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Will automation save the world against deep population decline?

Peter Zeihan Geopolitical Strategist
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Much has been made about China’s population crisis and how the decreasing numbers will weaken its manufacturing and production output. Whether it be in China, Italy, Korea, or any other country seeing a dramatic demographic shift, fewer workers generally put a drag on growth. Some say automation — robots for example — will become necessary to replace the missing workforce. Straight Arrow News contributor Peter Zeihan is less optimistic about the future of automation and argues machines require resources already in short supply in many affected countries.

Excerpted from Peter’s Mar. 17 “Zeihan on Geopolitics” newsletter:

A world caught in deep demographic decline, faced with the loss of consumption and the complications that come with all that…can automation help pull us out of this nose dive?

Here’s the quick and dirty on how we got here….back in the industrial era, birth rates started to decline, then got even worse when globalization came around, and then went to the sh***er once the countries that were a bit behind joined the industrial world.

Now onto how automation fits in. Spoiler alert: automation is not the holy grail it’s been made out to be. Sure, it can be part of the solution in systems that aren’t on their last leg, but we must remember that these are still machines. They take time to build, require lots of upfront capital, and don’t get me started on the consumption piece of this puzzle.

Automation isn’t going to magically reverse the effects of demographic collapse, but for countries with the time and money, it’s not a bad place to start.

Hey everyone, Peter design here coming to you from Phoenix, a city so artificial, it makes Vegas look like a nature preserve. I just want to spend a couple minutes real quick talking about actually answering a question that a lot of you have sent in. And that is in a world where we’re in deep demographic decline. And we’re facing the loss of consumption across the board and the dislocations that come to that for economics and trade. Can automation help solve some of these problems? So first, the backdrop, the birth rates started dropping precipitously in the industrial era, and then really doubling down at the end of World War Two when the Americans created globalization and then tripling down in the 1990s, when a lot of what had not been part of the global system. Your China’s your Russia is your Brazil’s joined in, everyone started industrializing and urbanizing. And birth rates went just just plummeted through the floor, until we got to the point where we are today in places in China and Korea, where birth rates are births per woman are now below point seven, and 2.1 is the replacement level. You play that forward for decades, and how we’re running out of people to have countries in the not too distant future. You know, historically speaking, now, the picture is different country by country. But it does raise the question and this is a good one, whether automation can help us with the workforce? And the answer is probably not and the short version, the longer version is you need two things. In order to maintain a trading network and economics as we understand them. The first one is consumption. Theoretically, automation can help with the production side of the equation, but machines don’t consume. So there’s no reason to expect a broad automation push is actually going to solve that unless you’re part of a system where there already is consumption. So in places like the United States and Mexico where birth rates are still reasonably high, and we’re not facing the kind of crash we’re seeing in Italy, or Germany, or Belgium, or the Netherlands, or Greece, or Spain or Brazil, or China or Korea or Japan or you get the idea. You know, it might work. So in those systems that are already the most sustainable automation can absolutely be part of the solution. But the second broader problem is capital. As you retire, you liquidate your investments and you go into T bills in cash, because if there’s a currency crash or a market crash, you’re you’re just out of luck. Well, that speculative capital back when you were investing in stocks and bonds, that’s what drives the tech sector. A successful tech sector requires not just loads of 20 and 30 somethings to do the work people we don’t have anymore, but a lot of capital to pay them for years before their investments actually bear fruit. And only then do you also need capital in order to pay for the prototyping and the operationalization and the build out and ultimately, the maintenance of all these systems. And we don’t have that capital environment anymore, either. So they’re just very few places in the world where tech in general in automation in specific can actually part be part of the solution. We’re gonna have to figure out different ways of doing things and for most of the world, that means doing less. All right, that’s it for me. Next up, perhaps Vegas

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