Siberia USA

I never believed in the durability of the previous economic bubble when I saw the quality of the knuckleheads who were getting rich. To me it was all artificial, and I wasn’t inclined to play the game. The shakeout was a long time coming. A vastly large percentage of the workforce is just dead weight. When the consolidation is complete the economic profile of the United States is going to look a lot different, and it’s not going to be a pretty picture. People are going to look to sustain themselves with manufacturing jobs. The service economy, which was always an illusion anyway, it going to suffer an ignominious demise, and good riddance to it.

The smartest country is Germany, which holds the key to industrial production. They make the machines, and they have been loath to change their business model, with good reason. Even in the current morass, Siemens is operating in the black.

One of the biggest losers will be China. If Barack Obama eliminates the tax break for warehousing overseas profits, a lot of the incentive for manufacturing offshore will disappear, and companies will decide to repatriate their production. The vast industrial infrastructure that sprang up overnight in China to serve the interests of American corporations will instantly become redundant. For those dreamers waiting for China to kick-start the world economy, the $560 billion Chinese stimulus, which was ephemeral anyway since three-quarters of it was supposed to come from municipal and provincial sources with only $140 bn. coming from the central government, is proving to be a mirage. Once the spigot of American liquidity gets shut off, the Chinese will burn through their reserves like a house on fire.

The Chinese had stated their intention to construct a full-blown capital market in Shanghai by 2020 to de-couple themselves from dependency on the dollar, but that is also an illusion. China’s modern economy was jerry-built to get rich quick over the fundamentally unsound foundation of a society with no laws, no courts and no transparency, which are the necessary prerequisites for capital markets.

India, on the other hand, has experienced more cautious organic growth. Most of its production is geared to internal consumption. The recent landslide victory by the Congress Party under economist PM Manmohan Singh ensures medium-term stability and a deliberate pace of economic liberalization. India has a tradition of press freedom, a fully developed capital markets infrastructure and orderly rule of law.

The competition between India and China is a classic tortoise and hare story, except India is no tortoise. It is innovating at a breathtaking speed and expanding into world markets with products like the Tata Nano, an automobile developed for the domestic market that sells for $2,500 and should sell tens of millions of units in the developing world. India is expanding in steel, IT, energy, banking, communications, entertainment, sports, you name it. Unlike China, most of India’s expertise has been developed by serving its domestic population.

Ultimately, China, if it doesn’t collapse into chaos completely, is going to have to look for new resources to aliment its enormous restive population. The ultimate focus has got to narrow on its immense, sparsely populated and resource-rich neighbor to the north, Siberia. There’s no question. It’s only a matter of time.

The Russians must be aware of this. If you had 1.4 billion desperately poor people breathing down your neck, wouldn’t you? That’s why the Russians are spending hundreds of billions on new weapons systems and military upgrades. Whatever threat they feel from NATO has got to be more a matter of protecting their back to concentrate on protecting their interests in resource-laden Siberia.

But bombers and missiles alone won’t do the job. China can build those as well. Ultimately, the Russians are going to have to figure a way to implant human beings on the ground, the same way you plant trees to stop soil erosion.

Russians don’t want to live there. For centuries successive Russian governments have tried every imaginable tactic for populating Siberia: financial incentives, forced migrations, exile. Whatever it was, upon arriving in Siberia, Russians immediately began plotting to get back to Moscow or St. Petersburg (or now Brooklyn).

But there is one race of people who are willing to go anywhere and do anything to get rich – Americans. There are countless Americans who would risk life and limb for the chance at a big payoff. All the Russians would have to do is build some roads, construct some houses and give the settlers title to the land, and you would see a land rush into Siberia that would dwarf anything imaginable. It wouldn’t be long before the properties would be consolidated into huge holdings, but with the immense size of the place there would always be room for successive generations to pile in.

Imagine the huge cities that could be built under geodesic domes, visible from outer space and powered by solar and wind technologies! Hell, if they can build ski mountains in Dubai they could build freakin beaches and gambling palaces in Yakutsk.

It wouldn’t be long before a new breed of millionaires would be flooding into American resorts, bragging about their Siberian operations. “I got a little place about 500 kilometers north of Krasnoyarsk. 50,000 square kilometers of timber, oil, a couple of cobalt mines and a salmon cannery. Me and the missus are thinking of putting in a game preserve. Sure it’s cold, but we got our money to keep us warm”.

Naturally, the Russian government would have to go through a period of adjustment. Americans require functioning courts, a high level of incentive and respect for property rights. But they’re not any more ornery than your average Russian, and a lot more productive. They could bring in Indian manpower for the labor force. In the end the place would be so bizarre that it resemble “Total Recall”, the Arnold Schwartznegger movie that took place on Mars, with all the colorful characters. Ultimately, the American and Russian governments would find common cause in defending rich Siberia from Chinese incursion.

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Posted on 5/26/2009 ( Permanent Link )
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