Peter: Africa’s problem has largely been geographic. There’s not a navigable river on the continent and the continent itself has an escarpment that averages about a 1,000 feet tall right at the coast. Then there’s a series of plateaus. In some places, five. It’s difficult to run infrastructure of a plateau anywhere, especially a rail line. You might be able to get a few roads in the interior, but you’re never going to have an African rail network.
What that means is we get these little enclaves, places like South Africa, or the Kenya-Uganda corridor, where you can run limited infrastructure in and those areas can interact with the outside world, like those city-states on the southern Chinese coast. You’re never going to have an interior system of size. None of these networks can connect to others.
Under the global order is the first time that these countries have been able to exist in any form and not very many of them have been very successful, because at least they didn’t have to worry about being colonized. Any security threats they had were just from one another and the geography of the region tends to limit how these countries can get at each other.
Most military conflicts during the global order structure have been when a country has imploded and everyone else has come to grab a chunk. The Congo Wars are the quintessential examples of that. The Great African War, if you prefer that term.
Moving forward, the global order is over, and so the capital supplies are going to get more difficult. Most of the growth we’ve seen in infrastructure and most of the growth we’ve seen in personal consumption for the last 15 years has simply been– we’ve had a lot of people in their 50s in the advanced world, which has pushed down capital costs, which means that you can apply money to things that you wouldn’t have applied them to before, because the cost was lower. It’s like the equivalent of buying a slightly larger house, because interest rates are low. You apply that writ large to a continent and you get the Africa story that we have today.
The global baby boomers are all moving to retirement within a few years, so that capital is going to dry up. The infrastructure that is not sustainable and completed within the next two to four years, that’s it. It’s over. We go back to an imperial mindset when it comes to economic integration, tap lines for resources that are specifically needed, probably with a degree of security assistance provided from the outside, which is a really nice way of saying that these countries will probably apply to be colonies if they want to be successful, with a few exceptions.
The places that do have a local geography that can still be exploited, where they can still have a certain degree of economies of scale, but there’s only six: the Luanda Corridor in Angola, South Africa, Kenya-Uganda, Senegal, the Niger Delta. Nigeria is always going to be a regional superpower and I can never remember at the sixth one. They’re all in sub-Saharan Africa.
Mark: Your point about the infrastructure projects drying up in two to four years is a little bit depressing from our perspective, because we’re working on charter cities. Basically, new cities with better legal systems to accelerate economic growth, sort of how Shenzhen, Singapore, Hong Kong, and Dubai did it. The bet is, to a certain extent, on continued globalization, on the continued differentiation of supply chains combined with rapid urbanization and bad legal systems that are currently holding back some populations.
Obviously, these cities need to be in somewhat core regions linked in to the broader economy. If you have these specific regions, South Africa, the Luanda Corridor, Niger Delta, etc., that you believe are going to play out, what does the broader structure look like? Do the arbitrary borders drawn in the colonial world breakdown? Do those continue? Is there continued urbanization, or does that urbanization trend revert and what does that look like?
Peter: I think you’re probably going to have both. If the global system breaks down, you’re going to have much higher and much more erratic energy prices and the ability to bring in consumer goods to any system that can’t create themselves is going to dwindle. In those specific corridors, those are areas where you can reasonably expect a degree of industrialization to continue. It’s not that it’s going to continue at the same pace that it has in the past, but they will have access, at least theoretically, to the outside world. They will be able to achieve a degree of economies of scale. They will be able to generate some local economic activity.
In those specific clusters, I would expect a degree of industrialization to precede apace. However, for the rest of the system, and even areas immediately adjacent to those systems, the cost of development is simply going to be too high. If that happens, you’re going to have a deindustrialization impulse, where people really have no choice but to move back to some subsistence agricultural activity.
Now this is going to obviously be most extreme in Africa, but this is not something that is going to be limited in Africa. I’m really worried about versions of this happening in the People’s Republic of China as well.
