Trausti Valsson.

This process will likely be accompanied by mass upheavals, societal collapses, famines, border conflicts, maybe even bigger wars. But as usual misery contains the seeds of opportunity. It is not impossible that the farsighted individuals who are now buying up Hudson Bay territories or Siberian riverside lands are positioning themselves or their heirs for lordships and kingdoms in 2200.

But let’s focus on just the next three decades. The opening of the Arctic by various “push” factors (overpopulation, global warming) and “pull” factors (shipping routes, resources) will create demand for infrastructure, housing, associated services, etc. Buying up strategic lands, routes and infrastructure in the Arctic region offers one of the best, and most overlooked, rates of return in the world today. Take inspiration from OmniTRAX, a Colorado-based company that bought the derelict Port of Churchill and its railway from the Manitoba government for a bargain basement price of $10 in 1998. Now that Hudson Bay has become clear of sea ice during the summer, these assets are receiving tens of millions of dollars of investment from the Canadian government.

How can you benefit from the coming Arctic boom? In the coming years, Russia is going to partially privatize lucrative state assets, such as shipping company Sovcomflot and the Port of Murmansk (which handles 60% of shipping across the Northern Sea Route). New ports, roads, railways, pipelines, mines, dams, oil and gas fields, aluminium smelters, LNG plants, etc. are springing up over the entire region.

Enter the ARCS of Progress: Why Alaska, Russia, Canada, and Scandinavia are Positioned to Dominate the Polar-Centric World

Идут на Север срока огромные,
Кого ни спросишь – у всех указ…
Взгляни, взгляни
В глаза мои суровые,
Взгляни, быть может, в последний раз.

- Soviet GULAG song, 1947.

O Canada!

Our home and native land!
True patriot love in all thy sons command.
With glowing hearts we see thee rise,
The True North strong and free!

- National Anthem of Canada.

Watching the economic news these days is a sure path route to depression. Anywhere you seem to look in the developed world there are awning budget deficits, soaring debts, depressed output, and stagnation. We’ve established that putting your money into the PIGS (Portugal, Italy, Greece, Spain) isn’t such a good idea. But the US is the “safe haven,” right? Unfortunately, its fiscal sustainability indicators are actually worse than the PIGS average. In 2009, the US got $0.6 in tax revenue for every $1 of outlays, or a receipt-to-outlay ratio of 0.6; the equivalent ratio for the PIGS was 0.78. Maybe Japan? With a 0.52 receipt-to-outlay ratio, it makes the US look like a paragon of fiscal discipline.

But within all that mess there’s a few, sparkling gems. Not only are they at the heart of the opening Arctic, but they are all excellent investment destinations on their own merits. They are the ARCS countries: Alaska, Russia, Canada, and Scandinavia.

Alaska

In contrast to the rest of the US, Alaska was barely dented by the economic crisis, its GDP declining by just 0.3% in 2009 and recovering 0.6% in 2010. Employment is lower than the US average. While states like California and Illinois flirt with state bankruptcy, Alaska has accumulated $40 billion in its Permanent Fund. Finally, it is – along with Greenland – the most demographically vigorous of the Arctic states, with a total fertility rate of 2.32 children per woman in 2006. It won’t be afflicted by the First World’s looming aging crises any time soon. Alaska is well set to fulfill its motto: “North to the Future!”

Russia

Though the poorest of the ARCS, Russia is also its fastest growing one, with 5% annual GDP growth during 2001-2010. Its high level of human capital (around 70% of Russians continue to higher education, a First World rate), vast resource wealth and decent macroeconomic management set it on a promising path to convergence with developed countries.

Additionally, Russia has a predominant population, economic and military presence in the Arctic. The Murmansk region by itself has more people than all of Alaska, while the Russian Northern Fleet is by far the strongest Arctic force. State policy is to transform the Arctic into Russia’s “strategic resource base” within the next decade.

Criticisms of Russia’s prospects typically center on allusions to its “Zaire with permafrost”-like corruption levels, plummeting population, crumbling infrastructure, “legal nihilism” and Putinist authoritarianism. While each of these has a grain of truth, taking them as gospel fundamentally misrepresents the country. For a start, if Russia really was more corrupt than Nigeria or Zimbabwe – as implied by Transparency International’s Corruption Perceptions Index – then it would still be deep in debt as in the late 1990′s, and its $480 billion foreign currency reserves would be in Cayman Islands accounts instead of the Central Bank’s vaults.

What about Russia’s demographic “death spiral”? A quick glance at Rosstat will show that its population grew in 2009, and that its total fertility rate, at 1.6 children per woman, is now higher than the European average.

One can spend pages upon pages unraveling the double standards, misrepresentations and outright lies which the Western media and political class use to attack Russia. But if you’re unconvinced, and refuse to buy into Russia’s undervalued market on principle, it’s your loss.

As t he professional Russia investor Eric Kraus wrote in Business Week in July 2010, “Russian markets are fashion victims, and are currently both unfashionable and cheap. You can own them now, or wait and buy the next time they surge back into vogue. And I will be selling out just about then.” I’d trust him – that’s exactly what he did in 2008!

Canada

Canada combines the American spirit of free enterprise, with a greater safety net and social mobility. It is also on far better fiscal footing. In 2010, its cyclically adjusted primary budget deficit was -2.7% of GDP (US: -7.0%), and its net debt was 32.7% of GDP (US: 65.2%; Japan: 104.6%). Possessing huge energy, mineral and freshwater reserves, as well as a well-educated and growing population, it is surely one of the better investment bets in the developed world.

Scandinavia (and Nordic)

The Nordic region is one of the richest, most educated and socially cohesive on Earth, frequently coming at or near the top in any global index of freedom, social mobility, environmental sustainability, and technological modernity.

In 2010, Sweden’s GDP grew the fastest in Europe at a blistering 5.2%, while maintaining a balanced budget throughout the crisis. Norway’s fortunes are far more directly tied to its oil industry, but peak oil, excellent state management of reserves and a low population make for bright prospects. Norway is the second richest European country after the banking center of Luxembourg.

Even apparent basketcases like Iceland may be a good investment to buy up on the cheap. While its international banking career might be over, it still has massive freshwater and geothermal energy reserves, that make it an attractive center for energy-intensive industries such as aluminium smelters.

Finally, contrary to right-wing depictions of social democracies as retirement homes full of effete, aging liberals, all the Nordic states have fertility rates that preclude major aging crises (they range from 1.8 children per woman in Finland to 2.2 in Greenland).

The Arctic when all the ice melts.

From an Ultimate Dim Thule…

By a route obscure and lonely,
Haunted by ill angels only,
Where an Eidolon, named Night,
On a black throne reigns upright,
I have reached these lands but newly
From an ultimate dim Thule —
From a wild weird clime, that lieth, sublime,
Out of Space — out of Time.

- Dreamland by Edgar Allen Poe.

Even in our day, science suspects beyond the Polar seas, at the very circle of the Arctic Pole, the existence of a sea which never freezes and a continent which is ever green.

- The mystic H. P. Blavatsky.

Before the rise of the world economy, spatial perspectives were local, at most extending to the boundaries of their cultural sphere or world-empire: The Ecumene for the Ancient Greeks and Romans; Dar al-Islam for the Muslims; Christendom for the Franks; the Great Wall for the Chinese. Medieval European geographers referred to any lands beyond the borders of the known world as Ultima Thule.

Globalization from the 19th century bound the entire world together, for the first time in history, but its flows and links of labor, capital and commodities passed the Arctic by. Unattractive to sustained private investment, the region’s development was always fitful and unbalanced, from the Yukon Gold Rush that petered out almost as suddenly as it flared up; to the penal camps, subsidized settlements and military bases of the Soviet Arctic, now decaying away except where hydrocarbons extraction has thrown them a lifeline.

But now the world is changing. No longer will opening the Arctic have to be a hubristic project, as with the chiliastic visions of Soviet planners; or a costly and unprofitable strategic necessity, as with the Cold War submarine patrols beneath the Arctic sea ice or the bomber flights over it. Today, it is global macro-trends such as global warming, resource depletion and overpopulation that will ensure the rapid but organic development of the Arctic.

With the growing human presence, the Arctic will inevitably begin to lose its luster of mysticism, foreboding and darkness. As the years turn into decades, and 2050 approaches, the polar-centric view of the world will become increasingly central to human spatial consciousness. The world’s trade, energy and capital flows will have been largely rerouted north.

The ARCS of Progress, their numbers swelled by climate refugees, and their economies bolstered by a flood of capital investment, will be amongst the leading Powers in the world. This assumes they retain their present political configurations. For instance, could an independent Greenland, with just 56,000 people today, retain its own national identity? Facing resource shortages and droughts in the south, would China encroach on the Russian Far East? Would the US try to assimilate Canada?

Whatever the answers to these questions, one thing is near certain. The vision of a northern Ultima Thule is dissipating, and will soon dissolve altogether (thought teh concept may be resurrected to describe a desolate, uninhabitable South many hundreds of years into an extreme AGW future). In its place there will emerge a polar world-economy of open seas, farms and growing cities by 2050.

There will arise an Arctic ecumene.

* According to more recent data, there were 34 transits of the Northern Sea Route in 2011, up from just 4 in 2010; with 820,000 tons of goods transported relative to 111,000 tons in 2010. Volumes are predicted to double again this year. This goes in tandem with record breaking sea ice melt in 2012.

Edit Jan 28, 2013: There were a record-breaking 46 vessels making the transit through the NSR this year.

(Republished from AKarlin.com by permission of author or representative)
 
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It’s been a great year! To recap, in rough chronological order, 2011 saw: The most popular post (with 562 comments and counting; granted, most of them consisting of Indians and Pakistanis flaming each other); Visualizing the Kremlin Clans (joint project with Kevin Rothrock of A Good Treaty); my National Comparisons between life in Russia, Britain, and the US; my interview with (now defunct) La Russophobe; interviews with Craig Willy and Mark Chapman; lots of non-Russia related stuff concerning the Arctic, futurism, Esperanto, and the Chinese language; possibly the most comprehensive analyses of the degree of election fraud in the Duma elections in English; TV appearances on RT and Al Jazeera; and what I hope will remain productive relationships with Al Jazeera and Inosmi. Needless to say, little if any of this would have been possible without my e-buddies and commentators, so a special shout out to all you guys. In particular, I would like to mention Alex Mercouris, who as far as I can ascertain is the guy who contributed the 20,000th comment here. I should send him a special T-shirt or something.

In previous years, my tradition was to review the previous year before launching into new predictions. I find this boring and will now forego the exercise, though in passing I will note that many of the defining traits in 2010 – the secular rise of China and of “The Rest” more generally; political dysfunction in the US; growing fissures in Europe, in contrast to Eurasian (re)integration; the rising prominence of the Arctic – have remained dominant into this year. The major new development that neither I nor practically anyone else foresaw was the so-called “Arab Spring”, as part of a pattern of increasing political stress in many other states: Occupy Wall Street and its local branches in the West; the Meetings for Fair Elections in Russia; Wukan in China and anti-corruption protests in India. I don’t disagree with TIME’s decision to nominate The Protester as its person of the year. However, as I will argue below, the nature of protest and instability is radically different in all these regions. I will finish up by reviewing the accuracy of my 2011 predictions from last year.

tsar-putin 1. There is little doubt that Putin will comfortably win the Presidential elections in the first round. The last December VCIOM poll implies he will get about 60%. So assuming there is no major movement in political tectonics in the last three months – and there’s no evidence for thinking that may be the case, as there are tentative signs that Putin’s popularity has began to recover in the last few weeks from its post-elections nadir. Due to the energized political situation, turnout will probably be higher than than in the 2008 elections – which will benefit Putin because of his greater support among passive voters. I do think efforts will be made to crack down on fraud so as to avoid a PR and legitimacy crisis, so that its extent will fall from perhaps 5%-7% in the 2011 Duma elections to maybe 2%-3% (fraud in places like the ethnic republics are more endemic than in, say, Moscow, and will be difficult to expunge); this will counterbalance the advantage Putin will get from a higher turnout. So that’s my prediction for March: Putin wins in the first round with 60%, followed by perennially second-place Zyuganov at 15%-20%, Zhirinovsky with 10%, and Sergey Mironov, Mikhail Prokhorov and Grigory Yavlinsky with a combined 10% or so. If Prokhorov and Yavlinsky aren’t registered to participate, then Putin’s first round victory will probably be more like 65%.

2. I will also go ahead and say that I do not expect the Meetings For Fair Elections to make headway. Despite the much bigger publicity surrounding the second protest at Prospekt Sakharova, attendance there was only marginally higher than at Bolotnaya (for calculations see here). So the revolutionary momentum was barely maintained in Moscow, but flopped everywhere else in the country – as the Medvedev administration responded with what is, in retrospect, a well balanced set of concessions and subtle ridicule. Navalny, the key person holding together the disparate ideological currents swirling about in these Meetings, is not gaining ground; his potential voters are at most 1% of the Russian electorate. And there is no other person in the “non-systemic opposition” with anywhere near his political appeal. There will be further Meetings, the biggest of which – with perhaps as many as 150,000 people – will be the one immediately after Putin’s first round victory; there will be the usual (implausibly large) claims of 15-20% fraud from the usual suspects in the liberal opposition and Western media. But if the authorities do their homework – i.e. refrain from violence against peaceful protesters, and successfully reduce fraud levels (e.g. with the help of web cameras) – the movement should die away. As I pointed out in my article BRIC’s of Stability, the economic situation in Russia – featuring 4.8% GDP growth in Q3 2011 – is at the moment simply not conductive to an Occupy Wall Street movement, let alone the more violent and desperate revolts wracking parts of the Arab world.

3. Many commentators are beginning to voice the unspeakable: The possible (or inevitable) disintegration of the Eurozone. I disagree. I am almost certain that the Euro will survive as a currency this year and for that matter to 2020 too. But many other things will change. The crisis afflicting Europe is far more cultural-political than it is economic; in aggregate terms, the US, Britain and Japan are ALL fiscally worse off than the Eurozone. The main problem afflicting the latter is that it suffers from a geographic and cultural rift between the North and South that is politically unbridgeable.

The costs of debt service for Greece, Portugal, Italy, and Spain are all quickly becoming unsustainable. They cannot devalue, like they would have done before the Euro; nor is Germany prepared to countenance massive fiscal transfers. The result is the prospect of austerity and recession as far as the eye can see (note that all these countries also have rapidly aging populations that will exert increasing pressure on their finances into the indefinite future). Meanwhile, “core Europe” – above all, Germany – benefits as its superior competitiveness allows it to dominate European markets for manufactured goods and the coffers of its shaky banking system are replenished by Southern payments on their sovereign debt.

The only way to resolve this contradiction is through a full-fledged fiscal union, with big longterm transfers from the North to the South. However, the best the Eurocrats have been able to come up with is a stricter version of Maastricht mandating limited budget deficits and debt reduction that, in practice, translates into unenforceable demands for permanent austerity. This is not a sustainable arrangement. In Greece, the Far Left is leading the socialists in the run-up to the April elections; should they win, it is hard to see the country continuing on its present course. On the other side of the spectrum, the Fidesz Party under Viktor Orbán in Hungary appears to be mimicking United Russia in building a “managed democracy” that will ensure its dominance for at least the next decade; in the wake of its public divorce with the ECB and the IMF, it is hard to imagine how it will be able to maintain deep integration with Europe for much longer. (In general, I think the events in Hungary are very interesting and probably a harbinger of what is to come in many more European countries in the 2010′s; I am planning to make a post on this soon).

Maybe not in 2012, but in the longer term it is becoming likely that the future Europe will be multi-tier (not multi-speed). The common economic space will probably continue growing, eventually merging with the Eurasian Union now coalescing in the east. However, many countries will drop out of the Eurozone and/or deeper integration for the foreseeable future – the UK is obvious (or at least England, should Scotland separate in the next few years); so too will Italy (again, if it remains united), Greece, the Iberian peninsula, and Hungary. The “core”, that is German industrial muscle married to Benelux and France (with its far healthier demography), may in the long-term start acquiring a truly federal character with a Euro and a single fiscal policy. But specifically for 2012, I expect Greece to drop out of the Eurozone (either voluntarily, or kicked out if it starts printing Euros independently, as the former Soviet republics did with rubles as Moscow’s central control dissipated). The other PIGS may straggle through the year, but they too will follow Greece eventually.

I expect a deep recession at the European level, possibly touching on depression (more than 10% GDP decline) in some countries.

4. How will Russia’s economy fare? A lot will depend on European and global events, but arguably it is better placed than it was in 2008. That said, this time I am far more cautious about my own predictions; back then, I swallowed the rhetoric about it being an “island of stability” and got burned for it (in terms of pride, not money, thankfully). So feel free to adjust this to the downside.

  • The major cause of the steep Russian recession of 2008-2009 wasn’t so much the oil price collapse but the sharp withdrawal of cheap Western credit from the Russian market. Russian banks and industrial groups had gotten used to taking out short-term loans to rollover their debts and were paralyzed by their sudden withdrawal. These practices have declined since. Now, short-term debts held by those institutions have halved relative to their peak levels in 2008; and Russia is now a net capital exporter.
  • I assume this makes Russia far less dependent on global financial flows. Though some analysts use the loaded term “capital flight” to describe Russia’s capital export, I don’t think it’s fair because the vast bulk of this “flight” actually consists of Russian daughters of Western banking groups recapitalizing their mothers in Western Europe, and Russians banks and industrial groups buying up assets and infrastructure in East-Central Europe.
  • The 2008 crisis was a global financial crisis; at least *for now*, it looks like a European sovereign debt crisis (though I don’t deny that it may well translate into a global financial crisis further down the line). There are few safe harbors. Russia may not be one of them but it’s difficult to say what is nowadays. US Treasuries, despite the huge fiscal problems there? Gold?
  • Political risks? The Presidential elections are in March, so if a second crisis does come to Russia, it will be too late to really affect the political situation.
  • Despite the “imminent” euro-apocalypse, I notice that the oil price has barely budged. This is almost certainly because of severe upwards pressure on the oil price from depletion (i.e. “peak oil”) and long-term commodity investors. I think these factors will prevent oil prices from ever plumbing the depths they briefly reached in early 2009. So despite the increases in social and military spending, I don’t see Russia’s budget going massively into the red.
  • What is a problem (as the last crisis showed) is that the collapse in imports following a ruble depreciation can, despite its directly positive effect on GDP, be overwhelmed by knock-on effects on the retail sector. On the other hand, it’s still worth noting that the dollar-ruble ratio is now 32, a far cry from what it reached at the peak of the Russia bubble in 2008 when it was at 23. Will the drop now be anywhere near as steep? Probably not, as there’s less room for it fall.
  • A great deal depends on what happens on China. I happen to think that its debt problems are overstated and that it still has the fiscal firepower to power through a second global crisis, which should also help keep Russia and the other commodity BRIC’s like Brazil afloat. But if this impression is wrong, then the consequences will be more serious.

So I think that, despite my bad call last time, Russia’s position really is quite a lot more stable this time round. If the Eurozone starts fraying at the margins and falls into deep recession, as I expect, then Russia will probably go down with them, but this time any collapse is unlikely to be as deep or prolonged as in 2008-2009.

new-eurasia 5. Largely unnoticed, as of the beginning of this year, Russia, Belarus, and Kazakhstan became a common economic space with free movement of capital, goods, and labor. Putin has also made Eurasian (re)integration one of the cornerstones of his Presidential campaign. I expect 2012 will be the year in which Ukraine joins the Eurasian common economic space. EU membership is beginning to lose its shine; despite that, Yanukovych was still rebuffed this December on the Association Agreement due to his government’s prosecution of Yulia Tymoshenko. Ukraine can only afford to pay Russia’s steep prices for gas for one year at most without IMF help, and I doubt it will be forthcoming. Russia itself is willing to sit back and play hardball. It is in this atmosphere that Ukraine will hold its parliamentary elections in October. If the Party of Regions does well, by fair means or foul, it is not impossible to imagine a scenario in which accusations of vote rigging and protests force Yanukovych to turn to Eurasia (as did Lukashenko after the 2010 elections).

6. Russia’s demography. I expect births to remain steady or fall slightly (regardless of the secular trend towards an increasing TFR, the aging of the big 1980′s female cohort is finally starting to make itself felt). Deaths will continue to fall quite rapidly, as excise taxes on vodka – the main contributor to Russia’s high mortality rates – are slated to rise sharply after the Presidential elections.

7. Obama will probably lose to the Republican candidate, who will probably be Mitt Romney. (Much as I would prefer Ron Paul over Obama, and Obama over Romney). I have an entire post and real money devoted to this, read here.

The US may well slip back towards recession if Europe tips over in a big way. I stand by my assertion that its fiscal condition is in no way sustainable, but given that the bond vigilantes are preoccupied with Europe it should be able to ride out 2012.

8. There is a 50% (!) chance of a US military confrontation with Iran. If it’s going to be any year, 2012 will be it. And I don’t say this because of the recent headlines about Iranian war games, the downing of the US drone, or the bizarre bomb plot against the Saudi ambassador in the US, but because of structural factors that I have been harping on about for several years (read the “Geopolitical Shocks” section of my Decade Forecast for more details); factors that will make 2012 a “window of opportunity” that will only be fleetingly open.

  • Despite the rhetoric, the US does not want to get involved in a showdown with Iran due to the huge disruption to oil shipping routes that will result from even an unsuccessful attempt to block of the Strait of Hormuz. BUT…
  • While a nuclear Iran is distasteful to the US, it is still preferable to oil prices spiking up into the high triple digits. But for Israel it is a more existential issue. Netanyahu, in particular, is a hardliner on this issue.
  • The US has withdrawn its troops from Iraq. In 2010, there were rumors that the US had made it clear to Israel that if it flew planes over Iraq to bomb Iran they would be fired upon. This threat (if it existed) is no longer actual.
  • The US finished the development of a next-generation bunker-busting MOP last year and started taking delivery in November 2011. But the Iranians are simultaneously in a race to harden and deepen their nuclear facilities, but this program will not culminate until next year or so. If there is a time to strike in order to maximize the chances of crippling Iran’s nuclear program, it is now. It is in 2012.
  • Additionally, if Europe goes really haywire, oil prices may start dropping as demand is destroyed. In this case, there will be an extra cushion for containing fallout from any Iranian attempt to block off the Strait of Hormuz.
  • Critically, the US does not have to want this fight. Israel can easily force its hand by striking first. The US will be forced into following up.

The chances of an Azeri-Armenian war rise to 15% from last year’s 10%. If there is any good time for Azerbaijan to strike, it will be in the chaotic aftermath following a US strike on Iran (though the same constraints will apply as before: Aliyev’s fears of Russian retaliation).

world-crude-oil-prodcution-and-fitted-growth-oil-drum

[Source: The Oil Drum].

9. Though I usually predict oil price trends (with great and sustained accuracy, I might add), I will not bother doing so this year. With the global situation as unstable as it is it would be a fool’s errand. Things to consider: (1) Whither Europe? (demand destruction); (2) What effect on China and the US?; (3) the genesis of sustained oil production decline (oil megaprojects are projected to sharply fall off from this year into the indefinite future); (4) The Iranian wildcard: If played, all bets are off. But I will more or less confidently predict that global oil production in 2012 will be a definite decrease on this year.

If investing, I would go into US Treasuries (short-term) and gold to hedge against the catastrophic developments; yuan exposure (longterm secular rise) and and US CDS (potential for astounding returns once SHTF). Property is looking good in Minsk, Bulgaria, and Murmansk. Any exposure to Arctic shipping or oil & gas is great; as the sea ice melts at truly prodigious rates, the returns will be amazing. I do think the Euro will survive and eventually strengthen as the weaker countries go out, but not to the extent that I would put money on it. Otherwise, I highly agree with Eric Kraus’ investment advice.

10. China will not see a hard landing. It has its debt problems, but its momentum is unparalleled. Economists have predicted about ten of its past zero collapses.

11. Solar irradiation was still near its cyclical minimum this year, but it can only rise in the next few years; together with the ever-increasing CO2 load, it will likely make for a very warm 2012. So, more broken records in 2012. Record low sea ice extent and volume. And perhaps 100 vessels will sail the Northern Sea Route this year.

12. Tunisia is the only country of the “Arab Spring” that I expect to form a more or less moderate and secular government. According to polls, 75% of Egyptians support death for apostasy and adultery; this is not an environment in which Western liberal ideas can realistically flourish. Ergo for Libya. I can’t say I have any clue as to how Syria will turn out. Things seem strange there: Russia and Israel are ostensibly unlikely, but actually logical, allies of Assad, while the US, France, the UK, and the Gulf monarchies are trying their best to topple him. These wars are waged in the shadows.

I've got some ways to go before I reach Navalny's demagogic stature.

I’ve got some ways to go before I reach Navalny’s demagogic stature.

13. As mentioned in the intro, 2011 has been a year of protest. As I argued in BRIC’s of Stability, in countries like China, Russia, or Brazil they will remain relatively small and ineffectual. Despite greater scales and tensions, likewise in Europe (though Greece may be an exception); these are old societies, and besides they are relatively rich. They won’t have street revolutions. I do not think Occupy Wall Street has good prospects in the US. By acting outside the mainstream (as part of a “non-systemic opposition”, to borrow from Russian political parlance) it remains irrelevant – the weed smoking and poor sartorial choices of its members works against its attaining respectability – and municipalities across the US are moving to break up their camps with only a few squeaks of protest. (This despite the arrests of 36 journalists, a number that had it been associated with Russia would have cries of Stalinism splashed across Western op-ed pages). I say this as someone who is broadly sympathetic with OWS aims and has attended associated events in Berkeley.

The nature of protest in the Arab world is fundamentally different, harkening back to earlier and more dramatic times: Bread riots, not hipsters with iPhones; against cynical and corrupt dictators, not cynical and corrupt pseudo-democrats; featuring fundamental debates about reconciling democracy, liberalism and religion, as opposed to weird slogans like “Occupy first. Demands come later.” Meh.

14. The world will, of course, end on December 21, 2012.

What about the 2011 Predictions?

1) My economic predictions were basically correct: “Today I’d repeat this, but add that the risks have heightened… The obvious loci of the next big crisis are the so-called “PIGS” (Portugal, Italy, Greece, Spain), and Ireland, Belgium and Hungary.”

2) Neither the Iranian war (chance: 40%) or an Azeri-Armenian war (chance: 10%) took place. If they don’t happen in 2012, their chances of happening will begin to rapidly decline.

3) Luzhkov still hasn’t been been hit with corruption charges, but merely called forth as a witness. Wrong.

Prediction of 3.5%-5.5% growth for Russia was exactly correct (estimates now converging to 4.0%-4.5%).

With headlines this December cropping up such as “End is nigh for Russia’s ‘reset’ with US“, my old intuition that US – Russia imperial rivalry couldn’t be set aside with a mere red plastic button may have been prescient: “In foreign policy, expect relations with the US to deteriorate.”

4) Pretty much correct about the US and the UK, though I didn’t predict anything drastic or unconventional for them.

5) “Oil prices should stay at around $80-120 in 2010 and production will remain roughly stable as increased demand (from China mostly) collides with geological depletion.” Totally correct, as usual.

6) China will grow about 9.4% this year, well in line with: “China will continue growing at 8-10% per year. Their housing bubble is a non-issue; with 50% of their population still rural, it isn’t even a proper bubble, since eventually all those new, deserted apartment blocs will be occupied anyway.”

7) 2011 was the warmest La Nina year on record, so in a sense thermometers did break records this year.

“Speaking of the Arctic, as its longterm ice volume continues to plummet and sea ice extent retreats, we can expect more circumpolar shipping. I wouldn’t be surprised to see up to 10 non-stop voyages along the Northern Sea Route from Europe to China, following just one by MV Nordic Barents in 2010.” If anything, I low-balled it. 34 ships made the passage this year! Sea ice cover was the second lowest on record, and sea ice volume was the lowest. So in the broad sense, absolutely correct.

“Likewise, expect the Arctic to become a major locus of investment.” This year, plans were announced to double the capacity of the Port of Murmansk by 2015.

8) Wrong on the Wikileaks prediction. The insurance file was released by The Guardian’s carelessness (whose journalists, David Leigh and Luke Harding, then proceeded to mendaciously lie about it), not by Assange. And the extradition proceedings are taking far longer than expected, though my suspicions that his case is politically motivated is reinforced by US prosecutors’ apparent pressure on Bradley Manning to implicate Assange in the theft of the State Department cables.

9) On Peter’s enthusiastic reminder, I did get my Russia Presidential predictions for 2012 wrong. Or 75% wrong, to be precise, and 20% right (those were the odds that I gave for Putin’s return back in May). I did however cover it separately on a different post, here. That said, I do not think the logic I used was fundamentally flawed; many other Kremlinologists ended up in the same boat (and most didn’t hedge like I did).

(Republished from Sublime Oblivion by permission of author or representative)
 
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The river of time flows on, and empires crumble, leaving behind only legend that becomes myth, while new polities arise to take their place. This process of decay and creation is going to receive a boost from “peak energy” and, above all, climate change – which will redraw the maps of power to an extent unprecedented since the end of the last Ice Age. Throughout recorded history, the centers of advanced civilization have seesawed east and west, but remained constrained within a “band of habitability” that did not extend much further north than Oslo, St.-Petersburg, or Harbin. If the pessimistic scenarios of AGW come true, this band will become inverted: the tropics and mid-latitudes will become increasingly drought-stricken, desolate wastelands, perhaps even uninhabitable by 2300, while the Arctic regions, and a thawing Greenland and Antarctica, will become new centers of global civilization.

In this post, with the help of many maps, I will explore what this will mean in more detail than I believe has been done anywhere else on the Web. Needless to say, I am making the assumption that there will be no technological singularity, or other technological breakthrough, that will enable the continuation of modern high-energy civilization. But not will these be any all-out apocalypse. That part of the technological base that does not rely on high levels of energy inputs for its maintenance will survive, that is, railways, electricity generated by hydropower, radios, even elementary computing. So let us venture forth into the brave new world of 3000 AD!

The Rise of the Poles

The first major transformation that I want to emphasize is that people will stop thinking of the world as they currently do.

world-map

This would make no sense when population levels in the equators and mid-latitudes plummet due to constant drought and heat stress that actually makes mammalian life unviable during the summer months. Let’s start with basics: temperatures under full humidity cannot exceed the body’s if you want to survive.

real-world-heat-stress-map

Today, the entire world fulfills this basic requirement. The same cannot be said of a world that is 11-12C warmer; at that point, a “belt of uninhabitability” will encircle the world.

simulated-world-heat-stress-map

As you can see above, life will become impossible within the interiors of the Eastern US, much of the interior of South America, northern Africa, large swathes of the Middle East, India, eastern China, and Australia. It will also get a great deal more uncomfortable almost everywhere else. Note how Siberia becomes as oppressively hot as the Ganges river plain today.

Furthermore, you need a constant source of water to sustain large-scale agriculture. Where this is impossible, as in the US Great Plains or much of the Middle East, there is a reliance on runoff from mountain snow-packs (the Himalayas, for instance, feed the great Chinese and Indian rivers) or fossil aquifers (as in the US Great Plains, or large parts of the Middle East and India today).

drought-map-2000

The world’s water situation will become a lot worse under extreme AGW, at least until plant life adapts and re-greens the southern regions (but this will take many tens of millennia at the very least).

drought-map-2100

As you can see from the map above, agriculture will become impossible in most of the world’s current breadbaskets. India will be too hot to survive in, despite its plentiful rainfall. Agriculture will largely be confined to what is now Alaska, northern Canada, Scandinavia, Siberia, northern China, and East Africa (as well as newly deglaciated Greenland and Antarctica).

But what’s more, quite a lot of the newly opened up areas will be flooded due to sea level rise. Below is a map of the effects of all the ice melting.

world-ice-free

This shows that two major regions that may have become (or remained) suitable for intensive agriculture will become flooded, such as much of what is now northern Argentina and the West Siberian Lowlands. On the other hand, they may go Dutch and salvage quite a lot of these territories by land reclamation. Also, the Caspian Sea and Aral Sea are obviously not going to expand as shown above, because they are internal and none of the extra water from melted icecaps is going to find its way into them; to the contrary, they will more likely vanish, leaving behind salted, desert wastelands.

But this is not all. A much warmer world will have much stronger storms, such as hypercanes. Originating from locally warmed ocean waters, they feature 800km/h (F9) winds and can traverse the globe several times leaving behind a trail of destruction. This will make civilization in Argentina difficult to achieve, as any dykes the agriculturalists build will be overwhelmed by the 18m storm surges generated by these hypercanes. Same goes for South-Eastern China, Borneo, and Papua New Guinea. On the other hand, the Arctic region will be much safer, because there will not be enough heat energy to sustain the hypercanes that far north; likewise, regions blocked off by mountains, such as East Africa, may also prosper, relatively speaking.

Finally, enclosed sea regions such as the Mediterranean, the Black Sea, the Baltic Sea, and the Caribbean Sea may become anoxic dead zones due to the shut-off of ocean circulation. But presumably any coastal dwellers will have long since left anyway.

All that said, it will be logical that – with the exception of whatever civilization happens to occupy East Africa, Antarctica, and perhaps Patagonia – the peoples of the world will cluster around the Arctic and will come to think of their world as one that is centered at the North Pole.

arctic-transformation

Indeed, people may no longer even think of world in terms of traditional concepts such as east, west, north or south. They may instead think horizontally (“Let’s go left, to Alaska,” says a traveler in Labrador) and vertically (“I think I want to either go down to see the ruins of Delhi this summer, then go up to the beaches of Novaya Zemlya,” says a rich aristocrat living in a city on the Yenisei flood plain).

Polar Civilizations

What will these post-high exergy, post-AGW civilizations look like? Much will depend on the geographic and climatic peculiarities of the entities in question. Let’s start off by listing the possible centers of powerful civilizations.

  • Scandinavia
  • Ob-Yenisei (West Siberian Lowlands between the Purana and the Urals)
  • Lena (Central Siberian Plain up to the river Lena)
  • Kolyma (maybe includes Anadyr; Kamchatka)
  • Amur (plus Heilongjiang, Sakhalin, North Korea)
  • Lake Baikal; Lake Balkash; Tian Shan statelets
  • Vorkuta (north-east of European Russia)
  • Alaska
  • Greenland
  • Canadian Archipelago
  • Labrador (along with Nova Scotia, Newfoundland)
  • Hudson Bay
  • The Eastern Rockies (to the far north)
  • East Africa
  • Patagonia
  • Antarctica
  • Though they remain cool enough, the regions of North California and the Himalayas will be unlikely to maintain high-level civilizations because they will be in permanent drought.

Below is a map of the Arctic region around 3000 AD, showing risen sea levels and a deglaciated Greenland.

arctic-far-future

The nature of the states and empires that will come to occupy this Arctic world will depend heavily on specific geographies and the patterns that have traditionally been associated with them. For instance:

  1. Massive flood plains and land reclamation, as may be expected in West Siberia, are typically pushed through by bureaucratic, authoritarian states (called “hydraulic despotisms” by Wittfogel). They tend to be populated by many peasants living near the edge of subsistence, feeding a religious, administrative, and military class that works to consolidate the country from internal rebellions and outside invasions.
  2. Bay regions, such as that of the Hudson Bay, and islands, as in the Canadian Archipelago, tend to be more diverse and disunited. Probably no single empire will consolidate them all under its control.
  3. There is a constant historical theme of conflict between lowlanders and highlanders. This may be resumed, though for different reasons. Historically, nomads frequently invaded and enslaved riverine peasant populations thanks to their craving of their material goods, emphasis on martial values, and protein-rich diets. In the far future, the highland nations in places like Kolyma or Alaska will be far more energy rich than in West Siberia or around the Hudson Bay, because they will have an abundance of the major remaining source of electric power: hydropower. Their populations will also be healthier, having access to more calories and being farther away from the diseases flitting across the tropical lowlands. If they can unite, their power will far outclass those of lowland empires, despite their lower populations.
  4. The other major historical enmity relevant to this world is that between sedentary people and desert nomads. Unlike the highlanders, the desert nomads will pose only a minimal threat. Nomads do not have manufacturing bases, and in a world in which guns and heavy weapons continue to be used in warfare, they cannot do anything more than harass border settlements.

Bearing these issues in mind, this is what I expect the geopolitical configuration of the world in 3000 AD to look like.

arctic-map

The West Siberian Lowlands between the Ob and the Yenisei, and the regions around the Lena River, will be an empire with resemblances to that of Egypt: heavily dependent on rivers and irrigation for agriculture in a region that would otherwise be desert, and obliged to support a big elite caste to manage said waterworks. These two river basins may well be united under one mega-empire, for the Central Siberian Plateau does not represent a serious impediment to communications between the West Siberian Lowlands and the Lena valley.

Kolyma will be able to sustain another major hydraulic civilization, and likely a more productive one because its hydropower potential relative to the population its river basin can sustain is greater than is the case in Siberia; and because Kolyma’s mineral base will be exhausted later than Siberia’s because it won’t be exploited as soon due to its remoteness. Kolyma will probably have hostile relations with the empire(s) to its west because of its logical desire to secure the Lena River. Separated from them by mountain ranges, Kolyma is probably unlikely to be united with smaller mountain states such as the ones that will appear in and around current-day Anadyr, Kamchatka, and Magadan.

eurasia

Most states to the south of Kolyma will be poor, being landlocked deep within Eurasia. The major exception is the the Amur region stretching to the origins of the Lena river, and including Sakhalin and modern-day Heilongjiang, which I expect to form the foundations of a respectable Great Power.

We may expect smaller entities to form around Lake Baikal, and the Altai Region, and what are now the countries of Kyrgyzstan and Tajikistan. They have adequate rainfall, and can raid Siberia’s underbelly for food and slaves. A major Power is unlikely to appear in the Himalayas. It is predicted to be a drought-stricken area, and under catastrophic AGW the mountains will lose all their snow, so irrigation agriculture will also be impossible. Crops may find it hard to grow at such high altitudes.

Already being somewhat settled, any resources in Scandinavia will have long since been depleted in Scandinavia by 3000 AD – with the possible exception of the Kola Peninsula, which has one of the world’s greatest concentrations of Rare Earth Metals. What is North-East Russia will also be similarly exhausted, and in addition will be buffeted by hypercanes coming up from the Atlantic and racing over a flooded northern Europe: not shielded by mountains, as are the West Siberian Lowlands and much of Scandinavia, they will bear the brunt of these fearsome tempests.

greenland

Once it thaws, Greenland will have a geography to die for. Multiple awesome harbors? Check. Internal lake massively lowering internal transport costs, allowing for ease of capital accumulation? Check. Secure from external threats? Check. Many mountains that will provide hydroelectric power (and block hypercanes)? Check. Full of minerals that will take a long time to start exploiting? Check.

I fully expect whoever gets Greenland to develop the Arctic world’s most developed economy and navy, and perhaps even become its predominant superpower.

canada-map

Alaska will presumably go much the way of Kolyma – a set of states, possible competing, possible confederating, all of them rich in relative terms because of the plentiful rainfall, mountains, and resources that will only start getting exploited late in the world’s history. There may be naval skirmishes between Alaskans and whoever wants to challenge them for control of the Bering Strait from the Kolyma side.

Canada will be a relatively poor set of competing entities, divided primarily into four groups: (1) the Rockies states centered around the great Canadian lakes, which try to eke out an existence by whatever they can dredge from any mines still bearing lodes (their north will be buffeted by the remnants of hypercanes billowing through Vorkuta and across the Arctic, and their south will be harassed by nomadic raiders from the desertified Great Plains); (2) the disparate collection of sultanates, slave plantations, foreign naval bases, and pirate strongholds that will claim control over the Canadian Archipelago; (3) the competing lowland states clustering around what is today the Hudson Bay, with no resources or sources of energy, their trade strangled by pirates from the Archipelago and their border settlements attacked by southern raiders; and (4) the state that will appear in Labrador. This state, which may or may not also include what is now Nova Scotia and Newfoundland, will have rolling hill-lands and will likely be the only respectable Power on the American continent apart from Alaska.

antarctica-map-no-ice

Elsewhere, the only region I expect to have a chance of becoming powerful is what is now Antarctica once it melts; however, contacts with the Arctic region will be difficult, passing through a world of desert wasteland on land and sea, so it may technologically regress to a greater extent than is the case in the northern hemisphere. Regardless, despite its formidable extent and industrial potential, it is hard to imagine Antarctica playing power politics in the Arctic from the other side of a long-deglobalized world.

The only two other regions outside the polar regions that may continue to support advanced civilizations are East Africa and, perhaps, Patagonia. However, they are both isolated, and unlike Antarctica, do not have the territorial extent to constitute their own world empires. They will fall far behind, and most of their energies will be preoccupied by the single imperative of arresting civilizational collapse.

Conclusion

In a very real sense, catastrophic AGW truly will create a new world. And it will not necessarily be uniformly apocalyptic in the style of Mad Max and Waterworld (though there’ll be plenty of that). Some regions may prosper, like Kolyma or Alaska, and a few, like Greenland, may even offer their citizens a quality of life comparable to 20th century standards. Others will be populated by peasants eking out a subsistence existence, as in West Siberia and much of Canada. As one goes further south, civilization fades away, and as one ventures into what is now modern Afghanistan or Spain or south of the Great Lakes, even survival becomes impossible during the summer months. Away from the Arctic, civilization will live on live on in isolated pockets if that.

Whereas it is possible to make some informed deductions as to the geopolitics and political economies of certain regions in a warmed world, this becomes an almost purely speculative affair once we move onto national specifics, such as culture, language, ethnicities, or religion. Presumably, the descents of today’s Americans, Europeans (especially Anglo-Saxons and Germanics), Russians, Chinese, Koreans, and Japanese will be relatively well-represented. The same cannot be said of peoples now living in the Middle East, India, or Africa. Even if the northern Powers let in their climate refugees, it is hard to believe they will give them an equal footing with the indigenous inhabitants; more plausibly, today’s ethnic Russians and Canadians will become the aristocrats or military and priestly castes of countries transforming into hydraulic despotisms on the backbones of southern immigrants exchanging survival for serfdom.

It is at this point that futurism ends, and fantasy begins.

(Republished from Sublime Oblivion by permission of author or representative)
 
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Happy new year to all Sublime Oblivion readers! This blog wouldn’t be what it is without you. In fact, I’d have probably abandoned it after a month or two after a couple of posts as I did with my first blog in 2006. So please keep on reading and commenting.

BTW, the image above is of the Xue Long (雪龙) icebreaker in the Arctic. It represents the intersection of several major current trends: The multifaceted rise of China; the growing importance of the Arctic; climate change.

Year in Review: 2010

As usual, I will begin by reviewing the defining trends of this year (Part 1), before making predictions for the next and finishing up by reviewing the accuracy of my 2010 predictions (Part 2). The main global theme of 2010 is the continuing Rise of the Rest – led by but not limited to the BRICs (Brazil, Russia, India, China) – set against the background of the accelerating political, economic and above all institutional and soft power decline of the old Western order.

(1) China keeps getting stronger, on every facet of national power, at an exhilarating rate. A comprehensive overview is well beyond the scope of this post, but a few examples give an idea of the general picture. A country that first displayed its UAV’s in 2006, has now exhibited more than 25 different models. One of them, the WJ600 – boasting a jet engine, multiple missiles and stealth features – might even be more advanced than any US or Israeli model. Just as the year rolled to an end, leaked photos showed that the Chinese now have their own fifth-generation fighter, the Chengdu J-20. Bearing in mind that Russia also revealed its PAK FA this year (after around 25 years of development), I think it’s safe to say that the Chinese have now fully caught up with Russia in non-strategic military technology*.

However, unlike the USSR, China is not a largely one-dimensional military power. What’s far more significant is that in sector after sector it is investing massive resources into R&D and espionage to achieve qualitative near-parity with Western products (e.g. Japanese trains, German machine tools, etc) then seizing their market shares abroad through its lower labor costs. China now produces half the world’s wind turbines and solar panels, a hugely strategic sector given current energy prospects; it has the world’s most powerful supercomputer (and is now second overall to the US in supercomputing); and finally, PISA international standardized tests have confirmed that Chinese youth are now as skilled in reading, math and science as their (far richer) Western and Japanese counterparts.

One can stretch these examples almost indefinitely, but the main point is that “the rise of China” isn’t just 1980′s Japan-style hype; its tenfold larger population makes it the real deal. If you wish, dismiss it by referring to its aging problems (might be an issue by 2030) or its property bubble (when 50% of its population is still rural). But don’t be surprised by not-so-distant headlines such as “China becomes world’s biggest economy by GDP” or “RAND analysts claim PLAN has achieved military superiority in the West Pacific”.

(2) While China is its main champion, many other countries traditionally considered to be economically stagnant, politically unstable and socially backward are emerging as major regional Powers in their own right, and beginning to project global cultural influence. In its adroit PR handling of the flotilla incident, Turkey has staked out its claim to regional prominence by challenging Israel and appealing to global Muslim sentiment. Brazil and Turkey enjoyed blistering growth rates. Russia has resolved its differences with Belarus in recent weeks, and together with Kazakhstan has finalized the timetable for a customs union; with the election of Yanukovych to the Ukrainian Presidency and Ukraine’s (partial) reorientation towards Eurasia, it too may join in the next year or two. Non-Western outlets such as Russia Today and Al Jazeera are now major participants in the global media discourse along with the likes of CNN and the BBC.

(3) The ideological rift between pro-stimulus Democrats and pro-scrouging Republicans – and their mutual capture by special interests (the financial sector, the military-industrial complex, etc) – has become increasingly evident this past year. This now puts the probability of the US ever resolving its budget problems by choice, slim to begin with, at next to zero. At this point, the only realistic chance of returning to fiscal sustainability without unleashing massive social disarray is to increase taxes on the rich, cut security spending, reign in the financial and “homeland security” mafias and rule out future stimuluses (whose effects tend to be crude and non-lasting) in favor of targeted social spending. However, ideological factors preclude this (The Tragedy of Obama: “a corporatist centrist giving endless concessions to Republicans who (successfully) portray him as a radical leftist”).

(4) How not to close awning budget deficits: the UK (I regret to say that I blogged in support of the ConDem coalition). While any idiot can see that the UK is on a fiscally unsustainable path, the ways in which cuts are being made, with a sneering classism that hits the poorest and least-privileged; commercialization of state social functions; and dumping of state assets, is incredibly shorttermist, foments social disarray and undermines longterm prospects. From 2011, the UK will implement the highest university tuition fees in the world. The headlines say it all: “McDonald’s and PepsiCo to help write UK health policy”, “Students could boost marks by showing ‘corporate skills’”, etc.

(5) In Europe, the German corporatist model, the Swedish welfare state, and to a lesser extent French dirigisme, have acquired ideological supremacy over the UK and Irish neoliberal models and the bureaucratized Mediterranean states. In a low-key meeting at Deauville in October, Sarkozy appeared to agree with Merkel’s proposals that would penalize countries that require bailouts by denying them votes in EU councils and placing them under Brussels supervision. Will the Mediterranean accept these Diktats or will it fracture the EU? Is even Germany, with its own high debts and demographic problems, capable of guaranteeing them? In any case, one thing we can say for sure is that this development reinforces the trends towards a multi-speed Europe, with the power of the traditional Franco-German core reinforced further by their (relative) economic resilience.

(6) The posturing by North Korea is, as usual, a show meant to extract concessions. Not worthy of the alarmist headlines.

It appears that the main reason Israel has so far restrained itself from striking Iran – as I still think will happen, eventually – is the remarkable success of the Stuxnet worm at sabotaging its uranium enrichment processes. But in all likelihood – I give it 75% – this strike will come sometime in the next few years.

Afghanistan is as unwinnable as always, but ideological inertia and the “psychology of previous investments” conspire to keep the US there.

(7) If you want the single best example of declining US soft power, consider this: even as prominent US politicians called for the assassination of a controversial foreign journalist for “espionage” or “information terrorism” – and even better, while touting its plans for World Press Freedom Day in May 2011 (presumably Assange isn’t on the invite list) – and Britain imprisoned him on what are almost certainly politically-motivated rape charges from Sweden, the President of Ecuador offered him asylum and the Russians mooted giving him a Nobel Peace Prize. Now I certainly don’t mean this portrayal of Assange’s travails to demonstrate that countries like Russia are altruistic crusaders for transparency and journalistic freedom; to the contrary, its safeguards for leakers are not so much abysmal as non-existent. However, Wikileaks illustrates that when the Western power elite is challenged so openly, forced to go through the political version of the airport body scanners it foists on its own citizenry, all pretensions to lofty ideals such as “rule of law” are tossed out of the window**.

But Wikileaks is more than just a collection of political gossip, or revelations such as that the British train Bangladeshi death squads and US contractors traffic in children for Afghan warlords, or inspiration for national and regional leaker websites such as Indoleaks (Indonesia), Rospil (Russia) or Euroleaks (EU), or even confirmation of “radical” viewpoints such as that the political elites of most European countries take their marching orders from the State Department.

The Wikileaks Saga is a historical crossroads that will determine the future balance between privacy, freedom and security in the West. Down one road, the powers that be will clamp down on journalistic freedoms and the unrestricted Internet, and so confirm the dominance of the one-way “surveillance state”; down the other, the transparency virus unleashed by Wikileaks will destroy the effectiveness of state “authoritarian conspiracies”, leading to citizen empowerment and “universal sousveillance” (two-way surveillance). Since technological development makes increasing surveillance inevitable, and consequently serves to concentrate power in the hands of materially and legally privileged actors such as states and corporations, I think the kind of citizen sousveillance represented by Wikileaks is indispensable for preserving personal freedoms and people power in our cyberpunk future.

(8) In the hottest year on record globally, which saw a devastating heatwave in Russia and unprecedented flooding in Pakistan and Australia, AGW denialism claimed victories in the US Congressional elections and the inconsequential summit in Cancún (without verification or penalties, any targets or commitments aren’t worth the paper they’re on). The climate crisis is now so self-evident and imminently devastating that the only psychological option is to draw in the runaway train curtains and prosecute anyone who peeks out and points out the broken bridge ahead. Geoengineering it will be (attempted).

(9) On Russia, Nikitin has summarized the year with a report card. Swell job. (Apart from the bizarre Khodorkovsky apologetics – talk of teachers’ pets!).

In short. The economy is so-so: though 4% growth is respectable, it should be seen in the context of an 8% GDP decline in 2009. (On the other hand, updated Real GDP per capita calculations by the World Bank and OECD/Eurostat have indicated that Russia’s is around $20,000, higher than the previous estimate of c.$15,000. This makes it similar to Poland, Croatia or Estonia; and in overall size comparable to Germany, and far above France or the UK). Its demographic situation has remained mostly unchanged from 2009, a small rise in births being more than canceled out by a rise in death rates caused by the 44,000 excess deaths due to the heatwave. In the political realm, the biggest developments were: (1) the uneasy survival of the Reset with the US, in which Russia cooperates with the West in return for more technological access; (2) the huge $700bn rearmament program announced for the next decade; and (3) the increasing drive towards recentralization and technocratic management encapsulated by the ouster of Mintimer Shaimiev (Tatarstan) and Yuri Luzhkov (Moscow).

(10) The melting of Arctic sea ice and local warming is creating the foundations for a sustained economic boom. This year the MV Nordic Barents steamed into the record books as the first foreign flagged vessel to sail from Europe to China through the entire Northern Sea Route without stopping at any Russian harbor. With traffic through the North Sea Route expected to increase tenfold over the next decade, ports being expanded, and power and transport infrastructure built up at a furious pace, the Arctic represents the next investment El Dorado after the BRICs. Follow S/O’s sister blog Arctic Progress to stay on top of things at the top of the world!

* Of course, this isn’t to say that all Chinese military tech is now up to Russian standards. E.g. Russia is well ahead in air defense. On the other hand, China’s naval technology is now arguably better. On average, I’d say the qualitative level of conventional arms is now roughly equal.

** Just as they are with the Third World victims of Western imperialism, or its own repressed minorities in urban ghettoes, or Muslims, but when it happens to English-speaking white guys it’s far more serious.

Stay tuned for Part 2 in which I make predictions for 2011 and review those from last year. Meanwhile, please feel free to point out any major events or trends I missed out.

(Republished from Sublime Oblivion by permission of author or representative)
 
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The Arctic is one of the most ignored regions in commentary about global trends. This is unsurprising. The vastnesses of Hyperborea, a semi-mythical world of curdled seas, boreal lights and eternal sunshine, have always been “outside” history. But the fast pace of global warming in recent years is kick-starting Arctic history, bringing with it the promise and peril of industrial civilization: first energy extraction and shipping, then military bases, and eventually farms and cities.

Identifying the opportunities and risks in these exciting new developments will be the main aim of my new blog project Arctic Progress* (which you can also follow on Facebook).

Don’t worry – I’ll continue posting at S/O on “Eurasia, geopolitics and peak oil” (if not as frequently as before). Furthermore, most of the Russian translations and analytical “core articles” on Arctic Progress will be reprinted here, the first one of which follows below.

Introduction – Why Arctic Progress?

1. The Arctic will become much more important in the near future as the melting of Arctic ice opens up circumpolar shipping routes. They are shorter than the constricted passages through Suez, Panama and Malacca, and far less vulnerable to bottlenecks, piracy and terrorism.

2. The Arctic is a once in a century investment opportunity. As the ice and permafrost retreat, the physical infrastructure of industrial civilization will begin to overspread the region: ports, roads, railways, pipelines, mines, oil rigs, housing, farms, schools, shops and military bases. The four major populated regions encircling the Arctic Ocean – Alaska, Russia, Canada, Scandinavia (ARCS) – are all set for massive economic expansion in the decades ahead.

3. Nowhere else is global warming so intrinsically tied to the prospects of a region as the Arctic; it is the force awakening it from its long, cold hibernation into the strange lights and thrumming noises of the modern world. But the Arctic is not passive – how it reacts to higher temperatures will drastically affect the future course and magnitude of further global warming. Global ocean and air currents will be interrupted as the temperature differential between the Arctic and the tropics shrinks. One disturbing possibility is that the melting of the Siberian permafrost will release vast amounts of methane, a greenhouse gas that is far more potent than CO2, into the atmosphere, and tip the world into runaway climate change.

4. Many regions of the world are overpopulated and facing resource depletion (e.g. “peak oil”) and rising pollution. The Arctic defies these general trends. As good hydrocarbon and mineral sources deplete, the economics of Arctic resource extraction will become more and more attractive. As the global south sinks deeper into water crises, heat stress and energy shortages, the polar regions will be changing into habitable and rather agreeable places. Exploitation of the region’s plentiful resources – coal in Alaska; minerals in the Russian Far East; hydrocarbons in the oceanic basin off Siberia; etc. – can sustain billions of people for at least a few more decades. That’s enough time to make use of the Arctic region’s plentiful wind and water fluxes to rebuild industrialism on a sustainable basis.

5. The Arctic melt is the kick-start to its own history. Both Russia and Canada are are accelerating their Arctic military buildups. NATO has held yearly military exercises in northern Norway from 2006, in which the (“fictional”) enemy team has a rather uncanny resemblance to Russia. No doubt China and European coalitions will soon take an interest too. The father of geopolitics, Halford Mackiner, claimed that control of Eastern Europe was the key to world power. In the 21st century, the prime strategic asset will become the Arctic Ocean.

6. James Lovelock, the inventor of the Gaia theory, believes that “before this century is over billions of us will die and the few breeding pairs of people that survive will be in the Arctic where the climate remains tolerable”. If you think climate-pessimists and doomers like him are correct, more or less, then it might do you good to start planning a “doomstead” in the Far North. The Norwegians already made a start with the Svalbard Global Seed Vault, and one day perhaps cities will follow.

7. That few blogs (yet) exist on the Arctic is a good enough reason to start one, no? Besides, I think I can do a decent job of it. First, I know Russian – the other main language of the Arctic apart from English. This blog is about the Arctic, as opposed to just the North American Arctic. Second, my areas of blogging interest, centered around Russia, geopolitics, energy, and futurism, are well suited for an Arctic theme. One can even say that the Arctic brings them all together. …

* Why am I writing about the Arctic on another site? (1) I reckon this blog is crowded and chaotic enough as it is, mixing Russia, geopolitics, futurism, and heck knows what else, (2) I don’t want to drown this blog with short postings about specific Arctic developments which will not be of major interest to many S/O readers, and (3) I want Arctic Progress to develop as a stand-alone hub for Arctic commentary on the interwebs.

(Republished from Sublime Oblivion by permission of author or representative)
 
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EDIT 11/27/08: Since writing this, I have come to realize that peak oil is real and will play a major role in any future scenario, and far sooner than the other three themes I highlight here.

The twentieth century was, above all, a Russian century. Granted, Germany was the most important challenger Great Power in the first half of the century, while in the second the United States begun to assert itself on the world stage. Nonetheless, Russia, under its Soviet incarnation, was the key focal point of world history. It is hard to imagine a movement like Nazism arising in Germany, or indeed fascism in general, without the spectre of communism hanging over a country. Similarly, the US was only brought permanently out of its traditional isolationism by the Truman Doctrine – their pledge to “support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures”, or, in other words, to contain communism.

This article will be about Russia’s place in the world in around 30 years time. In particular, will it be able to reclaim its former mantle as a superpower? Does it have the potential to usher in a new Russian century?

Firstly, we must define what a superpower is. Let us assume that it is a state with a leading position in the international system and the ability to influence events and project power on a worldwide scale. Furthermore, it must be strong on multiple planes of power – not only in the military sphere, but also in ‘softer’ areas like the economic base and cultural influence.

(Chinese political scientists have developed a metric for state power called Comprehensive National Power. There is no generally agreed-upon method by which different components of power are weighted and totalled. Nonetheless, virtually all of them have the US leading the pack, with Russia, Japan, China, France, the UK and Germany following behind in a cluster.)

Today, the world’s only country with the whole plethora of attributes – economic, technological, political, military and strategic – that make a state a superpower is the United States. Nonetheless, there are important trends at work that threaten to undermine this full-spectrum dominance. We have identified the three most important of these as economic (re)convergence, exponential growth in IT and global climate change.

The most important of these is economic convergence. Given decent growth conditions and the appropriate human capital and physical infrastructure, per capita incomes should converge across nations via the diffusion of technology and best practice. This process has accelerated with progress in communications technology: while in the 19th C Sweden played catch-up at 1% growth per annum relative to Great Britain, today China closes its gap with the US at a rate of up to 8%. This means that, historically speaking, the world’s centres of economic power are shifting much more rapidly than at any time before.

This trend is very positive for large countries with currently low per capita incomes like China and India, but negative for advanced industrial nations like the US, Japan and Germany. Their economic decline relative to Europe took centuries – a process that culminated in the industrial revolution, which saw these formerly proud empires relagated to being colonial appendages of the Western powers. The time has come for a great reverse. As a medium-income country, the effect will be slightly positive for Russia. Assuming there is no large-scale disruption of globalization in this century (as happened in the First World War and the rise of tariffs in the early 20th C), this trend should hold.

Of course, it’s not sufficient merely to be behind to catch up. One must also have the human capital and physical infrastructure in place. One of the best proxies for human capital is education.

Sources: CIA World Factbook 2007 for literacy %; United Nations Statistics Division for school life expectancy (2005 or latest); World Bank for tertiary school enrollment (2005 or latest); PISA 2006 Math scores; PISA 2006 Science scores; TIMMS 2003 Math scores for 8th Graders; TIMSS 2003 Science scores for 8th Graders; * other source.

Now as we can see from the info above, Russia’s (and eastern Europe’s) educational profile is of a First World character. Hence it is likely that the region’s impressive post-millennial growth will be sustained, resulting in convergence with west European countries by a 2020-30 time frame.

A more comprehensive analysis of this phenomenom is given by Goldman Sachs’ GES (Growth Environment Score) and this seems to back up our fundamental points – namely, that China and Russia are better positioned for sustained growth than India or Brazil. (Russia recently overtook China in the GES). India will nonetheless grow quickly, despite its creaking infrastructure and poor human capital, simply because it is so far behind. Brazil, however, will not, because while it is a middle-income country, its human capital profile seems to dictate that that’s where it should stay. It will remain a land of promise. The same goes for the rest of South America and the Muslim world. It usually takes about a generation to effect real change in the human capital of a particular country. Hence, we think it unlikely that there will be any significant changes to the following picture – rapid convergence for China and eastern Europe with Russia, convergence from a low base of India and stagnation for all the other regions (in relative terms).

In conclusion, China seems destined to become a third economic pole in the world by 2020, in addition to the United States and European Union. (According to the World Bank’s revised figures, China’s purchasing power parity GDP in 2005 was 5.3trn $, compared with the US’s 12.4trn $ and EU’s 13.0trn $. Assuming it manages to keep a 6-8% annual growth lead over them, it should become the world’s largest economy by 2020). India will also become much larger, but its overall size will be comparable to Japan’s – furthermore, the same development pattern that we see today (islands of IT-based prosperity in a sea of poverty) will be preserved, and its per capita income will remain extremely low. Russia and eastern Europe, on the other hand, are likely to converge to west European levels of development by 2030. While Russia’s overall economy will remain small as a percentage of world GDP (around 4-5%, up from 3.4% today), it will be fully developed with a strong high-tech mainstay.

The second global trend is the doubly exponential growth in IT. Economic growth has been with us since the dawn of history, although it took us a long time to realize this. Furthermore, it is not only exponential (ie, growing by x % per annum) – it is doubly exponential (x itself increases exponentially). The reason it took us such a long time to recognize this fundamental fact is that in the beginning, growth was very slow (a fraction of a percent per annum, as late as medieval times), so we perceived it as being linear instead of exponential. (The futurist Ray Kurzweil calls it the intuitive linear view versus the historical exponential view. His article The Law of Accelerating Returns is highly recommended).

However, during this century Moore’s Law in computing – that the number of transistors that can be inexpensively placed on an integrated circuit is increasing exponentially, doubling approximately every two years – has become well known. Furthermore, it is doubly exponential growth – while calculations / second / $ doubled once every 3 years in the 1950′s, the doubling time decreased to 2 years in the 1980′s and is currently at 1.5 years. The same general pattern can be discerned in world economic history. In medieval and early modern times, all societies’ per capita income grew at a rate just a little above 0%, and this fact was concealed by much stronger cyclical and chaotic tendencies. However, leading industrial countries grew by 1% per annum in the late 19th C per capita, while today this has increased to 2-3% per annum.

As more and more of the components that are governed by Moore’s Law enter our manufactures (GPS in cars, etc) and services (automated banking, etc), so will the growth rate of the real economy increase faster and faster. The case can be made that the Great Powers of this century will be determined by such things as R&D spending and personnel, nanotechnology spending and supercomputer production; just as the Great Powers of yesteryear focused their energies on steel, coal and engines. Not only will they generate the Kondratieff wave of economic growth for the next 50 years, they will give the states that nourish them capabilities that will fundamentally alter the strategic landscape. Powerful computers can be used to construct a truly effective missile defence; nanotechnologies can create very strong body armor (the US plans to roll out a suit that integrates nanotechnology exoskelotons and liquid body armor by 2020, as part of its Future Force Warrior project. A number of other countries have similar programs). Furthermore, nanotechnology can also be used to mitigate the effects of the third trend – climate change – by releasing light-reflecting aerosols into the atmosphere or even mass producing molecular machines that break down greenhouse gases into harmless components.

Eventually, true engines of creation (molecular self-assemblers) have the potential to radically transform every facet of everyday life through the dematerialization of production and elimination of material scarcity. A computer that can pass the Turing test also lies on the horizon, and its development will unleash “an exponential runaway beyond any hope of control“. After all, superintelligence is the last invention man need ever make. Now scrutinizing these forecasts is beyond the scope of this blog, let alone this article. We will refer you to Kurzweil’s Law of Accelerating Returns and the excellent The Futurist blog, and leave it at that.

Sources: World Development Indicators database (2004 or latest) for R&D, ppl % is researchers / million people, sp % is spending as % of GDP; public nanotechnology funding 2003 in millions of Euros; countries’ % share of top 500 supercomputers as of 11/2007. * These are my estimations (2007 spending), based on these articles: India’s nanotech spending below global levels (India spends less than Taiwan which spends 104bn $) and Russia Pours Billions in Oil Profits Into Nanotech Race (Russia to spend 7bn $ in next 5 years).

This table illustrates how strong today’s leading countries are in the leading spheres of the high-tech industries. The United States has a commanding lead. It has an excellent R&D infrastructure, with most of the world’s best universities (as defined by Shanghai Jiao Tong University). It has more than half of the world’s most powerful (ability to do calculations quickly) supercomputers – if anything, their lead is underestimated, since all the major vendors that manufacture these supercomputers (IBM, Hewlett-Packard, Cray Inc., Dell, SGI) are American. Its high government spending on nanotechnology conceals an even larger amount of private spending, as can be deduced from the diagram below.

The only other country roughly comparable to the US is Japan (while Japanese supercomputers are less powerful, they beat American ones on efficiency). Although small, individual European countries like Sweden or the Netherlands are also comparable to the US, Europe as a region is weighed down by technological laggards like Italy, Portugal and central-east Europe in general. Although the large European states spend a lot on nanotechnology (as does Russia from 2007), there is relatively very little private enterprise in this area. Amongst the BRICs, China and Russia look like they have promising futures in high-tech; the same cannot be said of India and Brazil, notwithstanding all the recent hype about the former’s flourishing IT industry (which is mostly based on Western out-shoring of cheap services, rather than true innovation).

In conclusion, the US and Japan look set to continue dominating these high-tech industries, although the US will continue to make most of the conceptual innovations. There will also be regions of the world (Taiwan, South Korea, Israel) that will occupy strong niche positions. The big European countries will lag, although Russia has the potential to break through to a leading position (its government has recognized nanotechnology as a national strategic priority, allocated massive funds to it and is seeking to build a hi-tech venture capital industry to attract private investment). China might converge to Europe in this field, but India will likely and Brazil will certainly remain substantially behind.

The final major trend for the medium to long-term global future is that of climate change. Historically speaking, global warming has followed the ‘high’ scenarios of climate models since they were first seriously constructed in the 1980′s. Nonetheless, even they might have underestimated the risk and magnitutude of catastrophic climate change. The Earth has many feedback mechanisms that could make runaway global warming a real possibility. Increased heat due to CO2 emissions will unleash the methane underneath the Siberian permafrost, accelerate forest decay in the tropics and melt the frozen methane clathrates that lie beneath the world’s ocean sediments. Think of these as primed explosives, CO 2 levels as the fuse. Beyond this global climate tipping point, there is no turning back – and the Pentagon, being substantially wiser than the Bush administration, seems to have taken note. There is even evidence that the true magnitude of global warming to date has not been fully appreciated due to global dimming – the ‘sunshade’ that emissions of soot particles create over our heads.

There have already been articles about who wins and who loses in a warmer world and even a book (How the World will Change – with Global Warming by Trausti Valsson, which is available as a free download). Northern regions like Russia, Scandinavia, Greenland and Canada will gain immensely as global shipping shifts to the Arctic and new oil and gas deposits are found at the top of the world. (Russia’s leadership seems to have foreseen this global shift – it has recently claimed a large chunk of the Arctic seabed and made long-term plans for the resurrection of a powerful blue-water navy). According to the book,

Transportation access will be greatly improved by new transcontinental railways, and as the rivers leading into the interior have become more or less ice-free, this area will be able to reap the benefits of the enormous shipping traffic along the North Siberian border.

The effect on Europe as a whole will be neutral, since the cancelling of the Gulf Stream will be counteracted by generalized warming (although Italy, the Balkans and Iberian peninsula will face drought and maybe even desertification). On the other hand huge new areas will be opened up in the north. In North America, although the West will face desertification, new areas will be opened up in Canada to compensate.

China and India will be very badly affected, both facing severe water shortages and inundation of the coastlines and river valleys (Ganges, Yangtze, Huang Ho) where most of their people live. While Europe and the US will also face inundations as the Greenland and West Antarctic icecaps melt, the extent will be more limited (mostly the Netherlands and Florida). Below is a fun applet you can play with to simulate various states of sea level rise.

In conclusion, in a warming world the US, Europe and Brazil will weather the storm, while Russia will benefit not only relatively, but absolutely. China and India will have to devote massive amounts of state resources on mitigating its effects, and questions have to be asked whether they will even be able to feed themselves. China’s northern breadbasket is turning into a dustbowl and its wheat production has been falling for the last decade, while global grain stocks have also dipped in the last 5 years under a barrage of drought and crop diseases. Outright famine is unlikely, we think – after all, China is fast becoming a medium-income country, and there is room to cut back on food consumption by reducing the proportion of meat in the people’s diet (which has been the primary cause of rising global food demand, rather than population increase).

In any case, it appears that there will be a need for a massive migration from overpopulated southern countries to the north to prevent a catastrophic disparity in global wealth and resources. (As such climate change will act counter to the equalizing tendencies of economic convergence). It is reasonable to imagine Canada and Russia filling up with tens, eventually even hundreds, of millions of immigrants from the stricken zones to the South – provided they accept their moral duty to let them in. If they don’t, there will probably be intense wars over dwindling resources in the south, possibly involving the use of nuclear weapons, from which the rich northern countries will be unable to insulate themselves from.

As we come close to the end of our analysis of the three trends – economic convergence, technological progress and climate change – that will shape world geopolitics this century, it is time for a summary of the main findings.

The US, as today’s single superpower, will be challenged by economic convergence on the part of emerging markets like the BRICs. Nonetheless, it will not be catastrophically affected by global climate change and its extraordinary strength in hi-tech should stand it in good stead for the next few decades. It will preserve its vast strategic strength (nuclear arms), power-projection capabilities and cultural influence.

Russia will re-emerge as a superpower due to economic convergence and above all global warming, which will shift global shipping to the Arctic, open up vast new energy sources and make the Siberian interior habitable on a sustainable basis. It has the potential to break through and become a leader in hi-tech industries. Economic convergence should see its per capita incomes approach, and possibly overtake, those of European countries within a generation – nonetheless, its overall economic weight in the world will remain modest. It will preserve its vast strategic strength (the equivalent of the US), should have gone some way towards developing power-projection capabilities and most importantly it will be the only Great Power with surplus energy and mineral reserves.

China will be the world’s largest economy in purchasing power parity by 2020 at the latest, although it will continue to lag in per capita terms. The development of a comprehensive R&D network should allow the creation of a truly independent, comprehensive military industrial complex, thus joining the US and Russia in that regard. Nonetheless, it will be very negatively affected by climate change, and unless a technological solution is found to this problem, its government will be increasingly pre-occupied with mitigating the consequences of global warming – desertification and inundation. China also plans to build power-projection capabilities (hi-tech forces capable of winning localized wars against technologically advanced adversaries (read: the US)) and increase the size and comprehensiveness of its strategic deterrance.

The European Union has all the pre-requisites of superpowerdom, but the million-dollar question is whether they will succeed in uniting into a truly federal state with one independent, European foreign policy and an integrated military-industrial complex. Such an outcome looks unlikely at present (what with France’s and Belgium’s rejection of the European Constitution), and that is unlikely to change, especially as the EU expands to take in the Balkans and maybe even Turkey. As it stands, however, like the old Polish-Lithuanian Union, Europeans can be manipulated against each other by the powers to the east and west (Russia and the US), which are stronger than any individual European state.

There is no question of Japan, India or Brazil becoming a superpower. Japan is developed and technologically advanced, but it does not have the public will to become militarized and actively project hard power over its own region, let alone the world. It has no energy resources and is vulnerable to being cut off from energy and food imports; nor does it possess a strategic deterrant. India has all of China’s problems and fewer of its advantages (its human capital is much lower, the infrastructure is poor and it is already more than a decade behind in per capita income). Brazil can be energy independent and it has a respectable industrial base, but it has no room for convergence (due to its low human capital) and only a scant R&D infrastructure. It has neither the capability nor the will to project its influence beyond its borders.

Our prediction is that by 2030, there will emerge a tripolar world dominated by the US, China and Russia. As we have shown, all these countries possess the means or the potential to acquire the means to acquire superpower status.

Their populations, we believe, also have the will to achieve this. As a proxy for this, let us take the World Values Survey results to the question, “E012.- E012.- Of course, we all hope that there will not be another war, but if it were to come to that, would you be willing to fight for your country?” 97% of Chinese, 77% of Russians and 73% of Americans answered in the affirmative. In Europe, on the other hand, these figures were typically in the 40-60% range. If half of them say that they’re unwilling to fight for their own country, how many of them will struggle for a united Europe? Japan scores just 25% – a reflection of its pacifist, non-interventionist foreign policy. While both Brazil (72%) and especially India (82%) have the will to be superpowers, they will be unable to acquire the capability in the foreseeable future.

Fast forward to 2030. What do we see?

The United States is still a, if not the, leading economy. In absolute size it has long been overtaken by China. Both states possess respectable power projection capabilities, the technological and economic base to sustain them and a strategic deterrant. China devotes most of its energies to acquiring the energy, mineral and food resources to feed its bourgeoning economy, and in mitigating the effects of climate change. The US is affected by these two problems to a much lesser extent.

Russia is an economic minnow next to Europe, the US and China because of its relatively small population. In economic size and technological development it is comparable to Japan (a basic fact which will not change even if it were to expand to incorporate the Ukraine, Belarus and Kazakhstan). However, it will also possess a strategic deterrant, power projection capabilities and the will to use it. It is entirely self-sufficient in energy, agriculture and minerals, and can export surplus production. In a world which faces energy shortages, this will become an increasing important foreign policy level – on the largest scale, it means that Russia will be able to play off China and European US allies off against each other.

In the Israeli parliament, the Knesset, there is a socially conservative party called Shas. They only ever win small mandates, but since there is usually a narrow margin between the two main parties (traditionally Labor and Likud), they have the ability to tilt the balance of power one way or another. As such, they can exercise influence on Israeli politics out of all proportion to their numbers.

Russia seems destined to be the world’s Shas this century, balancing Chinese and American power. As of today, the US is much stronger, which might explain why Russia and China have banded together in the Shanghai Cooperation Organization. As both countries increase their Comprehensive National Power, it is likely their friendship will be revealed for what it is – a temporary marriage of convenience.

The Soviet Union never came close to being the world’s foremost economic power, yet it exerted its influence on the world through its ideological fervor and military might. In the new century, Russia can add energy dominance to its trumps. Provided it retains its traditional will to power, the next century may well be a Russian one.

Note: under the nanotechnology spending column in the Hi-Tech Table, Russia should be at 1000 mn Euros rather than 1400 mn. (I forgot to convert the dollar figure and can’t be bothered correcting the table).

Objections

Do you have any? Please comment and I’ll try to answer them.

Edit: there were objections criticisms from peak oil, US debt and demographics. I have tried to counter them in Mailbag: Back from a Russian Century?

Edit 2: for more on the vital link between economic development and education, please consult my article Education as the Elixir of Growth.

(Republished from Sublime Oblivion by permission of author or representative)
 
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Anatoly Karlin
About Anatoly Karlin

I am a blogger, thinker, and businessman in the SF Bay Area. I’m originally from Russia, spent many years in Britain, and studied at U.C. Berkeley.

One of my tenets is that ideologies tend to suck. As such, I hesitate about attaching labels to myself. That said, if it’s really necessary, I suppose “liberal-conservative neoreactionary” would be close enough.

Though I consider myself part of the Orthodox Church, my philosophy and spiritual views are more influenced by digital physics, Gnosticism, and Russian cosmism than anything specifically Judeo-Christian.