We're Witnessing Soviet-Scale Collapse of National Power

Key Takeaway

Today, map one product, project, or household essential you rely on and identify its most complex supply-chain dependencies: specialized components, foreign inputs, power needs, and single points of failure. Peter Zeihan’s core warning is that complex production cannot be rebuilt simply by taxing imports; it depends on thousands of coordinated steps. Use the map to create a modest backup plan—an alternate supplier, extra lead time, inventory buffer, or a less complex substitute—rather than assuming availability and prices will remain stable.

Episode Overview

Sam Harris speaks with geopolitical analyst Peter Zeihan about tariffs, manufacturing, policy uncertainty, supply-chain resilience, cartel dynamics, and U.S. foreign-policy oversight. Zeihan argues that broad tariffs may encourage some simple domestic production while undermining investment and complex, high-value manufacturing, with inflation and potential shortages as the central economic risks.

Full Transcript

Transcript of We're Witnessing Soviet-Scale Collapse of National Power from Making Sense with Sam Harris. Auto-generated from episode audio; may contain minor errors.

I have not seen an unraveling of national power on this scale since the Soviet breakdown. If we can't turn this around and get back to building things again, the debate now is, do you want high inflation plus productivity or high inflation plus a goods shortage? Neither of these are pretty. There's so little with this administration that goes in a straight line. We just hit our 600th tariff change since January 20. Everything is up in the air and everything is on hold. I am here with Peter Zion.

Peter, thanks for joining me. It's great to be back when it works. Yeah. Yeah. We'll see. We'll we'll see how lucky we are here. Well, so f first, you've been on the podcast several times and most people will have uh heard about you, seen you somewhere, if not here, but remind people briefly what you do. What's your what's your day job when you're not not doing podcasts like this? uh my job is to take demography and geopolitics and use it to paint a picture of the future and then show how it matters to the people who happen to be in front of me.

So most of my clients are in the world of finance or manufacturing or agriculture, some sort of economic association or business and I help them navigate the crazy that is to come. All right. Well, uh, speaking of, um, predicting the future and, uh, actually on points that, uh, matter, at least to me and a few of us, last time you were on the podcast, you told me that there was no way that Trump was going to win the 2024 election, so I have to ask you what the [ __ ] happened right at the top here.

Yeah, fair enough. Sorry, I I slept that day. My general feeling was that it was going to be America's independents that decided how things were going to go. Not people who said they were rep or independent but really were Republicans and everything but name but the actual 10% of the electorate that splits their vote because they had decided the last seven elections. So it felt pretty safe to me and in the post election polls it looks like that group decisively voted against Trump. Everyone else shifted however with one exception Washington state.

every state in every demographic shifted substantially towards Donald Trump and allowed him to win with the margin that he got. Well, how would you rate his second term so far? We're going to talk about tariffs and foreign policy and uh supply chain and and uh specifics like China, but um what's your what what most concerns you? What have there been any pleasant surprises? How would you uh how would you rate the last 10? usually try not to be critical of presidents in their first terms because you know they're they're learning it takes time for the policies to kick in the world doesn't move on a dime second term is different because they should have learned from what happened in their first term and by that measure uh it has not gone well most of the stated aims of the Trump administration things like reshoring manufacturing increasing its defense position have actually taken the country in a significantly different direction and I have not seen an unraveling of national power on the scale since the Soviet breakdown.

So, so far very impressed with how much damage is being done. Uh this is some combination of Zimbabwe, Argentine economic policy, maybe with just a a dash of French statism thrown in. All right. So, let's talk about the the unraveling. What are you seeing? Because so so over right of center in in Trumpistan, I can imagine many people believe that the the tariffs are working. Um we're onshoring uh American manufacturing. We're we're building up our manufacturing base. Jobs are going to be returning as a result of all this.

Uh we have China right where we want her. It's really just a picture of American strength. I mean, you know, Trump is uh the kind of guy you just can't screw around with. Finally, we have a president like that. Um, how are you not seeing this? Uh, let's start with the tariffs. Uh, when you do a flat tariff and you tax things at the border, no matter what they are, uh, you need to break down manufacturing into two broad categories. Uh, first you have your simple products, things like plastics or furniture, textiles where there's only a half dozen manufacturing supply chain steps.

And in a high tariff environment, it's relatively easy to relocate some of those stat steps within the tariff wall. So we are seeing significant buildout in the United States for things like furniture and glue and paints and all of that kind of stuff. More complex manufacturers, the hundreds or thousands of steps are very different. So here's automotive, aerospace, electronics, computing. When there are thousands of steps and you only produce say half of the steps in country, you have to pay the tariff every time an intermediate product crosses the border and the end product ends up costing significantly more.

So simple math, it's easier to take the steps that are within your tariff zone, move them outside of your tariff zone, and then you only have to pay the tariff once. So what we're seeing right now is a steady deindustrialization of the value added um high skilled labor intensive jobs and instead replacing them with much lower value added jobs and things like plastics or maybe things that are automated because our labor force is too much. So we've seen contraction in the manufacturing sector for the last 6 months and the number that I pay attention to the most right now is it called industrial construction spending.

It's a data point put out by the Federal Reserve and it's been negative since tariff day. So people are finishing the industrial projects they had started before April, but no one's really launching much that's new. So what are you expecting to see in the economy over the next 12 months as a result? I mean, does this is this anonymous with inflation, what you just described, or Well, I if you go back to before April, uh, we knew we were preparing for the fall of the Chinese system.

We were preparing for the end of globalization. We knew we needed to expand our industrial plant. Probably needed to double it and probably needed to increase the power plant by 50% to go with that. There's no way you do that on anything less than a 40-year time frame without a lot of inflation. And I would argue we needed to do it in the next 5 to six years. So inflation was already part of my forecast, but now we have de-industrialization going on on top of that.

And so if we can't turn this around and get back to building things again, and that requires a very different federal policy, we're going to enter a period where we're going to lose the products from abroad. At the same time, we no longer producing very many of them here. So we have to still go through that industrial buildout, but now against a backdrop of goods shortages. So the debate now is do you want high inflation plus productivity or high inflation plus a good shortage? Neither of these are pretty.

So obviously there's been a huge buildout with respect to data data centers for AI and progressing. Yeah. I that's the that's the one thing that is um has been a bright spot for the market. You know it remains to be seen whether it's a catastrophic bubble in the end. But um and it's definitely a bubble. Let's be clear. Whether it's catastrophic, yeah, who knows? Yeah. I mean, and it can be a bubble. I mean, we should be clear. It can be a bubble without AI itself being a bubble, right?

I mean, it can there could be this overinvestment and a buildout even if AI is in fact the future, right? Well, there's a lot of unknowns in that statement. So, I don't want to overly come down on one side or the other. 15 years ago, 10 years ago, people were aware of large language models, but I don't think there was anyone in the AI space who really thought that LLMs were the thing that was going to break open. And here it is. Um, so expecting the model we're on right now to be what we use in 5 years or 10 years or 15 years is a bit of a stretch from my point of view.

Technology doesn't go in a straight line like that. Um, also LLMs require a massive amount of processing comput uh capacity with graphics processing units and GPUs are the most advanced chips that humans make and GPUs cannot be made without a fully globalized system. So I actually look at today's buildout like this is great because every data center needs power to go with it. We need the power regardless and if we're entering a world where globalization breakdown breaks down, we won't be able to make the GPU.

So anything that's installed now is all we have. So while I'm not a believer in the trajectory that we're on, I have no problem with any of the steps we're taking right now. Do you think we're in the process, however gradual, of onshoring our dependence on Taiwan, or is that not in the cards? No, there's there's a 100,000 manufacturing steps for high-end semiconductors. The FAB facility is an important one. It's an unavoidable one, but there's another 40,000 that are like that. And once you actually have your fab facility, the next step down is testing and packaging and incorporating into components.

We do very little here. I'd argue that's much more important. And on the front end is the design and the logistics. We do do that. That's the highest value added part of the process. So this obsession with fabs is actually taking one of the lower value added steps that's most capital intensive and putting at the center of the conversation and that's just bad reasoning from my point of view. We should be focusing on things that are downstream closer to the end consumer if you're worried about national security.

Well say I want to talk about national security and foreign policy and talk about China and um Central America, South America. Uh but um just to close the loop on this, what what what do you think I if if this process of what you're calling de-industrialization continues a pace for the rest of Trump's term, what are you expecting uh to change over the course of four years? I mean, there there's so little with this administration that goes a straight line. So, that's a really loaded question.

Um key thing to remember is that Donald Trump still hasn't flushed out the government. He fired the top several thousand positions, filled very very few of them, and then surrounded himself with a cabinet that has very little technical experience in anything. So if you think back to Obama, we had a cabinet that was all academics that had never done anything in the real world. Now we have ideologues who have never done anything in the real world. So to expect to get good advice going to the president, even if he was open to hearing it, is pretty thin.

And we've now had major policy changes on drug policy, on illegal narcotics, on the Red Sea, on Israel, on Ukraine, on vaccines, on tariffs, because, and I quote, it's what I feel. Um, we get no straight lines on that. And so, you can imagine what's going on in the business community right now. This is the reason why industrial construction spending is falling. No one knows what the policy set is going to be tomorrow or next month or next year. and without some degree of continuity or some degree of guide, everything is up in the air and everything is on hold.

So if if this sort of ambient chaos holds and we just hit our 600th tariff change since since January 20, no one's going to put money to put anything in the ground because they don't know if it's going to be worth their time. So what's going on with Venezuela and Mexico? I know I know you focused on cartels violence. Yeah. Yeah. Um but uh yeah, what what's the um I mean Trump has obviously been threatening to deal harshly with the cartels. Uh I think it's remains to be seen what he's intending uh with respect to Venezuela.

U but how do you view our ramping up hostilities on both those fronts? Well, let's start with the understood reality on the ground. Uh Venezuela is a very weak state where the state security services have been so focused on crushing political defense for so long that they've lost control of large tracks of territory. And so some of the cocaine smugglers in Colombia have now used Venezuela as a way to get their stuff to the wider world. It's a minority. It's less than 10% of the flow.

Most of it still goes north into Central America and ultimately Mexico, especially Mexico before coming north to the border. But there is a flow that goes through Venezuela. I'd argue most of that flow eventually goes into Europe as opposed to coming to the United States, but it is real and there is a degree of collaboration among members of the Maduro government in facilitating those flows. Um, I don't know if calling it a cartel is the right term. That implies a degree of overarching control that probably doesn't exist, but it is a problem.

So, anything you want to do against Venezuela on a state security point of view, there's there's an argument to be made there. However, uh the Trump administration has yet to brief Congress about any of the details. So, none of the intel that supposedly identified the ships has ever been shared with Congress. And what I'm hearing from the military is that there really wasn't any ever. And that's before you consider the legal replic uh implications of some of the specific decisions. Um, we had both Trump and Hagsith brag about performing war crimes the week of Thanksgiving because if you take out an enemy combatant and they've been completely disarmed of any sort of offensive capability and then you shoot them, that's a war crime.

Every treaty the United States has ever signed on international law codifies that. And so now they're backtracking. It's like, well, well, maybe that's not what we meant. In addition, we now have the USS Ford down there, which is our top super carrier, badass piece of military equipment. And it was only on the Monday after Thanksgiving that Trump convened a national security meeting with the Joint Chiefs, Secretary of Defense, Secretary of State to begin the discussions about what the goals in Venezuela are. So to this point, the policy has been let's shake some sabers and see if Maduro will just leave.

Now they're starting to have the early discussions about what the policy might be. Very much horse on the wrong side of the cart. M yeah it's it's remarkable that the the these kind of extrajudicial killings of people on boats in the Caribbean is um uh I mean it's being kind of roundly condemned but it's it's just on its face it seems like it's uh has to be in violation of of some law or past practice because I mean we don't even kill drug smugglers when we catch them and convict them of drug smuggling.

I mean, that's not a capital offense. And yet now we're simply annihilating people who are alleged to be smuggling drugs. And and we we have been shown no evidence that that's even true. Uh and as you just pointed out, there's this recent case of uh this really patent war crime where we've bombed the boat. Now people are are scrambling in the in the water and we bomb them again just to make sure everyone is good and dead. Uh I that is a just a a uh unambiguously a war crime.

But I mean the whole idea that we can be just killing people who are suspected of smuggling drugs is is that has that been a past practice? Is that in line with any of our laws? Certainly not officially. I'm never going to say that it wasn't done because there's a lot that happens with covert action in Latin America that you know maybe is distasteful but is not technically illegal by US laws. And the the really the limiting factor here is the War Powers Act. So that was something that was put in place by Congress bipartisan in the aftermath of Vietnam.

Uh passed by a two-thirds vote, president vetoed it. It overcame the veto. It was like the biggest overcome of the veto that we've ever had in modern history. Um, every administration since then, including the Trump administration, has said that the War Powers Act is unconstitutional. It's an unconstitutional check on presidential authority, but it has never come up to the courts. And Congress since then has never called the president to account. So either the president has presented his case after 30, 60, 90 days uh to justify and then Congress votes to authorize the military action.

That's for example how Iraqi freedom happened or the president is done within 30 days and folds the situation down. This is the first time that the War of Powers Act has been directly challenged over that 30-day threshold. But Congress has done nothing. And unless and until Congress actually decides to act, technically it's legal. Yeah. Doesn't mean it's right. Doesn't mean it'll work. Congress has been sitting on its hands on uh virtually every question. What about Mexico? What's what's happening with our posture visa v the cartels and and uh what are the implications of that?

Uh this this is actually more of a Biden administration question than a Trump administration question. Um, under the Biden administration, a significant amount of progress was made at cracking down on the Sinaloa cartel, which for most of the last 15 years has been the most powerful organized crime group, not just in Mexico or in the United States, but in the world. And there was a general agreement that it was the most effective of the drug smuggling organizations because El Chapo ran it as a business. But El Chapo was eventually uh arrested and is now been put away.

and combine that with the effects of the last 5 years prosecution of his old organization. um his sons basically running the place like um Ud and Kus if you remember those Iraqi assets uh and has it been 2 years? Is it only a year? Relatively recently um one of Los Chapitos, that's one of El Chapo's sons convinced the guy who was the chief accountant of the organization to get in a plane and fly to El Paso. Yeah. Yeah. To look at some real estate. And the DEA was waiting.

Mhm. Uh so we basically had a shattering of the organization at the top and there's no longer one Sinaloa cartel. There's like a dozen and they're fighting one another. That sounds great. But the second largest drug trafficking organization in Mexico in the world is called the Holistical New Generation Cartel and they are an order of magnitude more violent. And now they are the most powerful entity and they are taking over a lot of former Sinaloa territory. So by taking out the big bad, we've helped inadvertently to create a new big bad that by many measures is a lot worse.

Uh because Sinaloa, their kind of guiding idea was you don't [ __ ] where you sleep. You bribe local law enforcement. So they're on your side. Haliscoco their their idea is that the [ __ ] is the point. And so the first thing they do when they go into a new territory is shoot the mayor, shoot the police chief, randomly shoot a bunch of people in town so everyone knows who's in charge and so nobody stands against them. Different model, a lot more violent, not as effective in the long run, but it generates a lot more activity that we are now seeing among other things in the murder rate in Mexico.

So has the Trump administration done anything new on that front to make? I know he's said that he, you know, wants to send in Seal Team Six to deal with the the cartels. Um, have we have we done anything that's actually changed our posture with respect to them? Not not hugely from my point of view, and I don't see that as a reason to love or hate the Trump administration. The core problem is demand driven. As long as Americans like their cocaine, you know, this is going to happen.

Um, and we've discovered that if you take out the kingpins, in the case of the Similoa, you create a more fractious environment where there's a lot more competition. That's for example one of the reasons why fentinel has risen. Um cocaine requires a supply chain that involves a half a dozen different countries and it takes about four man hours between the fertilizing, the growing, the processing and the smuggling for every dose of cocaine. Well, fentinyl, you can buy a bunch of in precursors on the open market, make a batch of a million doses in your garage in a week, and it takes four man seconds to get the fentinol in.

So, we've by cracking down on cocaine to agree, we've inadvertently created a new product set and taking out cartel leaders will have absolutely no effect on that. And one of the things we've ironically seen um with the border is by stopping the flow of illegals, it's made it very very very easy for all the drug smugglers to just ship stuff in containers. Uh so again, I don't blame Trump for that switch. This is one of those things that as long as people want their narcotics, uh there is going to be an economic pipeline of some form for it.

What do you know about the recent uh pardoning of the former president of Honduras who was a convicted drug smuggler? The Chinese basically haven't repopulated anyone under age 40. The bottom line is they probably now have more people over age 54 than under and there isn't an economic model that will work with that by the year 2035. In calendar year 2025, the US population dropped for the first time in the history of the republic with the notable exception of the Spanish flu. This is now our trajectory unless something significant change and that assumes that RFK Jr.

is removed tomorrow. What do you see post Trump? We all should be terrified of what that would look like.