by Peter Zeihan
Even if the Europeans can save their banks and the euro, even if the French and Germans can come to an amicable (and productive) meeting of the minds on how the Union should be run, they are still staring down the maw of demographic obsolescence—and they are doing so at a time when the rest of the world still boasts a (relatively) young demography. The Europeans can look to Japan—with its collapsing finances, hollowing-out industries, and ever-mounting debt levels—to get an idea of what the approaching financial self-immolation will feel like.
Luckily, there is one bright spot in all this. As Europe slouches into Japanese-style demographic and financial malaise, it is simultaneously retreating from the global system. Japan’s banks are so insolvent that all have already withdrawn from the international system. Europe is now following suit, with European financial involvement in everything from investment in East Asia to trade finance becoming an ever less European affair. As Europe’s crisis worsens and spreads, it is inadvertently fencing itself off from the international system. When the European system does finally snap, it probably won’t be taking the rest of us with it.
Problem Five: Germany in Crisis
The two world wars did not so much confirm Germans’ aggressiveness as it confirmed their desperation: Germany is too exposed to rivals at most points of the compass. No matter how successful the Germans may be in prosecuting a war in one direction, they simply lack the numbers to be successful in all of them. The only way Germany can compete is to be better than its neighbors: better education, faster financing, higher levels of efficiency, more productive workforce, more advanced industrial base, better infrastructure. This certainly allows them to prevail in struggles against any of their rivals, but it has never enabled them to prevail against all of them. Invariably, German success breeds ever larger and more powerful anti-German coalitions that eventually overpower it.
Unless, of course, someone changes the rules of the game.
That is precisely what the Americans did with Bretton Woods. The Americans granted the Germans access to all of the raw materials and markets they could ever need. The Americans also incorporated the Germans into an alliance network in which their neighbors were actually helping to defend Germany instead of threatening or resisting it. In a complete geopolitical flip, Germany’s rivals-turned-alliance-partners had become economic partners as well.
But the Germans didn’t stop being hyperefficient. All of their organization and energy was now wholly focused on their industrial base and export industries. Bretton Woods didn’t just allow for the end of European violence and the formation of the European Union, it also created a platform from which German economic and financial power would prove unassailable. Unable to compete with a Germany that was not weighed down by egregious defense costs, countries as varied as the United Kingdom, France, Spain, and Greece saw their economies steadily hollowed out by superior German industrial output. It was a great time to be German.
And in the post–Cold War era German life got even better. NATO expanded to the former Soviet satellites, ending Germany’s status as a border state. Reunification injected 16 million low-cost but still highly skilled East Germans into the West German system. That’s kept a lid on labor inflation, one of the perennial bugaboos of Germany’s high-skilled-labor economic model. Even the European financial crisis has helped. Lumping straggling countries like Italy, crisis countries like Ireland, and dysfunctional countries like Greece in with hyperefficient Germany has put substantial downward pressure on the euro. German exports can outcompete almost anyone, anywhere.
Well, it was fun while it lasted. Without the Americans imposing and guaranteeing Bretton Woods, there will be no NATO and no global economic trade network. The 32 percent share of German exports that requires open sea lanes and American largess represents 16 percent of German GDP, a greater relative portion than all American trade with the entire world. The remaining 68 percent of German exports—over one-third of German GDP, just shy of $1 trillion—is not immediately in danger as they are sold to countries either within the European Union or physically close neighbors such as Switzerland, Norway, Ukraine, and Russia.
But there is nothing to say that these exports will be secure or stable. Bretton Woods granted market access and physical security guarantees and made the peaceful evolution of the European Union possible. As each beneficiary has different security and economic needs, each will respond to the American withdrawal differently, particularly as a considerable list of European countries perceived the American security guarantees as guaranteeing their security from Germany. For nearly all EU members, the Germans are now far and away their largest source of imports. In a world in which their extra-European exports are suddenly in danger, this quickly escalates from a niggling political issue to a catastrophic economic one. Living in a world in which German industry dominates your economic life is one thing, but waking up to discover that the Americans are no longer holding the Germans in check is quite another.
Perhaps Germany’s biggest problem will be that there is no single place (or even five places) that the Germans need access to if they are to survive. Courtesy of Bretton Woods, the economic geography of early-twenty-first-century Europe is far more entangled than that of any other age of German independence. The most accessible energy production sites are nearly two thousand miles away, either in Azerbaijan or northwestern Russia, and Germany needs 2.2 million barrels of crude imports daily. As far as raw materials are concerned, everything from aluminum to iron ore is no longer even produced in Europe, which is long since mined out. German supply chains are no longer exclusively nationally held, but are instead dependent on intermediate inputs and even finishing work in Belgium, the Netherlands, Austria, Poland, and the Czech Republic.
This all makes Germany sound like a dependent has-been, doesn’t it? But this is Germany, and German organizational acumen and efficiency are not limited to industrial policy. When sufficiently motivated, the Germans are capable of transformations that are as startling as they are rapid. An end to Bretton Woods provides the motivation. Every country that chooses to restrict trade access will be one that the Germans will have to consider both a competitor for now-restricted supplies of raw materials and a now-denied end market. That might sound innocuous enough, but consider that such concerns were the driving rationale behind the last six wars the Germans initiated.2 Germany may not have much of a military at the present, but neither did it in 1935, just five years before it conquered eight of the nine countries that it currently borders.
This isn’t Uzbekistan or Japan where the requirements are nearby and so the path is obvious. This isn’t Saudi Arabia or Iran where the threats—and so the necessary steps to counter them—are clear. Without Bretton Woods, Germany’s mere existence is a threat to the very neighbors that Germany needs if it is to continue as a successful country, and under Bretton Woods the German economy has grown so much that even a deal with all of them still wouldn’t give Germany the energy, resources, and markets it needs. Without the Americans, Germany’s economic crisis quickly escalates to a European-wide strategic crisis where the paths and outcomes are clear to no one. The only certain variable is that the Germans will not lie down and die. For the fourth time in the past 150 years, they will challenge the European status quo. Only time will tell if they will shatter it.
Problem Six: Aggressive Neighbors
The Europeans have two neighbors—Turkey and Russia—who are likely to ramp up their pressure on the European periphery in the next decade. Both were discussed in the previous chapter, but there are a few Eurocentric points worthy of elaboration.
For the past decade a slowly awakening Turkey has played in the Middle Eastern sandbox, and it has discovered that the Middle East is full of intractable issues, bad blood, and, above all else, lack of economic benefit. The countries of North Africa, the Levant, and Iraq combined have a smaller combined economic footprint than Spain, a mid-sized European economy. The Middle East is not Turkey’s future. Historically, the
old Ottoman economic and intellectual heartland wasn’t in the Middle East or even in Anatolia—it was in the Balkans. And that’s where its future will be as well.
Currently, two things are holding the Turks back from this path. First, the current regime is new, having been in government for only a decade. They are still learning what works and what doesn’t—and most of all why. Second, NATO and the EU dominate the Balkans, with Slovenia, Greece, Croatia, Hungary, Romania, and Bulgaria all full members of both organizations. So long as the American security umbrella remains functionally in place, and so long as the EU continues existing in its current form, the Turks face limitations in what they can do to their northwest.
Both of those barriers exist on borrowed time. The EU is likely to devolve—in the best-case scenario—into more of a glorified free trade zone, but not one with any pretensions to a common foreign or security policy. As for the Americans, their falling interest in the world writ large is something the Turks will be able to scrutinize closely. Turkey is a NATO member: Ankara will be able to detect precisely when the alliance’s security guarantees devolve from relevance to mere words on a page. The only question is timing.
Russia, by contrast, faces no political or alliance constraints on its ability to pursue a strategic policy to its west. However, unlike Turkey, it does face a time pressure; Russia’s demographics are so horrid that if it fails to act before 2022, it will lose the capacity to act both militarily and economically. This puts Russia on a collision course with the eight EU members on the edge of what the Russians see as their preferred border zone: Finland, Estonia, Latvia, Lithuania, Poland, Slovakia, Hungary, and Romania. It would seem that the Russian challenge to Europe’s future is rather obvious.
Well, yes and no. Yes in that Russian pressure on places like Ukraine is both palpable and increasing, yes in that the emotional state of these eight European countries ranges from intense concern to panicked paranoia at the rising Russian tide, and yes in that should Russia follow a piecemeal approach it can encroach upon Europe’s eastern borders without unduly provoking Western Europe’s heavyweights. No in that the reactions of some of these countries to Russian encroachment may be even more injurious to the concept of European unity than the Russians themselves.
Problem Seven: Men in the Middle
As the country where the North European Plain transitions into the Eurasian Hordelands, Poland will decide Russia’s success in reanchoring between the Baltic Sea and the Carpathians. The Poles realize what is at stake and have been taking steps toward a plan for several years.
Poland, as Central Europe’s largest industrial power and with its largest population, sees itself as the natural leader of former Soviet satellites who joined the EU and NATO in the 1990s and 2000s. There is more than a small credence to that claim. But the crew that Poland seeks to lead is a motley one. Even after a quarter century of effort, the region’s infrastructure is remarkably fractured. The Baltic states have far better links to Russia, a holdover of the Soviet era, than they do to one another or the Western European region. Romania and Bulgaria are south of the Carpathians and have but one four-lane road that links them to the rest of Europe—and only two bridges that connect them across the Danube (the second of which was only completed in 2013). Slovakia is mountainous. Hungary is linked really only to Austria, and even that connection is pinched by the Vienna Gap. Poland, somewhat ironically, has the best infrastructure linkages of the lot—but those connections are largely due to its position on the North European Plain, which in turn ties it directly to both Germany and Russia, the two powers that Warsaw is most concerned about. Making matters worse, nearly all of the former satellites are dependent upon the Russians for both oil and natural gas.
An alliance of the Intermarium—the countries between the Baltic and the Black Seas—simply isn’t workable. Merely coordinating the actions of such disconnected geographies and heterogeneous cultures would be an endeavor attempted only out of sheer desperation. Without some far more powerful entity—say a rejuvenated European Union or an engaged United States—actively managing such a gangly alliance, the Russians would have a fairly easy time engaging and defeating each of the Intermarium states in sequence and in isolation.
That is, with the possible exception of Poland. Despite Poland’s largely indefensible position, and despite its potential need to defend against both Germany and Russia, the Poles have a Swedish ace up their sleeve.
Since being forced into strategic neutrality at the conclusion of the Great Northern War of 1700–1721, Sweden gradually became Europe’s forgotten power. While technically a Continental power, Sweden boasts water to its south and east, mountains to its west, and taiga and tundra to its north. By most definitions, Sweden operates as a naval power rather than a land power, and as such its military and economic strategies emphasize speed and reach. But they do so in a manner somewhat different from other naval powers.
Oceanic-oriented cultures like England and Japan were made famous because they became experts harnessing the wind to cover vast distances over open seas. Their vessels were notable for their relatively small crews (the wind did most of the work) and relatively large cargo areas (lots of supplies were needed to keep the crew alive on long voyages, and lots of trade goods were needed to justify the trip in the first place). With large, manpower-light vessels the British needed to interact with the locals right on the coast. They could rarely afford to penetrate inland with the men they brought, and any such excursion would have to occur on foot. Their boats, whose propulsion was limited by the whim of the wind and the depth of the water, could not easily or reliably sail on rivers. The result was an empire built on indirect rule and coastal trading depots.
Early Sweden’s approach was considerably different, because Sweden’s regional geography was considerably different. The Danish island of Zealand kept the Swedish Vikings and later the Swedish Empire locked in the Baltic, a very small place compared with the oceans. There was no need for the Swedes to learn to sail when they could simply row. Instead of huge, wind-powered vessels with small crews, the Swedes used small, oar-powered vessels with large crews. The more men, the faster the vessel could go. Short trips meant less need for supplies. Where the British made landfall with small, scrawny, scurvy-ridden landing parties eager to trade, the Vikings made landfall with large, strapping warriors eager to satisfy more basic instincts. Because longboats have such shallow drafts, and because they were manned by lots of brawny Vikings, they could easily be rowed upriver and even portaged. Unique among the “naval” powers, the Swedes punched deep inland, and even showed up as far away as Constantinople from time to time.
This more… direct approach is still reflected in Swedish strategy. Its military remains remarkably amphibious and its defense industry depends upon no external power. Its economic relationships are direct and deep, seeking full ownership, in contrast to the Anglo preference of involvement via minority share purchases. But Sweden remains undeniably maritime, valuing trade and financial connections over the hardwired infrastructure and military links of land-based powers. Even now, three centuries after Sweden’s grand defeat in the Great Northern War and its banishment to neutrality, the Baltic Sea remains a Swedish lake.
Much of the world has forgotten this. But not Sweden’s neighbors—because they were first raiding targets, then part of the Swedish Empire, and now part of the extended Swedish family (literally). Another culture that hasn’t forgotten are the Russians, whose rivers are not particularly amenable to traditional maritime transport but were perfect for the Viking expeditions of the previous age.
The issue for the Russians (and Germans) isn’t that Poland wants to be the brain and muscle of an anti-Russian (and maybe anti-German) Intermarium, but that Sweden has every interest in making sure that the Poles succeed. Like Poland, the Swedes fear undue German or Russian influence regardless of the form it takes. And while Poland might have difficulty spackling together an alliance, Sweden already has one. The familial relations o
f Viking and Imperial Sweden do not just include the weaklings of Estonia, Latvia, and Lithuania, but also Finland, Norway, and Denmark—economically developed, culturally united, militarily robust countries that boast more than enough petroleum to supply everyone in the extended Swedish family. And Poland as well.
By any measure a Swedish-Polish alliance would be a mating of synergies. Sweden is an advanced maritime technocracy, while Poland is a modernizing land-based industrial power. Sweden has the money and the technology needed to make Poland bloom, and Poland has the market to make it worth Sweden’s while. And neither are in the eurozone, so at least part of the European carnage to come will pass them by.
Numbers will still prove a problem. There are under 10 million Swedes to support fewer than 40 million Poles against over 80 million Germans and some 140 million Russians. If Poland is to be successful, it will need more than simply Swedish help. Which brings us back to the Americans.
The benefits of a Poland that can preserve its independence are undeniable: It would keep Central Europe out of either the German or Russian sphere of influence, and condemn both Germany and Russia to remain locked down in local issues. Unfortunately, Poland’s case—and its Intermarium alliance—is hopeless. Keeping Poland in play would require a substantial commitment of technology, treasure, and—in the end—likely even blood. It is exactly the sort of commitment that the Americans will try to avoid in the new era.
