I had no intention of posting another Peter Zeihan video so quickly after Is China Screwed?, but it’s also been a good long while since I did a Texas vs. California update, so let’s tuck in to this video:
Takeaways:
Texas doesn’t attract foreign investment.
Instead, Texas lures development and projects from other states with target tax breaks. “You can stay in Illinois and pay 20% tax or come to Texas, where we’ll give you a 20 year deferment and you’ll pay no tax.” (This is a bit overstated; some companies get those sweeteners, but for most Texas locales simply offer sounder fundamentals.)
“Everything is inexpensive. It’s where the food comes from, it’s where the energy comes from. The land is cheap. Mexico is right next door. It’s got the major port in Houston. It’s a financial center, it’s an energy center, it’s a manufacturing center, it’s a processing era. It’s all of those things.”
As global trade becomes more difficult, Texas moves up the value-added chain with more processed and refined goods. Lots of incentive for all sorts of manufacturers to relocate to Texas to take advantage of these intermediate products.
“Say what you will about the Donald Trump Administration, the renegotiation of NAFTA was a brilliant call, it was probably overdue by 15 years.” More North American content, especially from Texas and Mexico.
“Texas trades nearly as much with Mexico as the rest of the country combined.” Huge for automotive, but also electronics and aerospace.
Labor shortages: “Texas is just hoovering up people from across the entire country.”
“People are moving to the West, the Southwest and the South. Texas is right in the middle of that. It has the cheapest land and the cheapest power and the cheapest food.”
Biggest success story for the next 30 years: Houston. “It has it’s finger in each and every one of those pies. It works with the Mexicans, it’s in the energy sector, it’s its own financial link. It’s on the highway system that links on the East coast. It’s good at moving large pieces of metal around, so it’s getting into heavy equipment, it’s already in automotive. It has everything.”
My caveat: Not everything. It doesn’t have much of a software base outside the oil industry and a few related verticals, and it doesn’t have any semiconductor fabs (both of which the Austin and Dallas areas have in considerable depth).
Plus: Third largest metro in the country.
“Everything you hear about California when it comes to regulation and cost is true.”
All the good land has been grabbed. Maybe growth on the fringes of LA.
“The same urbanization and depopulation push that hit Europeans 60 years ago hit Mexico 25 years ago.”
“California is looking at decades of depopulation moving forward. Not catastrophic and not rapid.”
“I see Oregon and Washington as the next California, and I don’t mean that in a good way.”
Things are better the other side of the mountains (Yakima, WA, and Bend, OR). Also Tri-Cities (Kennewick, Pasco, and Richland), WA.
“The same thing that’s happening in the United States with the retirement of the baby boomers is happening in the wider world. But what is unique about the American baby boomers is that they actually had kids. So we’ve got the Millennials, which are a large generation that are providing a lot of consumption and ballast. That doesn’t exist in most of the rest of the world.”
And the rest of the world is screwed. “You’re looking at general economic degradation on a broad scale that we haven’t seen in well over a century and a half.”
Solution for the rest of the world is printing currency. Thus massive capital flight to more stable locations. “Nine cases out of ten that safer place is the United States.”
This all seems to excerpted from his book The End of the World Is Just The Beginning. As with some of his other videos, I think he’s identified some real concerns, but overstates his case (and the nearness of an imminent global trade collapse rather than some retrenchment). Irrational things can go on a whole lot longer than you might think they would be able to…
This entry was posted on Saturday, April 16th, 2022 at 10:40 PM and is filed under Economics. You can follow any responses to this entry through the RSS 2.0 feed.
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2 Responses to “The Future of Texas and California”
Mark Steyn identified these global demographic trends in his 2006 book “America Alone”. Japan, Italy, China, and Russia are screwed.
[…] Peter Zeihan says that Houston has the brightest outlook of any metro in the world for the next thirty years. (Previously.) […]