Disorder, Hard Times in the 21st Century: Economic and Geopolitical Notes

Introduction to Global Disruption

Disorder, Hard Times in the 21st Century - Elen Thompson Introduction Disruption - 2020s: The status quo

• General sense of democratic fragility all over the world;
• Increasing geopolitical turbulence (Europe and Asia);
• Ongoing worsening environmental catastrophe remain largely unaddressed;
• Global economies are experiencing a vast array of troubles (e.g. inflation, recession, supply chain disruptions);
• Lingering effects of the pandemic (long Covid, unclear developments re: variants, new threats) > How do we explain this widespread, worsening disruption?

There's no singular explanation, but several causes are contributing to the problem. Thompson lists 3:

1. Energy - 1860-today A primary cause of persistent geopolitical and economic turmoil. The history of energy is, primarily, the history of oil.
2. Economy - 1970s-today Several factors are now converging in creating monetary, financial, and energy upheaval (in addition to oil: gas).
3. Democracy - 1910s-today The dominant expression of democracy as we know it (i.e. representative democracy) is undergoing a crisis today. From the 1990s, as Neoliberalism became the de facto standard, democracies were emptied of democratic values: plutocracy and autocracy came to dominate. It's unclear what comes next.

Key Implications of 21st Century Trends

Key implications: The story of the 20th and 21st centuries is, for the most part, the story of fossil fuels, in particular oil and gas: the most important historical, geopolitical, economic events of this time frame can be explained through the lenses of energy. Oil and gas will remain central to our lives for many years to come, with severe implications for geopolitical, economic, democratic and above all, environmental matters. The future of democracy is unclear in most countries of the world: the political disruption that we have witness in the past decade, culminating with key events like Brexit, the 2016 US Presidential election, the Jan 6 2021 attack in the Capitol in Washington D.C. are, likely, only episodes of a larger, deeper, developing narrative.

Geopolitics and the Age of Oil

I. Geopolitics

The Age of Oil Begins: 1860-1945

1. The Age of Oil Begins Time frame: 1860-1945 Main characters: The US, Britain, European nations (Germany, France) - The Middle East (Saudi Arabia, Iran) - China - Russia Idea takeaway: Energy (oil and gas) is the key driver of the modern world's history; oil explains who won or lost WWI and WWII

The Non-Eurasian Eurasian Power Paradox

1.1 The Non-Eurasian Eurasian Power - The paradox: In the 20th century, the US was the dominant power. However, the center of gravity was located in Eurasia. Until the end of the 1800s, the dominant power in Eurasia was the UK, which controlled the biggest Empire in history.> What's Eurasia? Eurasia is the largest continental area on Earth, comprising all of Europe and Asia. > What changed everything? Oil, a (mostly) American invention: 1860: oil extraction + use for commercial purposes begins in Pennsylvania. 1870s Standard Oil Company Inc., John D. Rockefeller: leader in refining and transportation of oil. > Where else do we find significant oil production at that time? Russia: btw 1898 and 1902 is the world's largest oil producer. 1890s the key competition for European markets was btw Standard Oil (American oil) and two European businesses: the Nobel Brothers Petroleum Production Company and the Caspian and Black Sea Petroleum Company (Russian oil) - in the Suez Canal. Between them there was no cooperation at all, just fierce competition. 1908, Henry Ford's Model T with a combustion engine made the demand for oil explode. The story of the 20th century is also the story of the car. "The gasoline-fuelled car produced in the huge Ford factories in Michigan became the prime symbol of American technological innovation and industrial consumerism" 1970, Marshall Mcluhan: "when I say the medium is the message, I'm saying that the motor car is not a medium. The medium is the highway, the factories, and the oil companies. In other words, the medium of the car is the effects of the car: when you pull the effects away, the meaning of the car is gone. The car as an engineering object has nothing to do with these effects. The car is a FIGURE in a GROUND of services. It's when you change the ground that you change the car. The car does not operate as the medium, but rather as one of the major effects of the medium. So 'the medium is the message' is not a simple remark, and I've always hesitated to explain it. It really means a hidden environment of services created by an innovation, and the hidden environment of services is the thing that changes people. It is the environment that changes people, not the technology."

Politics and Oil in the Early 20th Century

Politics and oil: US - in the 1910s, US politics did not impede, but incentivised the growth of the energy industry (even though Standard Oil was broken up in 1911 for monopolistic tendencies). Russia - in the 1910s, Russian politics almost destroy the Russian oil industry (literally, by setting the wells on fire during the 1905 revolution) and missed the chance to capitalise the high demand during WWI (1914-1917). Europe - very worried about US dominance. Alternatives are hard to come by but in 1908, oil is discovered in Persia. An intense competition btw the UK, Germany and the US to control these territories and thus access vast quantities of oil ensues. The UK has an initial edge over Germany: 1911, Winston Churche main source of energy for the British Navy - there's no turning back. Middle Eastern oil played a significant part in shaping British-German rivalry before WWI.

WWI and Oil's Geopolitical Importance

Key historical events: WWI (1914-1918)

• Accelerates oil's geopolitical importance;
• Reinforces American oil dominance: as the Germans convince the Ottomans to sell the oil to the Austro-Hungary empire via trains, the UK must rely on the US (the Atlantic) ships.

* 80% of oil comes from the US SHIPS > TRAINS > Why does Germany lose WWI? Oil (or, rather, the lack of thereof). As soon as the UK can establish a convoy system for oil tankers coming from the US, it's game over for Germany. 1918: the Germans struck a deal with the Bolsheviks (Russia) for more oil, but it's too little and too late.The New Financial Emperor Has Eurasian Clothes

Post-WWI Financial and Oil Landscape

> What happens after WWI? a) the UK, which used to be the world's biggest credit, loses its position of privilege; b) in 1913, the US established the Federal Reserve System - after WWI, the US central bank quickly becomes the world's most important economic institution; c) WWI had been entirely funded by the US - France and UK would have not survived without the dollar; d) in the 1920s, the majority of gold reserves are in the US; the US Dollar overcomes the Sterling as the most important currency in the world; e) the US and various Europeans states compete for the control/access of the Middle East, using different strategies:

• The US did not intervene military or declares war against the Ottoman empire;
• The German Kaiser secured the declaration of an Islamic jihad against Britain, France and Russia in the hope that a revolt by Muslim from the Middle East to India would procure a German sphere of influence - but losing WWI made that useless;
• The UK, France, and Russia made an agreement to control the Middle East - but geopolitical tensions complicate things. Nonetheless, even though Iraq became a sovereign country in 1922, the UK maintained control over the country as a geopolitical space;
• 1920s, massive oil race: Europe vs the US - the UK in 1919-2020 controls at least 50% of the world oil reserves - the US decides to act in the Middle East to ensure a dominant position
• 1930s, the US gets access to Saudi Arabia (agreement btw the Saudi King and Standard Oil) and becomes a serious contender to UK dominance in Persia and Iraq.

US Isolationism and Intervention in Europe

Going back to the paradox of the 20th century: Btw 1914-1941, American politics made it impossible for the US to use their military and financial power to act decisively as a Eurasian power. > Why? The dominant political policy in the US up to that point is isolationism. 1914, Pres. Wilson says "we will not take part in another bloody European conflict!" but Wall Street is very happy to fund the war. This sets the stage for one of the dominant narratives of the 20th century: THE STATE vs. THE MARKET (JP Morgan) 1917, Pres. Wilson says "We must intervene in Europe!" The war is successfully sold to Americans through a massive propaganda campaign (PR ante-litteram, Edward Bernays etc.). >>> What is the tipping point? Germany's offer to ally with Mexico against the US - whereby Germany would support a Mexican annexation of Texas, Arizona and New Mexico. > How does the President sell the idea of the war to Americans? Thanks to the propaganda concocted by the mass social engineers.

WWI Recap and Aftermath

WWI, a recap: Britain and France vs. Austria-Hungary (and, by proxy, the Ottoman Empire) ⬇ Britain and France + US vs. Austria-Hungary (but US does not declare war on the Ottoman Empire) ⬇ Britain and France + US win the war - but US democrats lose both Congress and Senate in 1918 of anti-war sentiment and anti-bankers sentiments = 'Merchants of Deaths' ⬇ 1935-36: Congress passes neutrality laws banning banks loans to belligerent countries. > What does trigger WWII? Money!Recap:

• The US (Wall Street first) funded WWI (UK + France) with huge amounts of money.
• UK and FRance (thanks to the US) win the war, but they have to repay huge debts.
• The US is against any kind of allied debt cancellation.
• Also, the UK and France want the Germans to repay their debt for causing the conflict in the first place.
• Germany is unable to pay: its economy it's shattered and the German people are angry and hungry.
• Here comes a former painter from Austria, Adolf Hitler who promises vengeance and the glorious return of the Austro-Hungary empire.

The Nazi party wins the election in 1933. Most European countries (including Germany) repudiate their debts in the early 1930s (1929-1932), creating tensions with the US, who nonetheless agree to keep funding the Europeans. Also: a major financial crisis in 1929, The Great Depression first destroys the American economy, which soon disrupts Europe as well. To avoid further disruption, President Roosevelt decides to rein in US banks and to prioritise the domestic market ("America First" policy).

American Energy Power Returns

1.2 American Energy Power Returns 1929-1933: Great Depression + global economic crisis ->The US retreats to domestic policies to deal with it. Germany, Japan, Italy and the Soviet Union engage in violent territorial expansion, which will result in WWII. This expansion is fuelled once again by America, through oil. WWII is inseparable from energy geopolitics: WWII is a war fought with air power (aviation), which requires massive amounts of oil (kerosene). The need war generates for oil was unprecedented. The US benefits enormously from the war. Eurasian countries try to break their dependency from the US, especially Germany (a key priority for Hitler), but they largely fail. Hitler tries to develop synthetic oil via IG Farben but that does not work either. > Why does Germany invade Russia? "Operation Barbarossa", June 22 1941 - January 7 1942 Of course, oil. It doesn't go well for the Germans. The Third Riech is unable to take over Russia. The defeat at Stalingrad basically marks the end of Hitler's dreams and the beginning of Germany's capitulation. Gen. Rommel is defeated in North Africa because he ran out of oil and the Italian campaign soon begins. > Why does Germany lose WWII? Oil (or rather, lack of thereof). Britain had been unable to achieve energy independence throughout the 1920s and 1930s. > Why? a) Limited output from Iraq (which the UK basically controlled); b) Over reliance over other countries (Mexico and Venezuela, the US is down to 10%); c) The italians invade Abyssinia in 1935, but the US doesn't introduce oil sanctions against Mussolini. Italy blocks the entrance to oil tankers from the Suez Canal with the backing of Germany and the UK is in trouble. = the UK remained reliant on the US for its energy needs (this will become a recursive narrative) The French fully grasp the urge to access oil and create the entirely French-owned French Petrol Company (then Total and now TotalEnergies). The company is a huge importer of Russian oil until oil is discovered in France as well - like the Brits, the French were mostly unable to exploit the Middle East. ⬇ This left the US free to exert influence over the Middle East. 1943: the US declares the Kingdom of Saudi Arabia "vital" to US interests, offers military protection and massive lending of money; Standard Oil joins Aramco (née California Arabian Standard Oil Company).