Posted March 30, 2021
By Byron King
A Nuclear-Armed Big Box Store
Well, they finally dislodged that big green ship from the Suez Canal. Hurray! We dodged that bullet.
Evergreen M/V Ever Given blocking Suez Canal. Courtesy NASA/RosCosmos.1Something like 12% of all global trade passes through Suez, much of it in giant container ships. And when the canal seizes up like this, world commerce can have a heart attack.Its not over, though. Well feel ripple effects for months to come. They range from delayed sailings and dockings in Europe to eventual shortfalls as far away as San Diego.2But the vessel is off the sand, courtesy of mighty tugboats and hardworking dredgers.And give thanks to Selene as well, Greek goddess of the moon. She was in full phase the other day, at whats called perigee. The resulting high tide helped lift the ship out of the muck. Easily, her feat of gravity and buoyancy was as important as a fleet of tugboats.Meanwhile, the grounding of the cargo ship Ever Given, closure of Suez and shock to world trade illustrates the deep-seated weakness of our modern economy definitely of the U.S. economy.That is, without those big ships full of big boxes, were screwed. Because the U.S. has devolved into a nuclear-armed big box store.Lets dig into thisBegin several decades ago in 1991, at the end of the Cold War and collapse of the Soviet Union. This led, it seems, to a collapse in sober, Western, long-term strategic thinking as well.The demise of the Soviet Union was unexpected in the West. Few were prepared, as I discussed here.The fact is that the U.S. and West didnt so much win the Cold War as that political forces within the powerful, nuclear-armed, ex-USSR brought the East-West standoff to a close.Its a long story and people write books on these things. But philosophically, Communism a la Soviet had outlived itself, and a different sort of people came to the helm of Russias ship of state. To them, the Cold War no longer seemed a worthwhile enterprise of national resources.As the Soviet flag came down, a new Russian flag arose, including many old tsarist emblems. And Western triumphalism was grossly off the charts. We won! Yeah, right.Indeed, in 1992 historian Francis Fukuyama wrote a best-selling book about what happened, entitled The End of History and the Last Man.3
A book that reshaped U.S. thinking.
Fukuyama was no minor scribbler from some third-rate, Podunk college. He was a graduate of Cornell, did graduate work at Yale and held a Ph.D. from Harvard, where his thesis adviser was no less than the esteemed Samuel Huntington.
In the early 1990s, Fukuyama worked at the U.S. State Department on the Policy Planning Staff, which is a particularly important government job.
In other words, when Fukuyama opined, he opened wide a door into the political-economic-military policy thinking of the entire U.S. government.
What did Fukuyama say? In essence, he argued that history is directional; its endpoint is capitalist liberal democracy.
Well, well How totally convenient for that much promoted, so-called American! Way! Of! Life! some might say.
Fukuyama looked at two prime forces that supposedly push societies toward this self-evidently noble, America-dominant, Yankee-capitalist, liberal, democratic end state.
First, Fukuyama focused on science and technology, which he argued create homogenous cultures. And second, he highlighted the Hegelian concept of human desire for recognition, which drives innovation and personal achievement.
Science, tech, innovation, recognition, personal achievement Right up Americas alley, yes?
In other words, as we take stock of the past 30 years, the dominant, driving political assumption of U.S. governance was an extrapolation of American exceptionalism. The intellectual roots go back to Colonial times, to the Puritan ethic and America as the New Jerusalem, representing a place where the shining city on the hill beamed bright.
Indeed, Fukuyamas book and the first part of its title The End of History became an excuse for chronic levels of lazy, non-strategic thinking in government, business, academe, religion and culture generally.
After all, the world was Americas oyster, right? Who needs to think strategically when history is on your side, eh?
To which, one can only say, Hmm
One particularly ugly angle on this lazy End of History thinking was a baseless, vitriolic U.S. cultural-political-media theme. Essentially, that Russia was and remains a post-Soviet dumpster nation, filled with awful people.
This level of disdain is crystallized in a short, snarky comment by the late Sen. John McCain, that Russia is just a nuclear-armed gas station.4
It was an intemperate and stupid comment when McCain said it. And its just as ignorant today when people repeat it. Heres why
First, rest assured, Russia is far more than McCains silly caricature of some third-rate, broken-down, failing, gas station nation. I touched on it recently, here.
But lets drill deeper into whats going on with Russia.
And yes, Russia produces oil more oil per day than the U.S. in fact.
Frankly, theres nothing wrong with that.
Russia is blessed with energy security, something that helped the U.S. win World War II and something that the U.S. has fought wars over for 50 years.
Virtually all of Russias oil industry is internal, from drill bits to pipe valves. It means that the costs to run Russias oil sector are calculated in rubles. But oil output is priced in dollars.
The endgame is that production costs for Russian oil are near the bottom of global rankings. Or stated another way, Russian oil is profitable and generates significant revenues for the countrys oil sector, plus taxes. Nothing wrong with that either, right?
Meanwhile, over the past year U.S. oil output tumbled due to Covid. And the U.S. oil sector has a bleak future under President Biden.
To add insult to injury, the U.S. has been importing more and more of that Russian petroleum. For example, one recent headline in Bloomberg News stated, U.S. Thirst for Russian Oil Hits Record High Despite Tough Talk.5
Meanwhile, as the U.S. energy sector has languished, Russia worked closely with numerous other oil producing countries. Its a long story, but Russia currently controls critical marginal barrels on world markets. Hence, its fair to say that Russia sets the global price of oil.6
Bottom line is that Russia produces oil, makes serious money, and sets the global price.
In this sense alone, Russia is way more than a mere gas station. Its far more accurate to say that Russia is a strategic center of gravity for the worlds energy complex.
And now, considering how Russia is partnering up with China, all that energy is moving away from the West.
Its not quite The End of History that many people had in mind back when they first read Fukuyamas book.
But what about those nukes?
Lets review some more history.
When the Soviet Union collapsed in 1991, the Russian Federation inherited a massive, legacy nuclear power and weapons complex. Over the past 30 years, Russia maintained much of that enterprise. It closed old, outdated facilities and refurbished others to ultra-modern standards.
Compare this with the U.S., where according to no less than the Congressional Research Service, many legacy nuclear facilities are literally falling apart.7
Along the way, Russia reconstituted ex-Soviet nuclear/industrial capacity, much of it for commercial nuclear power and much else with a military focus on strategic nuclear weapons.
These kinds of nuclear facilities include, at the outset, really smart people (and I mean armies of them) from excellent schools and universities.
Smart people tend to do smart things, something we in the U.S. ought to remember as we witness imbecilic discussions over whether or not math is racist.8
Theres another long story here, but the fact is that today Russia is a world leader in nuclear power systems for commercial electricity generation, including a simply astonishing class of nuclear-powered icebreakers being built for Arctic development.
Under construction: Russian nuclear icebreaker, Project 10510. Courtesy RosAtom.9In short, get real. Because things in Russia are a far cry from the days of Chernobyl.On the military side, Russia has certainly kept up its nuclear capabilities. At a professional level and as a former U.S. Navy guy, I salute them, and I mean crisply.Russia has a well thought out approach to nuclear material processing, weapon assembly and maintenance, missile systems research and production, and launch systems ranging from road-mobile monsters to a superb class of new missile-firing submarines.Indeed, not long ago, three Russian nuclear-armed submarines surfaced through Arctic ice, just to show the world some of that capability.10For more about the highly evolved state of Russias navy, see a recent report by the U.S. Office of Naval Intelligence, here.So yes, Russia has nuclear power and nuclear weapons. Lots of weapons, in fact, which are routinely maintained and tested under constant, positive control through proper channels.In other words, Russia is a world class nuclear power. Its not some rogue nation with shoddy maintenance, run-down command and control practices and unpredictable, kooky political governance.The takeaway is that contrary to the late Sen. McCain and many others who parrot his dumb comment, its foolish and self-deluding to view Russia as a nuclear-armed gas station.Its far more accurate to characterize Russia as a highly competent cultural-political system that can do difficult things like global-scale energy systems and strategic weapons and basically get it right.Which brings us back to that ship that got stuck in the Suez Canal.Begin with just a simple photo:
Whoops. Courtesy BBC News.11
What do you see? Yes, of course, its one of the worlds largest container ships with about 20,000 containers on it.
Meanwhile, the image was taken from the bridge of another container ship, also laden with big boxes.
Obviously, there are many boxes going both ways. Meaning ships full of containers and manufactured goods going north towards Europe and west to America. And on the other side, many ships were blocked carrying empty containers south and east, back to Asia for refill.
But the photo also illustrates far more than just how a ship channel was obstructed.
In fact, globalism was blocked. Because in so many ways, this is the picture of your global economy.
The image also illustrates something else; namely, long-term deindustrialization in the West. Because every box full of stuff from Asia comes from a factory thats not in Europe or the U.S. And the related image of that phenomenon is something like this:
Close the factories, open the big box stores.12For 30 years, the West in general (the U.S. in particular) has shifted manufacturing offshore to other nations with lower wages, lower overhead costs, less regulation, cheaper everything.It seemed like such a great idea! The U.S. would export its reserve currency dollars, and other people far away would send us boatloads of stuff.But at the end of the day, the country wound up with a hollowed-out economy in which vast swaths of commerce are tied up in finance and real estate, plus bloated government running a massive welfare state. Its what economists call rent seeking.Meanwhile, all those exported dollars financed the 21st Century buildout of Asia into the worlds center of economic and financial power for the future.And then last year, the U.S. found itself in the middle of a pandemic and unable to manufacture most of its pharmaceuticals and medical products. See here and here. Its why U.S. medical care has transformed into China-care.Its why the U.S. is marching towards a new kind of feudalism for most of its inhabitants, such as we discussed here.Is this really what The End of History was supposed to look like? An entire economic and cultural system at risk because one ship runs aground at a geographic choke point?In a bitter twist of fate, the Suez Canal event has turned Se. McCains disparaging Russia insult on its head.Because at the end of the day, and as forces of no less than the moon refloated the stranded container ship hull, all evidence points to how the U.S. has blown itself up over the past three decades.At the end of the day, the U.S. has transformed into not much more than a nuclear-armed big box store.On that note, I rest my case.Thats all for now Thank you for subscribing and reading.Best wishes,Byron King
Managing Editor, Whiskey & GunpowderWhiskeyAndGunpowderFeedback@StPaulResearch.comP.S. Feel free to forward Whiskey & Gunpowder to friends, family and colleagues. If you received this article from someone and would like to subscribe, click here. Thank you.
12 Blue Collar Voters: Trade Is Killing Us, The Conservative Papers