Hey, everybody, Peter Zeihan here coming to you from Italy, Via de Costa, via della Costa, excuse me, the old Roman road that went all the way to Spain.

Since I’m leaving the country tomorrow, today, we’re going to talk about European politics.

You guys may have noticed that we have far right parties, which based on which country, you’re in what your politics are either anywhere from conservative, to moderate to Nazi taking power, or at least doing very well, in any number of electoral competitions in the European Space. In some cases, seizing outright power.

Here, among others in Italy.

There are a couple of reasons for this, the first one is almost boring and statistical. It’s because there’s a different electoral system, and a different approach in Europe, when the United States recovered from the Civil War, and when the US was created in the first place, there is this idea that how you force modernity or how you force moderation, is by forcing political groups to appeal to the largest number of individuals possible. So the United States has something called a first past the post electoral system with single member districts, which is a fancy way of saying that you vote for a specific person who’s going to represent a specific group of people.

That’s not how it works in Europe, in Europe, most of their electoral systems were designed in the aftermath of the world wars in the aftermath of a series of revolutions and conflicts that killed millions of people. And so it was perceived as far more important to instead of catering to the vast majority, to have a society that was more inclusive of everybody. So instead of voting for a person, you vote for a party. And if that party gets 20% of the votes, they get 20% of the seats in Parliament, and whoever has the most seats in parliament then goes on to form the government.

And in doing this, you allow groups that are maybe not in the center, but can still get a lot of votes to be part of the governing system. And so most countries in Europe don’t have two parties, they’ve got four or five, or six, or eight or 12, or whatever it happens to be. And so you get a lot more diversity in the decision making system, a lot more diversity, and the politics of the parties that make up the system. And that means your people from the extremes as well, anywhere from socialists and communists on the left to reactionaries and maybe even fuming on Nazis on the right. That’s by design, it’s not by accident. And so you’re always going to have this element of the election system of the electoral system of the voters who are willing to support candidates that other people might find little distasteful. And sometimes they form a government because they’ve got enough support. Now, that’s piece one. Piece two, Shakur is more demographic.

When you industrialized and urbanized, you start moving from the farm and into the city. And then the farm kids are free labor in the city, kids are an expense. And so as time goes on, you have fewer of them. Well, a good portion of Europe didn’t get serious about the business of urbanization and industrialization until after World War Two. So whereas the Germans and the Brits kind of led the way in that process, and the birth rate has been dropping fairly slowly, for a long period of time. In places like Spain and Italy, the process really didn’t start into the latter half of last century, and has proceeded at a much, much, much, much faster rate. Well, if you’ve got a birth rate that is less than two children per women, for a decade or two, it’s not a big deal. But if you do that for, say, seven or eight decades, all of a sudden you’ve got a problem. And the issue we have in a lot of Europe, is that the drop below replacement, as far back as the 50s, and the 60s, and they dropped past 1.5 children per woman, as far back as the 70s in the 80s. And you play that for another 50 years. And it’s not so much for that population reconstitution is impossible. It’s been impossible for decades. But we’re now at the point that the last people who were born in normal times are now turning 60 and 70. And nowhere is that more advanced than here in Italy. So it’s not that demographics, when they turn generate a more conservative population, it’s that when people retire, they give a little crotchety and we’re now seeing people across Europe, in vast numbers age past that point, and they didn’t have enough children to generate a more economically pragmatic population. And since those people don’t exist, there was not another generation born below to be more liberal. So if you remove the liberality of the youth, and the moderation of the middle aged folks, and all you’re left with crunchiness, you get more reactionary

Politics, electoral systems and ultimately governments. Its furthest along here in Italy. Coming up a close second is Germany. And I’m sure there’s no one worried about that. And after that, you got places like Portugal, Austria, the Netherlands and Poland, which are aging to this in a similar rate, but from a slightly younger base. So we are going to see more and more conservative politics more and more socially conservative politics, more and more populist politics moving on. Because if you are

turning 70, this year, you’re really not concerned about things like social rights, or economic development. You want your train ticket to be a half a Euro, and no more. Oh, yeah, that reminds me, having something like the common currency requires a more balanced economic system. And if you look back demographically, at the period, we’ve been in the post Cold War period, we’ve gone through a couple of interesting phases, because from roughly 1990, until roughly 2015, we saw these people aging, but no one had really hit retirement yet, which meant they hadn’t become interested in no change yet. In fact, if you’ve got people who are age 50 to 65, and who don’t have kids, their income is huge. You’re saving loads of money for retirement, the tax base is massive. And the financial wiggle room in that sort of system is absolutely huge. And that’s the same era when the Europeans decided that, hey, let’s do the common currency. And if you think back at how insane that sounded at the time, you have industrialized Germany, you’ve got technocratic Luxenberg, you’ve got post industrial, Portugal is based entirely on tourism. Who would ever think in a normal system that all of those systems could be under the same currency union. But when there was a huge amount of financial or just flooding around because of all these middle aged but not yet retired people, you could try a lot of things. And they did. One outcome was the common currency. But now a lot of the people who were generating all that capital to give them wiggle room have moved into mass retirement, and with them the hopes for the currency go as well.

And for those of you who are finance nerds out there, you think the Germans were obsessed with inflation before most of the working age population retired, just wait till they’re all retirees because that is something that happens within the next 10 years. When that goes down. There isn’t much hope for the euro. So you know, visit while you can make the most of it. And I’ll see you on the other side of the punch. Take care