Last episode I discussed the Canadian economy, and why so many economic commentators watch the United States so closely.  The reason we watch the US is because they are Canada’s largest trading partner for both exports and imports.  Over the next few episodes I will share how the history of the US has impacted Canadian investors, and how we can draw on lessons from history to chart a course for the future. 

 

I am borrowing ideas from a geopolitical strategist named Peter Zeihan.  Like most people, Peter is not infallible in all things, but I find him to be approximately correct in general on matters of the United States’ geopolitical position. I discovered Peter’s body of work a couple years ago, and his presentations and newsletters are worth studying, and I find a section on his website called “know your world” very interesting.  Peter points out that in the not so distant past, we didn’t trade goods, we traded bullets.  And the most important bullets were actually traded at sea.  The reason for this is because that even in the middle of large landmasses, transportation before our modern road and railroad networks was dependant on navigable waterways.  

 

If you look at a map of European settlement of Canada, you’ll notice that the oldest major cities are all along the water.  I was home schooled for several years, and my frenchspeaking mother had a keen interest in French Canadian history, so I learned more about the exploits of early explorers than most people. French Canadian heroes like Jaques Cartier, Samuel Champlain, and the men known as “les voyageurs” were all masters of transportation on the water. It was “les voyageurs” who made the lucrative fur trade possible by transporting heavy bundles of furs with large canoes over long distances, and their trade networks followed navigable waterways of Hudson Bay, the Great Lakes, and the St Lawrence River, with the men carrying everything between waterways including the cargo, provisions and the boats in portage. 

 

Even in today’s modern age, floating something from A to B is the cheapest way to to get it around.  Access to water and trade via waterways is so important that Part X of the United Nations Convention on the Law of the Sea gives landlocked countries a right of access to and from the sea without taxation of traffic through transit states. 

 

Since floating things is the cheapest way to move them, countries with the best access to navigable waterways have a big competitive advantage over others.  According to Peter Zeihan’s website, navigable waterways are defined as waterways with access to populated areas that are at least 9 feet deep, for at least 9 months of the year. Canada doesn’t even make it on the list because our waterways freeze over, but the ranking of countries with the best internal access to navigable waterways are:

 

10. Saudi Arabia - zero miles

9. Brazil - Zero miles (the Amazon doesn’t count because it doesn’t flow through populated areas) 

8. Russia - zero miles (the 2500 miles of the Volga System are unusable during Russian winters

7. Turkey - 300 miles

6. Japan - 600 miles

5. France - 1,350 miles

4. Argentina - 1,900 miles

3. China - 1,950 miles

2. Germany - 2,400 miles

And taking up spot #1 is the United States with more than 20,650 miles.

 

So there you have it. Within the borders of US, there is twice amount of navigable waterways than the rest of the competition combined.  And since floating things is the cheapest method of commerce, Americans has a massive competitive advantage thanks to their geography.  They have exploited this unfair competitive advantage since formation, and especially in world war 1 and 2.  While the world fought each other, the US got very rich by loaning the fighting nations money, and selling them ammunition, tanks, boats and planes that they were able to build in massive quantities thanks to their unrivalled industrial output. Winston Churchill was in awe of the US’ industrial might, and when the American isolationists finally agreed to join in WW2 he said  “I can’t describe the feelings of relief with which I find . . . the United States and Britain standing side by side,” Churchill told the press. “It is incredible. Thank God.” Americans literally can’t screw this up. Thier competitive advantage cuts through agency bias, cults, populism, mass shootings, and all manner of idiocy that regularly makes the news.  They cling to power - and over 20 thousand miles of navigable waterways is the reason why. 

 

Tomorrow we will explore the state of the world after WW2 was won, including the formation of the United Nations, the world bank, and how the cold war with the USSR spurred global trade.  

 

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