Now let’s talk about energy.  I’m going to give you some huge numbers here.  Quadrillion British Thermal Units (btu’s)   Quadrillion - sort of a Dr. Evil number.  Nobody really knows what it means, it is just really big.  Regions.  2001.  North America has been the number 1 the global demand center for as long as we can remember and can’t imagine a future that isn’t like that. Here comes that future in one generation.  We go up about 30% in energy requirements.  Developing Asia doubles in one generation.  That is a huge rule set shift. Let’s look at that.  Asia in 2025.  Break it down.  Here is your transportation.  Electricity, Electricity, Electricity.  Quintupling of cars - China.  Four-fold increase at least, in electricity.  Where are they going to need help? They have lots of coal.  They know how to turn on a nuke - don’t need anybody’s help there.  Where they are going to need help either to develop resources intra-region or to go out of region to buy those resources is gas and oil.  Already 2/3 of the oil coming out of the Persian Gulf goes to developing Asia - 2/3.  How are they going to pay for that doubling of energy?  Foreign direct investment.  This is the outflow since the second world war - 7 trillion dollars roughly, excuse me,  this is the inflow - where the money has gone.    This is where people like to invest.  See if you can’t spot my gap in the middle.  Who’s got the money - who has sent the money outward.  Tell me Middle East is connected to the outside world.  All those petro-dollars. 

This is why I have trouble with the Clash of Civilizations theory - because to get all that energy, the Asians have to be friends with the Slavs, the Muslims and increasingly the Africans.  To pay for all energy and all the infrastructure associated with it - trillions of dollars of worth of investment.  They have to be friends with the Europeans and those crazy Americans.   Which pretty much only leaves the Latinos for a clash of civilizations.  That’s understanding global integration.  If you think you can wage war with no understanding of that, then you really aren’t paying attention.  But let’s talk security and how we export it around the planet. Another stretching argument.  I’ll go back to the imperial heyday.  In the old core basically - in terms of its public sector exports.  It exported administration basically it kept the natives from getting too restless while it took the raw materials out at uncompetitive rates.   It was called colonization.  Jump ahead.  End of WWII.  The surviving core’s first order of business, resurrect those parts of the core that you want to resurrect - Europe and Japan - Marshall Plan, NATO, the whole shebang.  Over time, by the late 1950’s, you have a resurrected core - much bigger than the surviving core that came out of World War II.  And you see a new public sector export emerge - we create the US Agency for International Development,  OECD - Organization for Economic Cooperation, Coordination and  Development    They create this category of official developmental aid.  Foreign aid becomes a new public sector export - end of the 1950’s and early 1960’s.  And then the Arab’s get all that money with the oil and you see a big transaction rate on arms - which we are still dealing with.  1970’s the great heyday for arms transfers.  You get to the globalization era, I’ll argue you have a surviving superpower and partners.  Japan is sort of a head case right now, but I think they are coming out of it.  Our main public sector export right now is security.  You’ll say it is technology - I’ll tell you it is private sector.  You’ll say it is mass media content - I’ll tell you it is private sector.  The real public export is security.  You’ll say what about foreign aid?  I’ll tell you that foreign direct investment which was half of official developmental aid at the beginning of the 1990’s is now 5 to 1 official developmental aid.  Meaning that we send 5 times as much foreign direct investment to emerging markets and developing markets as we send foreign aid.  

Why does this matter?  Let me show you the conflicts across the 1990’s.  Here is roughly 3 dozen.   I’ll give you annual per capita GDP.  Here is the poorest countries - roughly half your conflicts. Here is your next level of poverty - basically all the rest.    When you are talking advanced states, you’re not talking about much violence.  And frankly, those are the two poorest neighborhoods there.  So simple guy that I am, I’ll argue - you get a country above $3,000 per capita GDP, they tend to get out of the violence business.  How do you get them above the $3,000 per capita GDP - it is not official developmental aid - it is foreign direct investment.  Why? Foreign direct investment needs security.  Basic argument - Ray Vernon’s product cycle.  Any industry over time -  profits rise, peak and then the labor gets too darn expensive and so you send the job overseas.  We had a textile industry here in the United States - that was country A.  Then it went to Mexico - that was country B.  Then it went to China - that was country C which is turning out to be Country C for a lot of industries - Why?  They crank out millions and millions of workers every year.  So think about the global economy.  Think about 3 big engines of job creation - EU, NAFTA and Japan which is becoming a huge patron and mentor to the Chinese economy.  And it is the demand of China that has pulled Japan finally out of that long term recession.  Where they send jobs, technology and investment - that is the core.  Where they do not send it - that’s basically the gap.  Does this matter in terms of development?  Absolutely.  This is per capita income growth across the 1990’s.  Rich countries got richer - big surprise.  Globalizing economies got a lot richer.  Non-globalizing economies got poorer.  You’ll say that all those globalizing economies produce is garbage - it is just manufactured raw materials.  It is not really high-end goods.  Twenty years ago, you were right. Twenty years ago the globalizing economies manufactured goods as a percentage of the economy -  only about 25%   One generation of foreign direct investment. This is the change - China is going to start exporting pickups and SUV’s under the Great Wall name within the next couple of years.   9,000 to 18,000 cars coming from China to the United States.  So I agree with Jesse Helms on one point, official developmental aid, plus correction equals a rat hole.  But rule sets that attract foreign direct investment that gets you real development.  Why? Because official developmental aid is an optimist - it hopes to change human behavior.   Money is essentially a coward.  If it gets scared it runs away.  That’s what security enables.  This is why the Middle East is screwed up I will argue.  It’s poorly connected to the global economy.  Basically, They send out oil, we send in money - Tom Friedman’s cheap gas station argument.   Inter-regional trade in the Middle East is the lowest in the world.  It’s lower than sub-Saharan Africa.  The Middle East attracted a bigger percentage of global foreign direct investment twenty years ago than it does today. It accounted for more trade twenty years ago than it does today.   Latin America, Asia they’ve have moved off raw materials to manufacturing.  Middle East has not.  Eight of the eleven biggest economies in that region do not belong to the World Trade Organization - they are not synchronizing their rule sets. They do not connect their money to the outside world.  Meanwhile their population has doubled in the last twenty years.  Guess where this is going?  Saudi Arabia had a per capita income of about 28,000 twenty years ago.  It’s $6,000 now.  With a huge chunk of their population under the age of 15, it will be below 3,000 very soon and I guarantee you, you will see mass violence there.