The beginning of a new year is a good time to draw some conclusions as to what has changed, what has worked and what has failed. This past year was in many ways remarkable because of a large number of irreversible, transformative events. In some ways, in 2019 we will be dealing with a significantly different planet. Let us look at what has succeeded and what has failed.
First, let’s look at what has failed and who has lost. It is already safe to declare Trump’s plan to Make America Great Again (MAGA) a failure. Beneath the rosy statistics of US economic growth hides the hideous fact that it is the result of a tax holiday granted to transnational corporations to entice them to repatriate their profits. While this hasn’t helped them (their stocks are currently cratering) it has been a disaster for the US government as well as for the economic system as whole.
Tax receipts have shrunk, causing the deficit to exceed $779 billion. Meanwhile, the trade wars which Trump has initiated have caused the trade deficit to increase by 17% from the year before. Plans to repatriate industrial production from low-cost countries remain vaporous because the three key elements which China had as it industrialized (cheap energy, cheap labor and low cost of doing business) are altogether missing.
Government debt is already beyond reasonable and its expansion is still accelerating, with just the interest payments set to exceed half a trillion a year within a decade. This trajectory does not bode well for the continued existence of the United States as a going concern. Nobody, either in the United States or beyond, has the power to significantly alter this trajectory. Trump’s thrashing about may have moved things along faster than they otherwise would have, at least in the sense of helping convince the entire world that the US is selfish, feckless, ultimately self-destructive and generally unreliable as a partner. In the end it won’t matter who was president of the US—it never has.
Among those the US president has succeeded in hurting most are his European allies. His attacks on Russian energy exports to Europe, on European car manufacturers and on Europe’s trade with Iran have caused a fair amount of damage, both political and economic, without compensating for it with any perceived or actual benefits. Meanwhile, as the globalist world order, which much of Europe’s population appears ready to declare a failure, begins to unravel, the European Union is rapidly becoming ungovernable, with established political parties unable to form coalitions with ever-more-numerous populist upstarts.
It is too early to say that the EU has already failed altogether, but it already seems safe to predict that within a decade it will no longer remain as a serious international factor. Although the disastrous quality and the ruinous mistakes of Europe’s own leadership deserve a lot of the blame, some of it should rest with the erratic, destructive behavior of their transoceanic Big Brother. The EU has already morphed into a strictly regional affair, unable to project power or entertain any global geopolitical ambitions.
Same goes for Washington, which is going to either depart voluntarily (due to lack of funds) or get chased out from much of the world. The departure from Syria is inevitable whether Trump, under relentless pressure from his bipartisan warmongers, backtracks on this commitment or not. Now that Syria has been armed with Russia’s up-to-date air defense weapons the US no longer maintains air superiority there, and without air superiority the US military is unable to do anything.
Afghanistan is next; there, it seems outlandish to think that the Washingtonians will be able to achieve any sort of reasonable accommodation with the Taliban. Their departure will spell the end of Kabul as a center of corruption where foreigners steal humanitarian aid and other resources. Somewhere along the way the remaining US troops will also be pulled out of Iraq, where the parliament, angered by Trump’s impromptu visit to a US base, recently voted to expel them. And that will put paid to the entire US adventure in the Middle East since 9/11: $4,704,439,588,308 has been squandered, to be precise, or $14,444 for every man, woman and child in the US.
The biggest winners in all of this are, obviously, the people of the entire region, because they will no longer be subjected to indiscriminate US harassment and bombardment, followed by Russia, China and Iran, with Russia solidifying its position as the ultimate arbiter of international security arrangements thanks to its unmatched military capabilities and demonstrated knowhow for coercion to peace. Syria’s fate will be decided by Russia, Iran and Turkey, with the US not even invited to the talks. Afghanistan will fall into the sphere of the Shanghai Cooperation Organization.
And the biggest losers will be former US regional allies, first and foremost Israel, followed by Saudi Arabia. For decades now the US was able to control and selectively destabilize the Middle East by acting through its local marionettes, but now all these puppets are in utter disarray. They now have to contend with a solidified Shiite Crescent and a resurgent and assertive Russia. Israel can do little about the Iranian military presence in the south of Syria, right across its border. Hezbollah’s political success in Lebanon and the renewed strength of Hamas in the Palestinian territories add to its stress.
Meanwhile, Israel’s inability to counter recent rocket attacks on its territory have demonstrated the uselessness of its air defense systems for protecting its increasingly impoverished population. Israel is barely able to hold together in spite of $3.1 billion in US military aid and generous loan guarantees; what will it do when this aid stops coming? My long-term prediction for Israel still stands: it will cease to exist, and when it does most of the Russian Jews, who make up about a third of its population, will try to go back to Russia.
Saudi Arabia’s recent gambles all ended up as losses, and it is now locked on a trajectory toward bankruptcy. Its attempt to prosecute a war in Yemen has been a failure. The Americans are pulling out of this conflict as well, UN negotiators are going in, and Iran is once again the winner. The murder of Jamal Khashoggi in the Saudi embassy in Ankara has demonstrated to the whole world the degraded state of the Saudi state. Its young prince is now a pariah and his development plans have been dashed.
While Russia and Iran are obvious winners in all of this, and while the US, the EU and the West’s Gulf allies are the obvious losers, it is as yet difficult to say anything conclusive about China. It has diversified its trade and boosted its domestic consumption, but too much of its trade is still with the US, making it vulnerable to economic disruption. But China is politically stable and solid while the US is rapidly becoming politically ungovernable, obsessed with palace intrigue rather than actual politics. This situation makes it highly unlikely that the US will be able to prevail over China either economically or militarily.
That is what the state of the planet looks like from where I am sitting. As far as what the future holds, it seems like a dead certainty that we are headed toward three simultaneous major crises, one having to do with finance and trade, the other with energy, the third with the destabilized climate. At the moment much of the world’s international trade is still tied to two major reserve currencies—the US dollar and the Euro—and this makes the countries that run trade surpluses, such as China and Russia, to trade product for Western debt, essentially making them into de facto Western colonies. But this is rapidly changing as more and more countries shift their trade to their own currencies, and as this happens the borrowing ability of Western countries will become impaired, their budget deficits will become impossible to finance and they will be forced to default on their mountainous public debts. This will be remarkably disruptive, because it is unclear how they will be able to continue financing their essential imports, energy especially.
Energy is at the crux of the other crisis the world is facing. Conventional Peak Oil was passed around 2007 while coal has peaked a couple of years ago. Unconventional (shale) oil in the US is likely to peak soon for reasons only partially related to the dwindling resource base (the other part is that the entire venture is deep in debt which it will never be able to repay and will be forced to curtail drilling the moment its debt-generating ability becomes impaired). The only country with an ample resource base (oil, coal, natural gas and nuclear energy) is Russia, and it is likely to remain as the world’s energy supplier of last resort for decades to come. It is now able to tap the virtually limitless supplies of above-ground Uranium 238 which it can convert to fuel in its latest BN (fast neutron) reactors, which can also burn up plutonium from nuclear weapons and high-level nuclear waste.
Climate destabilization will cost everyone dearly, but here too there are winners and losers, and Russia is again the major winner. The warmer climate is allowing it to become the grain basket of the world and the world’s largest grain exporter. Meanwhile, many of the countries further south are experiencing increasingly severe and frequent heat waves and droughts, more powerful storms, saltwater inundations and other climate-related calamities, impairing their ability to grow food and generating millions of climate refugees.
This is the big picture I see as the planet sails into 2019. The ultimate loser is the US, followed by the EU and their Middle Eastern allies. The ultimate winners are Russia and Iran, followed by China. And everybody else is stuck in the middle, forced to quickly reassess the situation and rearrange their alliances and trade relationships. It seems likely that, looking back on the past year, we will come to see it as resembling 1990—a year when the world suddenly flipped over surprising just about everyone. Let’s hope that it all goes down just as peacefully now as it did then. Happy New Year!