Which Countries Will Be Tomorrow's Winners & Losers?

Tyler Durden's picture

Submitted by Charles Hugh-Smith via peakProsperity.com,

The dictum “demographics is destiny” proposes that all the complexities of finance, society and politics are ultimately guided by demographics: the relative size of each generation, birth rates, death rates, etc.

For example, an oversized generation of retirees and an undersized generation of workers to support them has far-reaching consequences that can’t be legislated away.

The influence of demographics isn’t limited to pension costs. Some analysts have made the case that oversized generations of young men align all too well with the launching of wars.

The point is that birth/death rates—low and high--have consequences that impact national destinies for decades.

Another school holds that geography is destiny: if a nation’s geography is favorable, the barriers to prosperity and stability are low, while the barrier is high for nations with unfavorable geography.

Peter Zeihan, author of the 2014 book, The Accidental Superpower: The Next Generation of American Preeminence and the Coming Global Disorder, lists the core geographic attributes that are either favorable or unfavorable in ways that influence a nation’s long-term prosperity and built-in geopolitical challenges.

What does geography have to do with prosperity, stability and geopolitical risks?

Navigable rivers that reach deep into productive interior regions lower costs of transport dramatically, while natural harbors enable low-cost access to international markets via ships.

Natural barriers to invasion such as oceans, deserts and mountain ranges dictate whether a nation must spend heavily on military defense of the homeland or whether the cost of defense is lightened by favorable geography.

Zeihan extends geography into the political realm, noting that nations with difficult-to-defend borders require a strong central government to organize taxation and defense, while nations with few contiguous threats (for example,  the U.S.) can be governed in a more decentralized fashion.

Nations with no navigable rivers or deep-water ports are cut off from the wealth-creating potentials of low-cost sea trade, while nations with excellent natural ports and a seafaring tradition have an enormous advantage: consider Portugal, which established trading centers in India and Asia in the 1500s once its explorers rounded Africa, and England, which rolled up Portugal’s chain of wealth-creating trading network into its Empire in the 1700s.

Zeihan notes that while Africa has 16,000 miles of coastline, it only has a dozen continental bays worthy of port construction.  Other places are blessed with a wealth of natural bay: Texas alone has 13 world-class deep-water ports (the map shows 17 ports total.)

Nations surrounded by flat steppes and numerous potential enemies have a much more difficult challenge defending their territory than nations ringed by oceans, deserts or mountains.

One of Zeihan’s examples of the benefits arising from natural defenses and navigable rivers is ancient Egypt. Surrounded by deserts on the east and west and forbidding terrain to the south, Egypt did not have to invest heavily in defense and was thus free to devote its surplus labor and wealth to monumental building projects.

Moving all the needed materials, workers, food, etc. hundreds of kilometers was made possible by the Nile.  The geography was favorable to stable civilization: it was easy to travel within Egypt but difficult for invaders to reach it.

Nations without navigable rivers or ports must invest heavily in artificial man-made infrastructure such as roads. Add in the high costs of permanent defenses and it’s clear why nations with favorable geographies tend to dominate nations with unfavorable geographies: those with favorable geographies have built-in low-cost transportation and defense, which means they can invest their surplus capital in more productive assets such as technology and industrialization--tools that leverage those investments up to regional dominance or empire. Those with unfavorable geography are forced to spend whatever capital they have on transport, defense and essentials such as food.

If we consider resources such as coal, oil, metal ores, timber, rich agricultural soils, etc. as part of geography, those natural sources of wealth and energy dictate whether nations must buy essential commodities from others or whether they can produce surpluses that can be sold to others.

Geography, Costs and Capital Flows

All this boils down to capital: which geographies lend themselves to capital surpluses that can be invested in high-growth industry and technology, and which geographies make transport, defense and the purchase of essential commodities permanent burdens that soak up much of whatever capital is generated.

If we think about it, it turns out capital is also one of the primary dynamics of demographics: nations with a massive generation of retirees supported by a dwindling generation of workers are drained of capital by the high costs of pensions and healthcare for the elderly.

Countries with a large and highly productive young cohort of workers supporting a small generation of retirees can save and invest the surplus capital being generated.  If this capital is invested in productive assets such as technology and innovation, the nation’s wealth expands.

Demographics and geography are destiny largely because they define cost structures and capital flows: if costs are high—from the burdens of transport, and defense and imported essentials, or from caring for a large cohort of retirees, or both—there will be less capital available to invest.

In this circumstance, the nation lacks internally generated capital to grow, and its sluggish economy is unlikely to attract foreign capital seeking a high return on investment.

There’s a positive feedback loop between high growth that attracts foreign capital and trade and favorable demographics and geography: favorable demographics and geography enable high capital accumulation and investment, which then supercharges technological advancement and capital-producing industry and innovation, all of which makes that favored nation attractive to foreign capital, which enables more investment in productive assets, and so on.

Meanwhile, nations with high costs and low capital accumulation due to unfavorable demographics and geography will suffer low rates of growth which make them unattractive to foreign capital, leaving them capital-starved.

The Impact of Culture on Demographics

Before modern medical advances, birth and death rates were largely dictated by surpluses or shortages of food, epidemics and war. In today’s world, cultural and political systems influence birth and death rates.  Japan’s low birth rates do not result from a shortage of food, and the decline of longevity and birth rates in Russia following the collapse of the Soviet Union were not the result of famine but of political instability.  

Studies have found that high birth rates decline as the educational and work opportunities for women of child-bearing ages increase.

Broadly speaking, demographics is no longer driven by feast or famine, but by cultural, economic and political dynamics such as educational opportunities for women, political instability and the cost of raising children.

Geography has a hand in these dynamics. Societies with unfavorable geographies may struggle to maintain surplus capital and political stability. The culture that arises in such challenging circumstances may be conservative, hierarchical and fear-based as a response to the proximity of numerous enemies and shortages of essentials. Innovation may be viewed more as a threat than an opportunity. All these traits inhibit experimentation, flexibility, innovation and risk-taking—all the essential ingredients to rapid expansion of capital and prosperity.

Did Nature and Culture Already Pick Tomorrow’s Winners and Losers?

Where does this lead? If geography and demographics have already defined which nations will be attractive to capital and most likely to accumulate productive capital in their domestic economy, and those nations that will struggle due to high costs and low rates of capital investment, in effect Nature (geography) and Culture (demographics) have already picked tomorrow’s winners and losers.

As individuals, we may harbor strong biases about which nations we want to see falter and which ones we want to see prosper. But as investors, we must strip away our political opinions and biases lest they interfere with our primary job, which is to preserve whatever capital we’ve accumulated.

In Part 2: And The Winner Is..., we examine Zeihan’s conclusions about who wins and who loses in the next 25 years, and add our own analysis and conclusions.

Owning any asset in nations poorly positioned  -- disadvantaged geography, challenged demographics, bleeding capital etc -- is an inherently risky bet going forward.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

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Francis Marx's picture

If California was a country, I would say loose due to their socialism..

the grateful unemployed's picture

there are plans to build a port facility near Ensenada which would rival the Port of Los Angeles.

Richard Chesler's picture

I't's not about geography,

it's about genes.



remain calm's picture

After Texas annexes I will have to move there.

Fester's picture

Do you know the password?

A Pimp's love is different's picture

'annexes' what? I thought it wanted to secede

Squid-puppets a-go-go's picture

the problem with analysis like this (all respects to CHS) is that we need to distinguish between 'attracting capital' as in a rich person moving to and spending their capital in a country, and rick people lending their capital to the nation, which the nation needs to pay back and may not be able to

edotabin's picture

the password is "cat"

Ofelas's picture

"it's about genes"


absolutely right, that is why ancient high civilisations remain on the top...like Egypt, Mesopotamia, Indus, Greeks, Rome....

Kirk2NCC1701's picture

Yup, Genes. Plus Worldview.

Especially the Worldview... that leads to success of individuals and groups.

zeronetwork's picture

Its all about food. Easily available food means genetically living being ( human including ) loose the aggressiveness from their gene pool.

OverTheHedge's picture

Is this map a) up-to-date and b) drawn by a Brit?


Bendromeda Strain's picture

No & LOL

Mombasa is not in Tanzania, and Kenya is not Somalia were the first clues for me. This thing is worse than a diner placemat - at least those have advertising around the edges.

Sometimes I wonder if ZHers even pay attention to the stories at all and just skim them to get in to the comments.

KnuckleDragger-X's picture

They've talked about that for a long time, but there's that little government corruption problem to deal with.....

Latina Lover's picture

Identifying loser countries is easy.  Start with any country invaded and controlled  by the USSA deep state, and when they declare themselves to be free, you know they will fail.    The Ukraine and Iraq are good examples.

KnuckleDragger-X's picture

The American hegemony is recent, but basic human stupidity is eternal......

BarkingCat's picture

Don' t you mean "the Iraq"??

MisterMousePotato's picture

Found myself thinking about her a few weeks ago. American exceptionalism personified. Wonder what she's doing these days. Maybe she drowned in a bucket of water?

OverTheHedge's picture

Here's a thing - language can sometimes be illogical, and sometimes out-of-date.

THE Ukraine is CORRECT. As is THE CRIMEA. THE Lake Distric. THE Algarve. It is all about the status of regions, as viewed by English people some time ago. The Ukraine was never a nation, just a region within a nation, and therefore has "the" in front.

I agree that The Ukraine is now a nation in its own right (sort of), but why would you expect a language to immediately apply rules of logic and drop the "the"? Not how it works. Accepted usage for The Ukraine is THE Ukraine.

Now that I have wasted a significant portion of my valuable day being a pedant, can we move on?

Thank you.

buzzsaw99's picture

any country liberated and democratized by the usa or any country touted by goldman sachs.

BapZander's picture

Free executive summary, enrollment required to read more drivel. (just pay additional shipping and handling)

withglee's picture

If geography and demographics have already defined which nations will be attractive to capital and most likely to accumulate productive capital in their domestic economy, and those nations that will struggle due to high costs and low rates of capital investment, in effect Nature (geography) and Culture (demographics) have already picked tomorrow’s winners and losers.

The thriving group will be one attractive to traders with effective repellent against parasites like capitalists, socialists, and other freeloaders and manipulators.

RopeADope's picture

Krugman will then be sent to 'advise' those groups.

withglee's picture

Please ask him to wait in the lobby. We'll get to him as we have time.

KnuckleDragger-X's picture

"The thriving group will be one attractive to traders with effective repellent against parasites like capitalists, socialists, and other freeloaders and manipulators." 


As soon as you find one, let us know......

withglee's picture

We know there is none out there to find. But we also know how to institute one. Stand by.

withglee's picture

if a nation’s geography is favorable, the barriers to prosperity and stability are low, while the barrier is high for nations with unfavorable geography.

Right. Take that beautiful geography that is Saudi Arabia for example.

thatthingcanfly's picture

Did you even read the article?

withglee's picture

Did you even read the article?

Only the headline (which I assumed carried the thesis statement) that brought me to the article  ... and then quick scan of the first few paragraphs to confirm, as usual, he has once again immediately swerved off the tracks.

But in response to this question, I did go back and read a little further ... and quickly tripped over this.

Texas alone has 13 world-class deep-water ports (the map shows 17 ports total.)

Texas' original port ... Indianola ... was neither world-class nor deep water. A hurricane wiped it out never to live again ... and Galveston became the leading port ... again, not world class nor deep-water.

And I see he includes Houston. It didn't even have water ... just a ditch known as Buffalo Bayou. So when I see his own examples refuting his thesis statement, I quickly turn to more capable thinking.

Demonstrations of capable thinking are becoming rare indeed at ZH as it reveals itself to be just a mouthpiece for the Mises Institute and it's covey of acolytes I refer to as the Mises Monks ... who can't even explain what they themselves write ... or should I say regurgitate.

And then they respond to replies with things like "Did you even read the article?" as if I have failed as a consumer.

Miles Ahead's picture

Huh?  Saudi Arabia is sitting on a bathtub of oil in a world where the rest have a bucket full at best.  A even a second one that is a bathroom sink by comparison.

If that's not beautiful geography, then what is... Switzerland?  (yes it is, but...)

Saudi Geography can't help it if the Saudi royal idiots were, well, idiots.

withglee's picture

The Gulf of Mexico is also sitting on a bathtub of oil. Is that beautiful geography? Is it more beautiful than Lake Michigan or the Atlantic Ocean? One of us has a peculiar view of beauty.

chairman mao's picture

In 25 years the north pole ice cap will melt, resulting in a new trade route connecting Asia and Europe.

I reckon Russia will be resurgent.

Deus Irate's picture

They said that 25 years ago, still waiting for beach-front condos in Tuktoyaktuk... But Russia will indeed fare well, because all the rubbish in the article aside, it's all about raw resources. If you got em, you will prosper. QED. All the rest is just so much fluffery.

TurnwiseWiddershins's picture

"If you got em, you will prosper."

So the Congo is on the verge of rip-roaring prosperity?

BarkingCat's picture

see the comment about genes.

If the average IQ is 85 there will be no prosperity.

The bigger road block to advancement is not even the average intelligence but how far above the average the genious quotient falls.

If you have group A with an average of 100 but tops out at 105, they will be nowhere as advanced as one that has an average of 100 and tops out at 195.

The average peon just has to be intelligent enough to do a good job running things.

If the population is too stupid to see beyond tomorrow it will not prosper.

deimosaffair's picture

sure. just like brazil and angola, or don't you watch the news?   ;)

adanata's picture



Shipping is like transportation by semis and will always have a strong position. However, over land, Bullet trains can carry as much and faster. China and Russia are laying down a lot of track.

Theonewhoknows's picture
Theonewhoknows (not verified) May 14, 2016 11:05 AM

For investment look for low debt, good demographics and stable government - anything else can be bought, overcome or simply changed. Oh and if you find a place without central bank (and its not 3rd world country let me know)

Theonewhoknows's picture
Theonewhoknows (not verified) May 14, 2016 11:05 AM


Thinkor's picture

Actually, the map shows 18 ports in Texas, not 17.


Escapeclaws's picture

How stupid of me, I thought he was going to discuss individual countries, because the title kind of suggested that, but no, it was just a list of factors that could determine which countries could be well or poorly equipped for success. The factors seem pretty obvious, but I guess the idea is to wait and see how individual countries perform and then see how they fit the listed criteria in retrospect. Then we will be able to say, "that was a pretty perspicatious article he wrote back in 2016." Maybe he does discuss individual countries in the second part for rich readers.

dbTX's picture

Texas, like a whole other country.

ali-ali-al-qomfri's picture

it is a Fiat Accompli and due to the money lenders, greed and power.


Niall Of The Nine Hostages's picture

The winner is the United States, apparently, thanks to its geography and its being within striking distance of energy independence.

Said independence allows it (in principle) to quit being the muscle defending foreign elites from the consequences of their own corruption and incompetence---in other words, to finally tell the EU and Saudis to go fuck themselves. This causes decades of instability as chickens come home to roost across Europe and Asia. 

Only problem with the prediction is that America by rights should already be energy independent. Our elites, who do not bear the cost in money and blood of propping up their pals in Riyadh (poor people do that), simply refuse to cut them loose. The very idea of living within their energy means---much less paying Americans to do work Americans are perfectly capable of doing---is madness to them while they have any other options.

Lost in translation's picture

Somehow I suspect the country with $19T in debt, importing tens of millions of Third World savages and forcing the few remaining producers to carry them financially for life is not going to end up being a "winner."

Omen IV's picture

The premise is questionable especially with technology changing the need for only cheap water based transportation - high speed rail over thousands of miles will beat water for cost and speed

The key in my view is high grade DNA plus first class culture - produces easier management of the objectives. High IQ with work ethic coupled with abundance of natural resources and barrier to entry like difficult language puts Russia at the top of the heap.

Especially with China along the southern border with dirt cheap labor for endless production of cheap goods especially hi tech armaments. Russia / China will be unstoppable with USA using war and subversion to attack all on the planet.

Iran will remain with Russia as will many others that see the long term future.

Slavery everywhere objective with the Obama USA TPP enacted may be management solution to include recruits of cannon fodder but not sustainable with supressed populations.

State Capitalism mix with private enterprise to mitigate risk  coupled with Socialism is going to be difficult model to overcome

buttmint's picture

another article "Keen Eye for the Obvious"

The plea for dinero is palpable---get in line schmuck!