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Peter Zeihan

Geopolitical Strategist

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Ohio poised to make economic, political recovery

Nov 08, 2023

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Peter Zeihan

Geopolitical Strategist

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Ohio was once an industrial powerhouse with consistent economic growth and a highly influential political culture. But in recent years, “the birthplace of aviation” has suffered from consistent population loss, declining economic and political relevance, and a surge in support for far-right populists like Donald Trump and Jim Jordan.

Straight Arrow News contributor Peter Zeihan argues that Ohio suffered the most of any U.S. state in the wake of globalization and deindustrialization. Now, with some of these underlying trends reversing, Zeihan says that Ohio has “explosive” near-term growth potential, and may be positioned to play a healthy, highly prominent role in American politics and economics once more.

An excerpt from Peter’s Nov. 8 “Zeihan on Geopolitics” newsletter:

If you’ve ever spoken to an Ohio State fan, you know that they’ll tell you how amazing they are without you asking. Unfortunately for all of us, I’ll be adding to their boasting list today because there’s plenty of success and growth in store for Ohio.

After years of stunted economic growth caused by the Jones Act destroying its manufacturing base, Ohio is ready to turn the page like Bob Seger’s hometown. As Ohio’s reindustrialization process kicks off, we’ll see plenty more projects like Intel’s semiconductor facility pop up throughout the state.

Ohio’s political stance has long aligned with national sentiment, and we’re now seeing the state shift toward populism. Between a political shift and Ohio’s manufacturing resurgence, it’s a safe bet that this state (and all those Buckeye fans) will continue to play a critical role in the country’s future.

Hey everybody, Peter Zion here coming to you from not Idaho and not Iowa. But Ohio. I always got corn and pigs and soy, and insurance and Idaho has potatoes and wheat and the Snake River, Ohio excels at things like manufacturing. Or at least he did. Ohio is one of the states has been really hurt by something called the Jones Act, which is something that bars cargo ships from transporting cargo between American ports unless the vessel is 100%. American owned, captained, built in 75% crude, something we did in 1920, as part of the Interstate Commerce Act that absolutely destroyed the ability to move things on the water. And since Ohio is bordered to the south by the Ohio River, which is one of the world’s great waterways, and on the north, by the Great Lakes, which are one of the world’s great waterways. Ohio is arguably the State of the Union that has suffered the most. It also took a big hit because of globalization. Ohio is also the state that has arguably suffered the most from globalization because it had an economic geography that was excellent in terms of lots of flat land that was easy to build infrastructure on and a lot of legacy infrastructure from its industrial period. But with globalization, the United States basically elevated places that didn’t have very good geography as part of our plan to defeat the Soviet Union. And that meant the places with subpar geography thinking here, Brazil or India or China, were able to get a huge leg up, and that gutted a lot of the manufacturing base here. Now, Ohio is still a significant manufacturing player just not as rich as they used to be. And part of the decline in the use of the waterways and because of globalization is part of the reason why Maga and Donald Trump have done so well in this state and why the state politics has taken such a hard turn to the populist right? That is in the process of shifting, maybe not the political stuff. But all the economic trends a D globalization means that we need to rebuild a lot of industrial plants in other parts of the world. And all of a sudden Geography Matters again, and Ohio is looking pretty good. Ohio as one of the healthier demography is in the advanced world, suggesting that has a pretty robust potential workforce. And the state and the local governments here in the Columbus area have been very aggressive at going out and coordinating the investment. With the single biggest achievement, they have been the Intel facility that is just down the road here. Intel is an American semiconductor manufacturer who was the world leader until about six years ago, when they made a bad bet. They bet that this new thing called extreme ultraviolet lithography was just not ready for prime time. And they designed their chips using an older type of technology that’s much more expensive to operate and a lot more finicky. But turns out that the UV actually was ready. And the company that bid on a bet on it was TSMC, which is the semiconductor manufacturer out of Taiwan. So today, all the world’s best chips are basically made in Taiwan. And while Intel has designed some of the chips that TSMC makes, they don’t really make the new factory very many of their own. Certainly not here in the United States, this new facility that’s under construction in Ohio seeks to change that, specifically, they got these two models called the 20, a and the 18. A, if it works, by 2025, will be produced in this facility and their sub five, even sub three nanometre, which will almost overnight, elevate them to producing some of the world’s most advanced chips. So far $20 billion has been sunk into this facility, 2 billion of which is local and federal subsidies. And if Intel has its way over the course of the next decade, that number 20 billion will increase to 100 billion. And that’s just for fabrication. That doesn’t include any follow on businesses that are likely to pop out from network effects, whether that is assembly, or testing or light manufacturing to take these chips and put them to things that we use every day. So the potential here for the Ohio region to grow is explosive. And that even assumes that we don’t do anything with the Jones Act. And if we do that all the old manufacturing is likely to come back as well because you just can’t beat the local geography here for internal transport. So will that have political connotations? Probably, and that’ll get really colorful, but we’re gonna cover that in in a different video. I’m just outside Columbus today, and we’re gonna talk politics a little bit.

 

We’ll use a link in this mail to give you an idea of where I generally think US politics are going. But the general issue here today is we’re at an inflection point. Ohioans are proud that they’ve been voting for the winning side in almost every presidential election for over a century with only events in 2020 breaking their pattern. And the reason both for it happening in the pattern break is Donald Trump. So before 2020, Ohio was the middle of everything middle class, middle income, middle and manufacturing middle and services. It was very representative of the United States as a whole. So

 

was very easy to tack track the political winds based on what the Ohio winds were thinking. But they did suffer quite a bit from globalization. And something like the Jones Act, as you saw in the previous video. And so there’s a lot of resentment in the state. And since Donald Trump basically ran on resentment and people who felt they had been left behind, Ohio switched, and now is considered a generally populous conservative socially area. However, if you remember some of my other work, you know that the political factions that make up the country are moving around, basically, the the American political system is made up of two very large parties, because the electoral system forces that into form. Basically, you have to get one more vote than the other guy in order to win the seat. And so therefore, you don’t want to alienate any potential voters. And in that sort of environment, you get to huge parties that are made up of independent factions that shift around based on changes in economics, sociology, politics, demographics, and in the last 30 years, we’ve had a lot of things go down, we’ve had the rise of the baby boomers, and now the retirement we’ve had hyperglobalisation. And now it’s end we’ve had the rise of social media, and the implosion of information transfer. And through all of that, the two parties held together until very recently, and in the Trump era, that relationship is breaking down. Now, Trump did a lot of things for a lot of reasons to a lot of people. But the ones that matter for this discussion, is he elevated a faction known as the populace to power. And they are now the single largest voting bloc in the United States. They’re very powerful here in Ohio. But in doing so he drove away a number of more traditional factions, he would call them rhinos that include the entirety of the business community, but he was able to court other groups that are more socially conservative people like the Catholics and the Hispanics over to his side. And as part of that process, there is now a tug of war between the Democrats and the Republicans over the future of organized labor, we’re in organized labor is only going to become more and more powerful over the next decade, because we need to build out the industrial plant. And most of those jobs are blue collar. And we’re an environment of labor shortage. So we’re going to see more and more strikes. What this means is the business community, and the labor community, which have traditionally been the two most powerful voting blocks in Ohio, are suddenly sweetened voters. So everyone got used to Ohio being the man in the middle, and ultimately representing what we were all thinking. We’re still there. It’s just that the two factions that matter the most are at the moment, not part of the political process. So what we’re going to be seeing over the next few years between this massive reindustrialization and build out, and this political shift is Ohio is still going to be the man in the middle and where they come down is going to determine the shape of our political parties moving forward. And we’re seeing those arguments across the Ohio political landscape right now, with everyone engaged and everybody angry and everyone hopeful all at the same time. So stay tuned. Watch Columbus, and they’re going to give us our first good taste of what our post Trump party structure is going to be.

 

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