by Peter Zeihan
• The biggest advantage would be full inclusion in the American currency zone. Albertan inward investment and “export” income would be in the same currency as its outward tax payments and labor costs. Agriculture wouldn’t struggle to survive. Manufacturing wouldn’t face impossible price competition. Alberta could even get into refining and sell products like gasoline and jet fuel—also denominated in U.S. dollars—to its former countrymen for a deliciously fat profit.
Alberta as a U.S. state would not simply be rich—the richest in the Union, in fact—but would have a vibrantly well-financed and diverse economy that would put its former (and a lot of its newfound) countrymen to shame.
The question of course is, will the Albertans jump countries? The answer will be given only after the Albertans engage in a thorough debate about who they are culturally. Canadians have long defined themselves as the not-Americans, a sentiment that has traditionally been just as strong in Alberta as it has been in Ontario. But since the energy sector started booming in the 2000s, the Albertans have begun to add not-just-any-Canadians to that identity. These stirrings are distilled into the Wildrose Alliance Party, a once-fringe political group that espouses independence that has successfully transitioned to the mainstream. In the 2012 Albertan legislative elections, Wildrose captured seventeen of eighty-seven seats and established itself as the Albertan parliament’s official opposition.
As time progresses, as energy becomes ever more important to Alberta, as Alberta’s economic existence has less and less to do with Canada, and as the net financial cost for maintaining Canadian citizenship rises from today’s $6,000 per citizen per year to something that might be considered onerous, the question of Albertan identity will become unavoidable—and the platform of Wildrose will move to the center of the Albertan political debate.
So what will the Albertans decide? I have no clue. Identity is the heart of who we are, and deciding to cut ties with one people and merge with another isn’t remotely an easy decision to make, no matter how much it might make economic, financial, and even political sense. Just please bear in mind two things.
First, this discussion will happen. Economic and political trends are pushing Alberta out of the Canadian mainstream just as surely as they are sucking it dry.
Second, should the rest of Canada try to force Alberta to remain, secession is a viable option from a military point of view. Canada, as a country that does not share a land border with a hostile power, has never had a large army, and what it has had has been substantially downsized as part of a lengthy post–Cold War disarmament program. It is unlikely that the Canadian army, which numbers only fifty thousand soldiers, would be able to forcibly subdue four million Albertans, and even that assumes that Ottawa would be willing to turn its guns on its own, that the Quebecois would stand for the national army being used to subdue would-be secessionists, and that the Americans would stand idly by while a civil war flared on their northern border. Add in Canada’s infrastructure bottlenecks—the Prairies are largely cut off from both British Columbia and the Ontario-Quebec core, doubly so in the winter—and Alberta would have far more than a fighting chance.
Should the Albertans take the plunge and replace the Maple Leaf with the Stars and Stripes, a rapid-fire sequence of events would unfold.
First, Canada would quickly dissolve as a country. British Columbia and Yukon would be separated from the rest of the Canadian territory.7 They would have little choice but to either declare independence themselves or follow Alberta’s lead. Saskatchewan too would be forced to leave Canada. After Alberta, Saskatchewan is the youngest and richest Canadian province. If Alberta managed to escape the fiscal drain of the Canadian system, all of Canada’s financial needs would have to be met by the mere 1 million Saskatchewanians. If supporting Canada would damage Alberta’s economy, it would eviscerate Saskatchewan’s.
In the east, things would likely get very… interesting. Quebec prides itself on standing apart from the rest of Canada, and the idea that the Quebecois were not the ones to secede would undoubtedly stick in their craw so painfully that they too would consider secession. The fact that an Albertaless Canada could not hope to fund the compact would help push consideration into outright action. At that point, all that would remain of Canada is Ontario itself—now landlocked—perhaps Manitoba, and the Maritime provinces, which are already more tightly linked into the American economic system than the Ontarian. And the two regions would be separated completely by a no-longer-Canadian Quebec. Whether the rest of the (former) Canadian provinces actually applied for U.S. statehood beyond that point is irrelevant. There simply wouldn’t be a “Canada” left anymore.
Scared New World: A World Without Canada
As of 2013 the total bilateral Canadian-American trade relationship was worth about $640 billion, not only making the two countries each other’s largest trading partners, but making the bilateral relationship the largest in world history.
Folding all that into the American domestic system would do more than simply increase Canadian purchasing power, or blunt the impact of aging Canadian demography, or eradicate any hint of American energy dependence upon the outside world, or do away with the barriers between Canadian and American hockey teams. At a stroke it would reduce the United States’ involvement in the global system by some 2 percent of GDP and turn the expanded United States into an energy exporter. If the Americans are broadly disinterested in the wider world now, just imagine how inward focused American politics will be then.
At that point, the only piece of the broader international system that would reliably attract Americans’ collective attention would be the only piece that composed a similar share of its trade-sourced GDP. That is the country we turn to next.
CHAPTER 13
The North American Drug War
Canada, of course, is only half of the Americans’ inner circle, and evolutions on America’s southern border are even stranger than what is going on in the Great White North. Like most other countries, Mexico is under assault by the three trends that will make up the new world: shifting trade patterns, inverting demographics, and spasming energy patterns. In Mexico’s case the resultant changes are almost completely positive, but there is still a dark side—and it will not be contained within Mexico’s borders.
The Geography of a Failed State
Mexican geography is, well, wretched. From an economic and political point of view, the country is far more fractured than even what the Canadians have had to contend with. Mexico has no navigable rivers whatsoever. Whereas Canada is too cold, Mexico is too hot: Much of its territory is fully tropical or hard desert. Worse, nearly all of Mexico, whether temperate, jungle, or desert, is mountainous as well. Cut any way, this is a bad place to start down the road to civilization and stability.
Let’s begin with Mexico’s tropical nature. Jungles are the worst biome from an economic development point of view:
• The unrelenting heat and humidity of jungle territories provides an endless array of biological diversity, including an endless array of diseases and disease vectors. Some diseases, like malaria and leprosy, are only rarely fatal and simply enervate all infected, imposing chronic costs in the form of lost labor productivity. Some, like cholera, can sweep through an area with terrifying speed, infecting thousands of people a day. Some, like rotavirus and dengue fever, are so deadly to children that they can impact overall demographic profiles. Others, like yellow fever and Ebola, are lethal to anyone unlucky enough to cross paths with them. What they all have in common is that they—and the vectors, mostly insects, that transmit them—thrive in the tropics. The seasonal frosts and freezes of temperate climes not only inhibit the spreads of various pathogens, but also tend to kill off the insects that carry them. People living in the tropics have no such luck.
• High heat and humidity exacts a constant toll on infrastructure, from roads to buildings. Maintenance costs tend toward the extreme because builders must choose between having to replace everything more ofte
n, or using different (and more expensive) materials in construction. Then there is the simple fact that the basic technologies of modern road building—the use of heavy machinery and the drying of concrete—are rather hard to manage in a downpour. Asphalt softens on a hot day, and the tropics have hot to spare.
• Tropical soils are very thin and shallow, only retaining their fertility when they are part of a natural biome. That fertility comes from the constant recycling of a jungle’s myriad plant species, and the process of clearing land for agriculture guts the cycle. Former jungles and rainforest lands, therefore, require constant fertilization to maintain agricultural production, even for tropical crops like bananas and yams. And if surrounding jungle lands are not cleared as well, then heavy pesticide use is a must, raising costs further even as water quality declines. Often the tropics boast higher annual production totals per acre than temperate climes because the heat and sun of the tropics frequently support more than one crop cycle a year, but that increased output comes at the cost of radically increased inputs. So more foodstuffs, yes, but the overall production is generally among the least efficient in the world. There are very few places on earth where those farming the former jungle are not mired in poverty, and Mexico is no exception.
Counteracting the effects of its tropical climate is Mexico’s first challenge. The Mexicans addressed this by going uphill. Higher elevation mitigates heat and humidity, soil fertility has higher potential, and the cooler temperatures and thinner air work against diseases and their vectors. Most of Mexico’s population and all but four of its major cities are nestled in the multitude of plateaus, highland basins, and mountain valleys throughout the country’s midsection, where the elevation lifts the land out of the tropics into a more temperate environment. But that simply replaces the tropical challenge with a mountain challenge, which in many ways is just as onerous.
Mountains by definition don’t sport large tracts of flat land. There is no Mexican equivalent of the American Midwest that has the ability to generate scads of capital or support massive populations. Unlike other locations in North America, not one Mexican urban region has a hinterland. Chicago and St. Louis have the entire Midwest, New York City the Hudson valley and Long Island, Orlando all of central Florida, and the cities of the coastal Southeast can draw upon the Piedmont. But when one leaves Mexico’s highland valleys, one either hits deserts or jungles or mountains or—more likely—mountainous desert or mountainous jungle. Each mountain valley is limited in size and is more or less on its own. Any infrastructure that benefits one region cannot be extended to synergize with another. It must be rebuilt in each and every region without contributing to a greater whole. Mexico isn’t split into five sections like Canada, but instead dozens, most of which cannot independently generate meaningful economies of scale. By far Mexico’s largest highland enclave is the greater Mexico City metropolitan area, home to one in five Mexicans and built on landfill. It isn’t so much a good location as it is the best that the Mexican geography has on offer. Beyond Mexico City, only ten Mexican metro areas pass the 1 million mark,1 and none of them break 5 million.2 The economies of scale, abundant capital, and ease of development that the Americans take for granted—and that make industrialization possible—are all absent in Mexico.
Transport—always the difficulty of the human condition—is more onerous in mountains than in any other terrain. Sharp elevation changes generate swift currents, meaning that not one of Mexico’s rivers is navigable, naturally or otherwise. The Mexico core region of Mexico City sits at an elevation of about eight thousand feet despite being only two hundred miles inland.3 Even when Mexico’s disassociated regions manage to construct some local infrastructure, links between those regions require tackling topographic verticality that is painfully daunting not just to build but also to operate. Organic consumption growth is nearly impossible because what little capital there is must be dedicated to infrastructure. But even then basic internal distribution is nearly impossible because of the extreme operating costs. It is a recipe for disconnected poverty and fractured, ineffectual government.
Such difficult terrain skews what development that can happen into decidedly inegalitarian directions. This isn’t the American riverine Midwest with low barriers to entry and cheap long-distance transport options. In Mexico, the only people who can make a serious go are those who already have capital to spare—those who could afford to build the expensive road/rail necessary to link a middling patch of useful land to the coast, those who could afford to pay workers for months or even years to clear and fertilize land so that it might one day support crops. Most Mexican territory requires irrigation, further increasing the gap between those with capital and those without. Even the climate works against economic liberty. Tropical plantation crops like bananas and coffee require a great deal of capital to establish, and a mammoth amount of unskilled labor throughout the crops’ life cycles to tend, harvest, and ship. In comparison, temperate crops such as wheat, barley, and corn require little labor between planting and harvest, and the actual harvesting process is fairly light on labor. You can machine-harvest (or even scythe and thresh in preindustrial times) a field of wheat in a very short period of time, but each bunch of bananas has to be harvested and carefully stored by hand.
When an oligarch uses his money to build a road and a plantation and maybe even a port, that oligarch finds himself quite literally the ruler of all he sees. He has applied his wealth to make something out of nothing, and he is well aware that no one who works for him could have possibly done the same. He has little interest in sharing his investments with anyone else, even another oligarch. To do so would dilute the absolute economic and political power that he holds in his own personal fiefdom. Perhaps Mexico’s biggest tragedy is that when—against very expensive odds—someone does manage to make a portion of Mexico functional, that someone has every interest in resisting contributing to a broader regional or national effort to replicate the success. To do so would jeopardize not only control over the sunk investment but also the privileged economic and political position that comes with it. Whereas the United States was settled by the poor who became rich, Mexico was settled by the rich who commanded—and command still—the poor.
These factors—low capital generation from a lack of cheap transport, high capital demand from infrastructure, limited land due to topography, a political/economic system geared toward regional jefes and their plantations—sharply limit the ability of the country to urbanize, much less industrialize. Mexico’s capital scarcity and extreme capital needs mean that much of the money that will be used for infrastructure development will have to come from foreign sources. And in a quick logic chain threading from geography to population patterns to transport needs to debt markets, you now understand how Mexico’s regular bouts of debt crisis are both endemic and inevitable.
And then there is its government.
Meaningful central authority has a prerequisite: the ability to reach all portions of the territory. Not only is that far from a given in Mexico, but much of what transport infrastructure exists is beholden to the needs of the oligarchs. Its use is not automatically available to the government. Making matters worse, the oligarchs have tended to develop the most useful patches of land; in Mexico’s too-dry mountainous north or its too-wet mountainous south there is little of economic interest, and thus little oligarch activity and little infrastructure. Upwards of half of Mexican territory, concentrated in the far north and far south, exists in a sort of Hobbesian limbo, where anyone who wishes to exert sufficient resources can make his will a temporary reality.
Mexico’s borderlands are zones so lightly populated that local authorities cannot police them, and they have so little infrastructure that national authorities cannot reach them on a meaningful time scale. Even in periods of plenty, these areas will always be insufficiently patrolled and so will always be smuggling zones and can never be secured in the way that the Americans define the term.
In essence, Mexic
o lacks the geographic characteristics to be a successful state. Geography condemns it to be home to a poor, drastically unequal, underdeveloped society riven by regional and class-based cleavages that no degree of local investment or understanding can ever heal. The only other significant country in the world that was dealt as bad a geographic hand as Mexico is perhaps Afghanistan. If not for a few lucky oil discoveries around 1900, Mexico would have likely faded into oblivion long ago.
Yet Success Anyway: The Four Factors
But as wretched as Mexico seems from time to time, no serious observer would say that it is even remotely as bad as Afghanistan. The reason for that is quite simple: It is next to the United States, the global consuming superpower. Somewhat ironically, Mexico’s weakness has become the key factor in ensuring its success. The sheer difference between the two countries’ topographies—America’s capital richness versus Mexico’s capital poverty, America’s ease of development versus Mexico’s constant struggle—ensures that Mexican labor will always be both cheap and underutilized, making Mexican labor perennially attractive to anyone wanting to service America’s nearly bottomless demand. In that differential lies the core of Mexico’s economic success.
In the next couple of decades a shift of circumstances will turn Mexico from the United States’ (extremely) junior partner to something significantly more. Four factors are at work:
1. Chinese Labor Costs Have Skyrocketed