by Peter Zeihan
The American response to the proposal over the next few decades can best be summed up as a dismissive yawn. The American government knew that the Canadians were going to build the lock system anyway, because having some sort of transport system that allowed Quebec and Ontario to interact economically was a national imperative. To do otherwise risked hardening Canada’s Anglophone-Francophone divide into something truly ugly. The Americans also knew they would be able to use the fruits of Canadian labor in an unrestricted manner regardless of whether Washington helped pay for it or not: The system would be right on the border and at least some of the canals would have to be on the American side of the line. The Canadians couldn’t make the system operate without perennial American sign-off.
The American sign-off had a very clear price: You pay for it and we get unrestricted access to the entire thing. In the end, the Canadians had to foot over 70 percent of the bill, pay almost all of the maintenance, and the Saint Lawrence Seaway wasn’t fully operational until 1959.
Premier Global Location
More broadly, the United States’ global geographic position also serves it extremely well.
The United States is the only country with significant populations on both the Atlantic and Pacific coasts, with nearly 50 million people on the Pacific and twice that on the Atlantic. So only the Americans have broad-scale access to both of the world’s great trading zones. This results in two outcomes.
First and most obviously, as the only country with easy access to both global trading basins, Americans are well positioned to reach all global markets and take advantage of the growth fad of the moment.
Second and less obvious is that this omnipresent exposure allows the Americans to shift their trade portfolio with a speed that belies their size. The Americans have sufficient infrastructure to enable their Pacific citizens to trade with Europe when Asia is in recession, or to allow their Atlantic citizens to trade with Asia when Europe is in recession. Because they can easily switch dance partners, the Americans only suffer a recession caused by international factors when the entire world goes into recession. That’s a polite way of saying that the world has not imposed a recession upon the Americans in the post–World War II era, but every recession the Americans have generated they have… exported.
Industrialization and the United States
Although I’m not exactly a fan of his work, Karl Marx made some solid points. Industrializing is most definitely not easy. First, it wipes out nearly all preexisting economic activity and radically changes how a people interacts with itself and the outside world. Second, thorough, widespread industrialization requires large concentrations of labor and financial resources, regular access to perennially hungry markets, and even when the process is successful, it triggers deep social pressures. Every country therefore adapts to the realities and rigors of industrialization in its own way, and because every geography is different, every industrialization is different. Two of the world’s more successful industrializations gifted the world with Soviet Russia and Imperial Germany. Getting it right isn’t easy.
Unless, perhaps, you are American.
America’s industrialization experience was less stressful and more successful than that of the rest of the world largely because American geography stands apart from the rest of the world. The best way to illustrate the American command of industrialization—and just how easy it was for the Americans—is to view the United States in comparison to the characteristics that shaped the German experience.
Local Government
Germany had to have hypercompetent local governments because those local governments didn’t have good physical connections to Berlin, and even the handful of communities that were physically close enough couldn’t count on it for much help in the first place: Berlin’s resources had to be spent on military defense. As the saying of the 1700s went, “Prussia is not a state with an army, but an army with a state.” Each local government was its own organizational node that married all local assets in order to protect itself in a hostile Central European world.
The American developmental experience, on the other hand, took on an entirely different cast largely because American geography was a world apart from German geography. Germans needed always to be on their toes because they lived on disconnected pieces of smallish land and were duking it out with large and capable neighbors who were far more advanced culturally, economically, politically, and militarily. Not so with the Americans. American lands were at a more southerly latitude, providing longer growing seasons. Their soil was better, particularly in the Midwest. Their rivers were collectively eight times the length of the Germans’ and drained more well-watered, fertile land than all of Europe combined—so much land that the early American government had to resort to giving it away. Most of it was even all in one conveniently contiguous piece, whereas smack dab in the middle of Germany, sandwiched between the Rhine and the Elbe, is an annoying knot of mountains that impedes Berlin’s writ to this day.
In the United States barriers to entry were laughably small. A Conestoga wagon with six months of supplies could be purchased in inflation-indexed dollars for about the price of a modern-day Kia (about $11,000). For a modicum of start-up money an American could move out west and be exporting grain to earn hard currency in a single year.
Those lands were safer too. The War of 1812 drew a line that the Canadians would never cross, and the Mexican-American War established one of the world’s largest buffer zones. Between the wealth of good lands and waterways that Germans could never match and a dearth of security threats of which Germans could only dream, there was never any pressure on the Americans to actually be well governed or, during the first several decades, to be governed at all. So while the Germans had to make the most of every worker and deutschmark, the Americans were so swimming in the land, labor, and capital that made the industrial age possible that they didn’t need to worry… or plan. Germany became industrial and efficient because it had to. Private entrepreneurs and businessmen led the industrial charge in America because there were simply so many of the necessary inputs lying around in such vast quantities that ordinary citizens didn’t need much by way of governmental assistance or organization to develop their little corners of the country on their own.
Infrastructure
Germany needed artificial infrastructure to weld its disparate regions into a single coherent state. Without a national effort to lash the Rhineland and the south into Berlin’s influence, many German provinces would find more in common economically, politically, and even culturally with Germany’s rivals. To a degree, the original thirteen colonies shared this concern: Their maritime nature meant that by design they were more linked into the British imperial system than into any “domestic American” economic system. The British took full advantage of this during the War of 1812, applying political calculus to their blockades of American ports, often selectively applying and relaxing their naval blockade to achieve political ends.
But so long as the British were not actively causing problems, the Americans faced no foreign cultural and economic beckonings. The mountains and forests of the Northeast blocked meaningful integration with Canada, while Mexico was on the other side of a highland desert. For the Americans, artificial infrastructure was a luxury that they could do without rather than an expensive prerequisite for national coherence. The river system of North America provided the early Americans with all the “infrastructure” they could ever want.
In fact, for the first half century of U.S. history the Americans built exactly one federal infrastructure project: the aforementioned National Road. From the road, the Ohio, Mississippi, and their sister rivers could take you anywhere you wanted to go without crossing meaningful boundaries. And that was that. With the same vessel you could travel from Pittsburgh to Sioux City and St. Paul, or down to Muskogee and Shreveport, or through New Orleans to the Intracoastal and over to Miami, Savannah, Hampton Roads, New York City, and Boston. These are some of the advantage
s that come with a naturally unified system.
Instead of the painstaking micromanagement of Germany, American development happened organically. Farmers in an area grew the same products and so had the same needs: tools they couldn’t build themselves, docks and boats to ship their grain, schools to educate their children, banks to deposit their earnings. The farmers’ mere presence spontaneously created small towns and agricultural entrepôt cities that popped up along the riverways. Larger towns (with larger banks) naturally formed at key points along the maritime system: where two rivers met, and at heads of navigation. Chicago, Pittsburgh, Louisville, Charleston, St. Louis, Shreveport, Albany, Minneapolis, Independence (better known today as Kansas City), and Memphis are some examples. Smallholders quite inadvertently created an educational and financial system that was national in scope but local in origin and with only moderate commitments from Washington.
By the time the industrial technologies percolated from Europe to the United States the United States already had fifty urban centers with their own organically generated education and financial systems able to apply the new technologies. Infrastructure expanded as required by the local population centers, and local solutions responded to local economic concerns rather than national solutions to strategic concerns, as was the case in Germany. When the need for faster transport options on a national scale started arising just before the Civil War, the resulting binge of construction was not government-managed. A few land concessions to the (aptly named) robber barons and in under five decades the Americans had stitched together their constellations of small towns and river cites. It may not have happened (quite) as fast as it did in Germany, but the result was the world’s largest artificial transport network, with 164,000 miles of track by 1890—all with minimal government involvement… or money.
Capital Capture
Everything needed to be coordinated in Germany because the Germans were always racing Armageddon. Always behind. Always outnumbered. Always under threat. Addressing all of these issues required not just hypercompetent organization, but also money. Money for education. Money for roads. Money for rail lines. Money for industrial plants. Money for the army. Money for technological development. All that money had to come from somewhere. Berlin forced German banks to be part of the organizational networks that make Germany function at the state level. Financiers sat right along with generals and politicians and industrialists in making and implementing the decisions about how Germany would deal with this or that problem. Every scrap of cash was funneled to those banks, and the government leaned on them to make sure that any program in the national interest, whether public or private, received financing before anything else. On the downside, it is really hard to get a mortgage in Germany.6 On the upside, the German state is better able to allocate its scarce resources to deal with whatever the crisis of the day happens to be.
If the German and American approaches to government and infrastructure are a world apart, their approach to capital is a galaxy apart. The United States’ sixteen thousand-plus miles of integrated waterways and their position atop the world’s best farmland absolutely swamp the country with capital. Far lower development costs and a complete lack of local strategic threats put drastically lower pressure upon that capital. Simply put, the Americans have the world’s highest capital base, yet among the lowest need for that capital.
Since no organization and relatively small amounts of capital were needed, the American government felt little impetus to regulate how that capital was collected, managed, invested, lent, borrowed, or repaid. Instead the Americans allowed the market to take the capital to wherever it wanted.
One result was the world’s first truly integrated financial system. With money unrestricted, there was never a need to establish regional financial regulators. In contemporary times the strength of this unity shined brightly during the 2007 financial crisis. In a matter of a few hours the Federal Reserve chairman, the FDIC chairwoman, and the Treasury secretary were able to squeeze around a two-top and hammer out emergency policies, fully fund them to the tune of $700 billion within days, and then tweak them repeatedly over the next several weeks without leaving town. The Germans, with their regional banking system and tradition of multitiered government, took months simply to come to grips with the scope of the problems their nation faced in the European financial crisis, plus four years of negotiations including eight summits with their EU partners to hammer out a European policy—a policy that is still under negotiation and won’t actually be fully funded to its planned 55 billion euros until 2025.
Quest for Quality
The heated international competition and near-constant state of threat that Germany had to endure for centuries of its history is something that the Americans have only rarely had to worry about. From the Louisiana Purchase onward, the Americans have boasted the world’s most capital-rich geography. By 1850, the Americans outnumbered the Mexicans and Canadians combined by three to one, and there haven’t been any credible threats to U.S. territories for two hundred years. The Americans can afford to be—and often are—laggards.
But more to the point, America’s “problem” is that it is the land of plenty. It is the world’s largest agricultural, technological, financial, and, based on how you collate the data, industrial power—and has been all of those things for fifteen decades. Its availability of land, labor, and capital is unprecedented in human history, and all those cheap inputs mean that the United States does not have to be at its best to be better than everyone else. Why get better when you can simply get bigger?
• Upon independence the Americans gained the unsettled Ohio valley, doubling the amount of useful land the young country had access to.
• The acquisition of the Louisiana Territory doubled that again just a generation later.
• A deal with the British for the territory around the Columbia River increased American lands by an area similar to that of the original thirteen.
• The Texas annexation and Mexican-American War increased American lands by another (cumulative) third.
And even in contemporary times, the Americans still have loads of room to grow. Even if you ignore the portions of American territory that are less than ideal, population density in the United States is only 180 people per square mile, one-third that of Italy or Germany, one-quarter that of the United Kingdom, and one-fifth that of Japan.
Dawn of a Superpower
The characteristics of North American topography grant the Americans nearly endless capital, bottomless markets, low defense costs, and easy routes of power projection. But no matter how favorable a geography might be, everyone still needs time to grow up. At the beginning of the Revolutionary War, the American population (some 2.5 million) was less than one-tenth of the French population. Even in the most aggressive estimate, it was perfectly reasonable to expect the Americans to need a few generations to install the base infrastructure of farms, ports, towns, and industry that form the bedrock of all powers, great or otherwise. And every time the young country’s borders expanded, the timetable was pushed back even more.
Serious industrialization didn’t even begin until 1850, and was unceremoniously halted—or more accurately, skewed in decidedly military directions—during the United States’ 1861–65 Civil War. After 1865, however, the Americans’ security environment returned to its charmed nature. The Americans were able to once again forgo the cost of maintaining armed forces and pour all of their resources into development. For the thirty years of Reconstruction, the Americans didn’t simply politically reunify North and South, but also applied all of the technologies that the Europeans had developed over the past two centuries to the entirety of the American lands. From 1860 to 1890 American railways had quintupled, creating a multimodal web of steel that lashed North to South to Midwest to—via two transcontinental lines—the West Coast. The trip from New York to San Francisco shrank from months in 18407 to eight days in 1870. Similar advances in telegraphy allowed instantaneous communication an
ywhere touched by urbanization or rail corridors. By the end of Reconstruction the United States had reemerged as the world’s largest economy, its largest market, its largest grower of wheat and corn, its largest producer of steel. With their country finally secured, developed, and unified, the Americans traded in their “manifest destiny” for something greater.
All maritime powers are by their very nature offensive powers. They use their superior mobility to choose the time and place of conflicts. They use their superior transport capacity to ensure that their forces have a quantitative advantage when those conflicts erupt. And their superior capital position means that their forces typically enjoy qualitative advantages as well: longer reach, greater speed, better durability, more concentrated firepower, and so on. In this the United States is similar to the great maritime powers of the past.
But the United States is different from its maritime predecessors in two critical ways: insulation and size. All previous maritime powers have either bordered land-bound competitors or been very close to the mainland. The English Channel, the Korea Strait, and the La Pérouse Strait8 are minuscule in size compared to the vast swaths of the Atlantic and Pacific. England and Japan can be—and have been—invaded from the mainland. So while British and Japanese military strategies throughout history have usually been offensive, those nations have always had to keep an eye out for countries or coalitions that might be able to challenge their position. That doesn’t exactly make them defensive, but it certainly makes them somewhat thoughtful. In contrast, no one has attempted even a partial invasion of American territories since 1815. Even the global geopolitics at the time of the 1890s American emergence was benign. The world of British supremacy had passed. With the rise of Germany, the Royal Navy was forced to spend more time in European waters. There simply was no navy that could so much as harass American shores.
