Zachary Karabell on the History and Lasting Legacy of the Suez Canal
Connecting the world - the risks and rewards
On this episode, Peter Ravella and Tyler Buckingham are joined by Zachary Karabell, author, columnist (NYT, WSJ, WaPo, Politico, Wired), and grand thinker to talk about the Suez Canal, the Ever Given crash, and what it means, if anything, for international trade and our future. Karabell wrote Parting the Desert: The Creation of the Suez Canal and is a recognized expert on history, economics, and international trade. His latest book, Inside Money: Brown Brothers Harriman and the American Way of Power, comes out in May. A great conversation with one of the leading thinkers around today.
Peter Ravella 0:00
Hello, everybody and welcome to the American shoreline podcast. This is Peter Ravella, co host of the show.
Tyler Buckingham 0:06
And this is Tyler Buckingham, the other co host,
Peter Ravella 0:09
Tyler on March 23, there was an event that captured the imagination of the world and certainly the press around the world. And that was the the grounding of the ever given a 220,000 tonne Japanese owned container ship, which lodged itself in the Suez Canal from March 23. until Monday, March 29, a period of 144 hours closing one of the busiest and most important waterways in the world, the Suez Canal. And we're going to talk about that event, but in a larger context of what these international connections mean to us as a society. And we have with us, I think, a true expert to take us down a path of really understanding what this incident means. So I'm really looking forward to talking today to Zachary Caravelle. And Zachary is the founder of the progress network. He's a columnist widely written in the Washington Post Wired magazine, The New York Times Wall Street Journal, Politico, the Atlantic. He's a regular guest on CNBC and Fox TV, Columbia educated Oxford and Harvard. He is a writer on history, economics and international relations. He is an author of 13 books, one of which includes parting the desert, the creation of the Suez Canal, which came out in 2003. He is the host of the podcast, what could go right? An incredible thinker, historian analyst, Zachary carrabelle, someone I'm really looking forward to talking to Tyler,
Tyler Buckingham 2:01
me, too, Peter, and I am really looking forward to looking at this, looking at the Suez Canal through the the years looking back on it and looking at that period of time of the the mid 1800s. When so much was going on. It reminds me a little bit of what we might be on the eve of here on the American shoreline. With all that's going on around our shores here, planning for climate change and sea level rise. So this will be a I think, a really rich conversation. I'm really excited for it.
Peter Ravella 2:33
Well, the Suez Canal Tyler, as you mentioned in the late 1800s. And just in the introduction, let me get some of the facts on the table that we'll be talking about. The Suez Canal was opened in 1869. It was created, really driven by a Frenchman named Ferdinand de les ups, who formed the Suez Canal company in 1858. When this waterway was constructed and opened in 1869, it was considered to be a symbol of progress. And as a way to unite the world, the east and west, great hope in the transformative implications of this waterway when it was constructed in 1869. The Suez Canal links the Mediterranean Sea in the Red Sea, and was largely I believe, and our guests will help us understand this history operated, owned and operated by French and British interests, until it was nationalized by Anwar Sadat in 1956. So that the Suez Canal has continues to be a critical waterway around the world. Its recent blockage for 144 hours was said to cost the world $10 billion a day. We'll find out about that. So that's the subject of the show today, and I'm just dying to dive into it.
Tyler Buckingham 3:58
Well, I'm sure everyone out there is too so let's hear from our sponsors and then get into the interview.
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Peter Ravella 4:56
Well, Zachary curveball. Thank you for taking time out of your day to join us on the American shoreline Podcast Network. Welcome to the show.
Zachary Karabell 5:03
Thank you so much, Peter.
Peter Ravella 5:05
Well, Zachary, I'm, I was wondering if you might help us understand, we tried to lay out a little bit of the facts in the future but in your book parting the desert, the creation of the Suez Canal in 2003. Can you tell our audience a little bit about the creation of the canal, and in particular, what was hoped to be gained by the development of this basically highway of water?
Zachary Karabell 5:28
That's a good expression, highway of water. I like that. So just quickly, a fact check moment. You know, I hate hate doing this, but just for the sake of so we understand the whole picture was actually Gamal Abdel Nasser, who nationalizes the canal in 56. In a in a moment of like efflorescence of Arab nationalism, and we're gonna own our own future, which then of course, Anwar Sadat inherits in the seven days after Nasser's departure. So, to go back before we go forward, as you ask, canal building had been a human thing for 1000s of years. Now, the idea that you can dig a trench from one waterway to the other end, the water well as water does flow from point A to point B is not as complicated as the superconductor or brain surgery. I always wonder what brain surgeons refer to when they want to talk about something being particularly complicated rocket science. I think that's right. It's and then the rocket science. So canal building had been around, there's some evidence that there have been a rudimentary canal of sorts, even in phoronix times 1000s of years ago, although not a completely connected 120 mile ditch, which is what the Suez Canal is connecting, as you said, the eastern Mediterranean with the Red Sea. But the idea of modern canals and the idea of massive human Earth projects, as as something that could be done quickly and dramatically, is really a 19th century European technological moment where the fusion of human ingenuity and machines and being able to manipulate the physical world marries to some degree, these grandiose notions of human progress, which were prevalent in the mid 19th century. And again, I don't, these are all huge generalizations, right, that the Chinese built the Great Wall of China over hundreds of years long before this. So human beings wanted to manipulate the physical world as long as human beings have looked at the physical world. But this idea of progress, right, that we are going to create a world of endless advancement of human prosperity of human longevity of trade, commerce and of global connectivity, is what animates the building of the canal, which I think is a little sounds a little foreign to contemporary, somewhat more jaded, somewhat more cynical ears, you know, that the idea that people really believed that they weren't just making money and making trade, but they were also making progress is ineluctably bound up in the idea of the modern Suez Canal, the funding of the modern Suez Canal in the in the 1850s, and then the opening of the Suez Canal in 1869.
Tyler Buckingham 8:28
Zachary, how did people see the world back then, in the 1850s, I realized the technology now exists to dig a big ditch. We obviously are familiar with the Civil War and the great railway lines and logistics and the telegraph. And it's just an incredible period of time. But was the world feeling smaller? When I saw that big ship in the Suez Canal, the world felt small, the ship fell huge. But man, we're moving things around. How when, when this when the Suez Canal was approached? What were people thinking about the size of the world? Was it kind of still infinitely large? And was there kind of an infinite amount of resources to exploit I'm just, you know, frame that up for us.
Zachary Karabell 9:18
So I think when, when the people who who originate the idea of the canal, and a lot of this comes from a Frenchman named Ferdinand de les Epps, who was, I suppose, in the mold of a wannabe entrepreneur in the 1830s and 1840s, he was a man in search of a plan, who found a canal and he wanted to inscribe his name on the future of the planet, and he wanted his name to be inscribed on history. And he succeeded in both of those things in a, in a way that's unusual, but he was also animated by this culture. In France in the story of early to mid 19th century that really talked about the world as, as as sundered. And that one of the reasons for the conflict between the East and the West or between Europe and Asia, or between even male and female was that the planet itself wasn't perfectly set up in order to unlock the potential of the human race and the potential of the physical world. And that canal building and railroad building, and all these things were mankind's way of setting right what had been either incomplete or wrong. And they talked about this in terms of medical advancements and learning about disease, right. So it's all of a part and canal building is just one. And then in terms of how the world felt people have been, you know, sailing around the world since Vasco de Gama. And the 16th century, but the distances were in years and months, not in days, hours and weeks. So it took a long time to get from point A to point B, it took a long time to get from point A to point B, in the continental United States, or even throughout Europe, which people have been going back and forth for centuries. And to get from Europe, or to get from France, or England, to India, or Asia, was a many months long process of going around the Cape of Good Hope and into the Indian Ocean. And then from there. So the world was big in that sense. But you had this human drive to make it smaller, or to capture, not just space, but time. And and canals. In particular, the Suez Canal was a way of doing that. Because by connecting the Mediterranean to the Red Sea, you eliminate that whole journey of 1000s of miles around the Cape of Good Hope. And, and even with the birth of the steam engine around this time a little bit before. You're still talking about differential of a couple of months versus a couple of weeks. And that's a big deal.
Peter Ravella 12:04
Indeed, and I think that we are talking about this period in the late 19th century to the early 20th century. Let me tick off a couple of the connecting projects that occurred during this period. The suez canal is inaugurated on November 17 1869. So within a few years after the American Civil War, the American transcontinental railroad is connected in Utah in the same year of 1869, about six months earlier than the Suez Canal, may 10 1869. The transatlantic cable, which allowed communications between Europe and the United States, instantaneously is 1858. And the other great canal that we all know about the Panama Canal is 1914. And what you're suggesting in I think, in your remarks here is that at this period of physical engineering, technical capacity to connect the world, these early steps toward globalization, those projects, which are you know, literally the Suez Canal is building a ditch. It's a high, it's a waterway, but it's 120 miles long, and but we in we we in colocate these projects, with a significant level of social, political optimism that these events, these physical connections are going to lead to hope and progress and prosperity. And I'm wondering is, as these projects were conceived, is that a fair description of what people said they would do? And then I'd like to talk about did it turn out that way?
Zachary Karabell 13:53
So you're, you're totally right, Peter, that that's how they talked about these projects. I talked about them as, as not just engineering, but as metaphysical. Living examples of human progress and that it was going to it was just going to unlock everything that the world was gonna be made better by virtue of the railroads and the canals and and dredgers and earthworks and you name it. And if you're gonna judge solely by the growth of global trade and the connectivity of goods, services of people moving around the world, in many ways, these projects lived up to their advanced pillock. Right they were they were every bit as transformative as the hyperbole of the rhetoric would suggest. Whether or not that benefited everyone equally as a whole other question, because it is clearly true that the rewards of that connectivity We're not, at least in real time universally shared. And if anything, you know, the experience of Egypt in particular, this is a canal funded in part by the ruler of Egypt, who thinks that by joining hands with the French, that not only would east and west or in this case, Europe and the Middle East be united in a common endeavor to build a better future, but that Egypt itself would be vastly enriched, made more powerful become an imperial or powerful state the way it had been 1000s of years before. And that so did not happen within 10 to 12 years of the canals opening, the ruler of Egypt had been removed, the state of Egypt had been placed in kind of a receivership, financial receivership to the British government. And basically, Egypt is then taken over by the English in one form or another for the next 80 years. And then you could play that story with, you know, parts of India, parts of Asia, Sub Saharan Africa, also huge railroad building craze north to south and Africa. So the benefits of this connectivity and the growth of trade and the growth of global commerce and the movement of people to in no way was equally dispersed.
Peter Ravella 16:15
Right It not only are the benefits of these connective exercises unevenly distributed, I wonder whether the, when you strip away the notions of progress, the the hope, and the connectivity being leading to greater peace, when you strip those away, what we're talking about here is, is money, we're talking about infrastructure that is going to produce wealth, and that these connectors are as much disruptors and creators of tension, as they are creators of unity. And the example I would use is an want to Tyler's favorite subjects during the Civil War. One of the early objectives of the North, in during the Civil War was to control the Mississippi River, and the battles along the Mississippi and the battles in Vicksburg to control these transit corridors, which is, which are sources of power and prosperity. So when you look at connections, like the Suez Canal, or the Panama Canal, or other globalization, connection projects, were also creating competition for access to economic power, which leads to in I don't know if it would be fair to say that the Suez Canal, or other projects like it contribute to international tension contribute to war, is that too? Not sure. That's fair to say? What do you think?
Zachary Karabell 17:53
They certainly become causes of conflict and war. But I'm not sure that they transform conflict and war, which has been going on long before for other reasons. You know what I mean, in that their Suez Canal becomes a conflict zone and a place for powers to compete over who's going to control it, and who's going to benefit sending a Panama Same thing with many of these projects. But humans have been competing over one thing or another, for centuries, regardless, so I think it's overdoing it to ascribe to these projects, conflict that that would otherwise not have been there, right. Human beings have competed over resources, land, trade routes, waterways, this may have accelerated some of that and change the specific dynamics of it, right. But I'm always a little wary of Yeah, we don't say rose, the rose tinted glasses about things were so lovely before and then modern world came around and messed everything up.
Peter Ravella 19:01
Yeah. Now, I think I completely agree with that, that that these these assets, these connective assets become the new forum of competition. They don't create the competition, but they create a new area of the search for dominance over the asset itself. But what it does suggest is that there isn't anything intrinsically positive about globalization or connections or projects that we undertake to bring the world together, whether it's physically through transit, infrastructure, or in the modern time, the internet and the information age, which is a connecting system without a canal. I mean, there was a notion I think, early in the discussion of the internet that this particular connective device would bring the world together, people would have access to all of the information in the world and there's going to be greater understanding and the sense of Peace, hope and prosperity was part of the early billing of the internet. But there in my my thought is that there isn't anything intrinsic about these connections that leads to peace, hope and prosperity, or a more egalitarian or unified world. What do you think of that, as a historian this? And why do we attach this notion, this hope, prosperity notion to these physical thing I don't get why, why? Why do we attach so much to these damn things?
Zachary Karabell 20:31
It's a really good comparison. Peter, I once wrote a book called a visionary nation about American particular tendencies to have these utopian moments of we've found the perfect formula of peace and prosperity, which are inevitably followed by dystopian moments of disillusionment and despair. And the Internet of the late 1990s, which was nothing compared to the connectivity we actually have now, but it was more of the peering over the Advent horizon to what what lay ahead. This belief in as you said, it was gonna unlock human potential, create endless wealth, allow for a kind of human connectivity, dissident intermediated, by government or society, in a way that will unlock human potential is exactly the same. animating spirit as the canal building and railroad building of the mid 19th century. And like that, it has, that utopian moment always gives way to dystopian, because human belief in in the utopia is as as as unrealistic. But it's also the dystopia is equally unbalanced. These are neutral, unlocking of potential that inevitably people use and then abuse and then learn how to use better. And I guess, to some degree, all this in a really metaphysical way goes into, are you a cup half empty? Your cup half full person? You know, do you believe in net net? some degree of you know, things turn out better at the, at the end than they then not? Or are you someone who really sees more of the the harm and destruction that's wrought, and you can make a pretty credible argument in both directions. But your observation about, you know, these things start with shiny new objects, all the hopes in the world and often end in a much darker fashion. I just think that to some degree, both of those perspectives, the utopian and the dystopia are equally distorted. It's always a much more complicated model of both.
Tyler Buckingham 22:39
You know, when you were asking that question, Peter, I was thinking to myself, you know, if a Vulcan were to hear that question, they wouldn't, they obviously couldn't go with all of this connectivity kind of conjecture, they would just merely say that it's gonna change things, this thing's gonna change things, it's going to physically change the planet, there's a new way to go. There's a new road, it's a bypass, and it will be used, and it's going to have ripple effects. And that's all we know, like good or bad. That's that's the way it's going to be. I'm curious, speaking of this feature that we can that now interconnects, the, the, the planet in a new way, going back to when it was open? What was going through this thing in the mid 1800s? And then on into the turn of the century? How was the canal used? in global shipping? Were people moving through it? What was happening there?
Zachary Karabell 23:36
Yeah, it was mostly ships. Certainly, there were people, but people movement was less important than goods. Moving through the canal. And in 1869, when it opened, you still had some sailing ships, triple mass, large, trans, oceanic sailing ships, but you increasingly had steamships which were part of the mix. And the steam ships were more rudimentary, but they were faster, they were more powerful. And the advances in steam technology were pretty rapid after 1869. So you basically have faster, somewhat bigger ships throughout the late 19th century. You don't have the massive container ships that we now see, which are all a product of the mid mid 20th century onward. But you have a lot of a lot of ships and a lot of goods. The British had already taken over India and the subcontinent. They were setting up shop in coastal China. The French were moving into Southeast Asia, not to mention Africa. The Dutch were in Indonesia. And so these trade routes between Europe and Asia were we're already pretty vibrant even before the canal and the canals opening just hyper charges that in terms of the volume of trade, and yes, it helps people get Back and forth. But, you know, even at the height, there were less than a million English administrators and whatever settlers in India. So it's not like there were so many people going back and forth.
Tyler Buckingham 25:13
So this was mostly goods, I guess, short raw materials. And I would love to learn more about that. But what I'm reminded of Peter is our conversation with naval historian dragon Eiffel. And we were talking about this transition between the age of sail and the age of steam. And he said, like, if you had been born 300 years before, you know, the 1830s, you could go to a vessel, and pretty much understand it and sail and sail and manage it. Yeah. And whereas you go an extra 50 years, and you're looking at the iron clad era, and it is like, you wouldn't know what you would know, all the rules like going into port, the tide had to be right, the wind and like all of a sudden, just the approach to and what what, the reason why Zachary, I asked about the size of the world thing is because in the modern era, the world feels to me much more finite, like there's a lot of human beings on the planet, we require a lot of raw material to sustain, at least, you know, our American lives. There
Peter Ravella 26:23
is no frontier, left, correct. Planet really, at this point?
Tyler Buckingham 26:28
Yeah, I mean, we talked about the Arctic as being kind of this last waterway kind of frontier, where people are rushing in and taking advantage of the retreating ice. But I guess my question is, I don't know if I even have a question. Can you comment on that?
Zachary Karabell 26:49
Yeah, I mean, certainly, the legacy of the past 150 years is a planet that shrinks in the sense of the conception of distance. You know, I'm, many of us in a pre pandemic era, still marvel that, you know, you could get on a plane. And 10 hours later be on the other side of the planet, or 15 hours later be on the other side of the planet. And in many ways, that was disorienting, because it was so rapid. You didn't have time to adjust. It wasn't like you spent a month getting going from point A to point B and getting used to it. And even a sailing ship that between Liverpool and New York in 1910, like the Titanic, took days, right? It didn't take weeks and months the way it had taken in the 17th century. And then, of course, the internet and, and telecommunications and that connectivity is just that same phenomenon on steroids. a much bigger question, of course, is that, does that fundamentally change human conflict, our conception of things or not? That's way beyond the purview of this particular conversation, but the idea of of a world that gets smaller and therefore, you know, your What you see is what you get is certainly part and parcel of the of the quote unquote, the conquest of nature, in the late 19th and early 20th century.
Peter Ravella 28:20
Zachary, would it be fair to like to see if this subject makes any sense? Could we discuss the political fallout of the Suez Canal, not it maybe not in its specifics, but in the fact that this new connection had been made? Are their derivative political implications in terms of power distribution, or who controlled what that can be fairly attributed to the creation of the Suez Canal?
Zachary Karabell 28:53
I think, even if there have been no canal, it is likely that European expansion which began in the 18th century, accelerated in the mid 19th, and continued into the early years of the 20th was going to happen one way or the other. But part of that expansion carried the impetus for these sort of canals and railroads, I don't know which is the chicken and which is the egg here. But the result of these projects, and I alluded to this earlier was the people who built them, and the countries that sponsor them, financially, primarily, the Europeans, the Americans to some degree, starting in the late 19th century, particularly with the Panama Canal and on the railroads, which you talked about before. They benefit. They benefit economically, they benefit politically. And the countries where these things were often benefited Not at all. So canal is not the beginning of a new age for Egypt. It's basically the end of one for Egypt.
Peter Ravella 30:07
Wow, becomes a client state to centrally.
Zachary Karabell 30:10
right. And you say the same about Panama, right, which is been an offshoot of Colombia, and then becomes its own quote unquote, independent country, but not really sending Nicaragua, right, there was another canal idea that there would be a secondary canal through Nicaragua, in addition to the Panama Canal, which becomes a reason for the United States essentially take over the Nicaraguan government. So the promise of these is partly fulfilled. If by partly, you mean some people benefit hugely and others don't, we'll never know whether the same dynamics would have been imposed, right? Even if these things hadn't been built yet.
Peter Ravella 30:50
I want to take a shot at this. I'm beginning to see in the press people writing about the implications of the ever given accident in the Suez Canal, a ship that was 1300 feet long, 192 feet wide, 20,000 container capacity massive ship. And some writers are now starting to talk about the implications of this accident, and what it might mean. And the question I have is, what story do you think we will tell through the lens of this incident? of the ever given? And is there anything interesting to say? Or is it if I can just be frank, a lot of bullshit to try to draw too much out of the figure really good means that this guy crashed the ship in 144 hours clogged up a waterway? I mean, what really are is the implication of that, can you? What do you think is the story or the narrative that will be created out of this incident as a historian,
Zachary Karabell 31:53
so one part of this story is the small bore part which is interesting, regardless, in that, when you see pictures of this immense thing, that human beings belt, this 1300 foot towering ship have, as you said, 20,000 t containers. And the dredger, which was a big crane, next to it, trying to dig out looking like a little toy, a little toy, it was striking. I mean, it was a very cool set of imagery, right? It was like, Wow, look at this. One thing that did strike me and I think is probably the more important story, but not the story that actually got told is when I wrote the part in the desert book in 2003, the canal was in a was sort of a becoming a backwater. global trade was increasing massively, but it no longer necessarily was increasing, commensurately proportionally for the canal. And with the rise of these massive container ships, some of them couldn't even fit through the canal at the time, at the time, because the canal was expanded over the past 20 years to make room for these big ships. And even though it took another, it takes another couple of weeks to go around the Cape of Good Hope, with these massive ships, it doesn't necessarily matter as much. So the centrality of the canal had faded. why this is such a big deal today is because between the time I finished the Suez book, which was again, mostly about history, China's rise retransform global trade yet again, and the link between Chinese goods and Europe on Chinese goods in the United States, became a whole new source of shipping volume. And the reason why this mattered, and I think, again, people might have viscerally keyed into this, but I don't, I didn't see this being a central part of the story over the past few weeks, is that it was very, I think, common a year ago, when the pandemic hit, and everything just shut borders, shut, treads to global transit, ceased. For people to think that's it, this era of globalization is done. The Chinese are going to focus on themselves internally, Europe in the United States are an increasingly antagonistic relationship with China. And so we're going to, we're going to end this chapter of globalization and what the crisis over this ship and the backup of billions of dollars of trade and all these ships kind of waiting to go through the canal should have alerted people to is there is just zero way in which globalization as a as a way of describing the globalized supply chains, the movement of goods and people. That is so not done. Even in the middle of a pandemic. You have a backlog of massive volumes of shipping in the canal. Because it's true that tourism ended. And business travel stopped because we can all do it via zoom and, and connectivity in that way. But goods and serve goods just have kept going. In fact, the demand of goods is anything that has accelerated to some degree as people are moving out of the pandemic. And that's why this, this crisis actually revealed something about the world today.
Tyler Buckingham 35:27
Zachary Karabell 35:28
people maybe have sort of been very quick to say is over. But the sheer volume of stuff sitting there in the canal waiting to go through, should have been a reminder of you could say it's over. But it ain't over.
Tyler Buckingham 35:47
Man, I've got a few questions after that. What first one is what how does climate change factor into globalization? And and, you know, this, I agree that it's not over. And I mean, there's just there's no interest. But clearly, the exploitation of the planet, push it. I mean, you're, you're you can speak to this in just much more, a much more educated, educated way than I can. But it seems to me that China and corporations, not not just nations, but but corporations are building, you know, like slapdash ports next to mineral deposits to quickly extract them so that they can turn them into iPhones and like moving stuff all over the planet, removing raw materials. And like, as I said before, like I don't I don't believe that that is a sustainable practice. Is, and maybe it's not, maybe we will change. I mean, I we talked about this a lot on this show. But is this is does globalism, adapt through climate change? Are we taking globalism with us into the future?
Zachary Karabell 37:08
Oh, if we knew the answer to that, wouldn't we all be happier humans? Look, there's an old sort of saying of something will continue until it can't, which seems oddly syllogistic, but it's a reflection of things tend to go on until they can't go on anymore. And while it's tempting to say, this can't continue. The fact is, it clearly can continue. The question then is, at what point can't it you're still seeing places like Pakistan and parts of Southeast Asia, and the Philippines, you know, they're building bigger ports and more ports because they have their own burgeoning middle class of hundreds of millions of people. Yeah, globally, it's several billion people. And the tension of global climate change remains that the most urgency about it tends to come from Europe, peripherally, maybe the United States, who no longer need the level of economic development to meet a middle class standard of living. And it can seem at times as if the more developed world is saying to the world that still, whatever we call it emerging, developing, burgeoning. You can't do this, right. I mean, I know people in Pakistan doing various forms of project development who say, look, it's not that we want to use coal, per se, to burn our power plants. But we don't we're not set up to do solar in parts of the mountains, because there's not enough sunlight in a consistent basis. And where's the energy going to come from? Are we supposed to just sit around without electricity, internet and and running water, just because a bunch of Europeans set a carbon emissions target for 2030? And I don't think in many ways, the climate community, I think the climate committee gets that I'm not sure anyone has right grappled with that reality. And on the more hopeful side, you have places like China, committing itself, whatever that means to being carbon neutral or zero emissions in 2050. Right, logic is there, their internal pollution levels are untenable for domestic Chinese. They say until people until the equation shifts domestically, where the where the domestic immediate harm seems much greater. Things like global climate change are just going to be too abstract. And it took the Love Canal in the 70s people to realize in the United States that Oh, wow, we're polluting our rivers.
Peter Ravella 39:45
Well, that was interesting. During the Beijing Olympics, if you'll remember they had they had shut down a lot of factories in the region in order to clear the air up so the athletes could run and swim and do the things that they do. And in the press, there were photographs of the landscape and the surrounding mountains that you could suddenly see, because China had had, and I think this is what you're suggesting, when people get a taste of the transformation that could be possible, we might start to see a greater degree of action. As much as the Paris Climate accord is a is a wonderful accomplishment on the international stage, it's not simply it's not going to be the driver for massive transportation in and of itself, it's going to take this other experience to occur. Peter,
Zachary Karabell 40:35
you had the same thing going on in pandemic land? Where Yeah, in New Delhi, for instance, there were, as everything shut down in India, on government mandate, people could suddenly see the Himalayas from Delhi. And there were these pictures and like clear air, beautiful skies, and you could see the mountains. The flipside is, for the several 100 million people being royally screwed by pandemic policies, who couldn't basically go to work and we're starving. Like, which, which trade off? Makes sense? Yeah, I would rather see the mountains or starve. And I and honestly, I think people need to think in terms of those equations. What happened in China was at a certain level of economic development, people started going, Hey, wait a minute, this is just not acceptable, and my eyes are burning, I can't breathe the air. And it's basically that there has to be a turning point in climate change. Or domestically, people stop perceiving pollution as progress and start perceiving it as toxic interest. But But usually, that only happens at a certain level of development. 100%, I
Peter Ravella 41:40
think it's widely stated. And I think this is true that environmental health and improvement in environmental conditions is a function of economic prosperity, that you have to be able to afford it. And it's like you're saying in Pakistan, or in developing countries that simply don't have the revenues to deflect that energy into sort of restorative things, but are still trying to just get electricity and food to people. It's the Hierarchy of Needs problem, you can't get to this greater environmental sensitivity until you've got the money and the thought space to do it. And it it want to turn attention to you because you're a historian, because you were covering economics internationally, one of the things that we've started to see is a greater institutional investment in the transformation of the world economy away from carbon based power. And, you know, BP and Shell Oil were just huge betters, on the offshore energy leases off of the Atlantic coast. To build wind powers that wind power, the lease sales, were $400 million for the rights to construct wind towers off of the Northeast Corridor. So we're beginning to see companies moving in this direction, Bill Gates just kind of comes out with a big book on climate change. Now, international investment houses are starting to look seriously at ESG investments or environmental and social justice kind of investment strategies. As an economist and as a historian, is this greenwashing or are you seeing or beginning to see a shift in economic resources and horsepower, that are going to be transformative economically, and perhaps beneficial to climate change? Is it anything out there striking you about that topic?
Zachary Karabell 43:36
Well, also, I mean, I did write a book once about sustainability in business, I ran a sustainability focus hedge fund for a couple of years, which I know sounds like an oxymoron. But it wasn't. And I'm actually a big fan of greenwashing. Because I think once companies start talking the talk their shareholders, and the public tends to hold them responsible for walking the walk. That's a controversial and debatable statement. I'm just putting it out there as something to think about. But they're also, you know, following kind of the economics and the demands, I think, what what's going on around climate in China is the most interesting and most illuminating. And potentially the most hopeful of the conversations around this. I know, it's very popular to be hostile and antagonistic toward China for all sorts of reasons. And some of those may be justified, and some of them I don't think are, but what the Chinese government's doing domestically around pollution and around carbon is I think, a good sign of the goal should be to try to accelerate global development. So that as you just talked about an Maslow's hierarchy of needs. People then begin to perceive that less carbon intensive A ways of producing essential needs is in everybody's self interest, every national self interest and every individual self interest. And every corporation self interest partners, my corporations have a self interest in this now is because if you can control your input costs and also limit how much you need to, to, to buy for your inputs, the more control you have of your bottom line. So carbon intensive production that requires oil or even certain stuff, you need to dig up, you're always vulnerable, both the price and supply. Yeah, if you can find ways to do that in a renewable fashion, 3d printing, or less resource intensive ways of producing stuff, you can control your input costs, you control your cost of goods, and there's a productive capitalist output for that 100%.
Peter Ravella 45:52
I mean, in the Suez Canal example, the state of Syria was rationing oil and gasoline because that the vulnerability of risk of the Suez Canal created this financial and economic crisis in that country because the supply was that vulnerable. I agree with
Zachary Karabell 46:12
all the pipelines have been, you know, semi destroyed after nine years of civil war in Syria.
Peter Ravella 46:18
And I think you're right about the transformative power to convert to a less carbon intensive economy is going to be a function of the fact that it is cheaper and more reliable, to use other sources of energy that are more locally generated. And if you look at power production investment in the United States over the last five years, you're beginning to see more installation of wind and solar power than you are in any other form of energy production. And it's because the prices are starting to get to a point where it's just a better idea. And we're seeing billions of dollars investment in the North Sea wind power industry 30% of the power consumed in, in Great Britain now is renewably produced. And that's what I think is going to end that the economics of that are give me hope that at least in the power sector. The idea of burning coal seems to me is one step above the cave men getting sticks and building a fire. I mean, the notion of combustion as a way to reduce reduce or produce energy is an archaic way of heating and generating power. In fact, I think it's one of the few technologies that has survived centuries. And it's simply, you know, this is about Star Trek, you get on board the USS Enterprise on Star Trek, and nobody's burning anything, you know, and it's, it's all about electron movement. And there's a lot of weight and ways to move electrons besides burning things. And I just think there'll be a day when we'll look back and they'll say, Do you realize they used to dig up mountains of coal in Wyoming, put it on a train, get it all the way down to Texas, put it into a power plant, burn it and then have to deal with the fly ash waste, toxic issue, it's gonna seem a bit absurd system.
Zachary Karabell 48:25
Like it's already becoming for most parts of the world. I live in Pakistan, where it is still the cheapest, most readily available. But its costs are huge environmental, and for most countries, China included, they're looking for alternate ways of fueling what they're doing. The other thing that's going on, and we talked about this earlier, kind of the analogy of the internet and the canal, you know, these are connective tissues, one being a waterway, the other being fiber optic cables, that the more that that current wave of technology and connectivity increases. To some degree, the less resource intensive our economies become. So, services doing a podcast this conversation is a very resource light process. As opposed to making furniture,
Peter Ravella 49:21
Zachary Karabell 49:22
we're still gonna need furniture, right. But it may be that the Suez the volume of traffic than the current Suez Canal sandwiches, oil, a lot of witches, stuff made in China, heading to Europe and made in Thailand and made in the Philippines. It's not just China, that we may be a peak stuff, not because the rest of the world isn't developing but because the nature of our economic consumption is just shifting away from from stuff. I've kids, her teens, and even in their lifetimes, I've noticed that you know, Christmas coming is around and and demands are digital and not material. So the only thing that is material at Christmas now are the fo boxes to house like the digital. Here we buy something online. And like that's a that's a transformation going on everywhere. So that in and of itself. augers somewhat well in terms of climate interesting. It makes
Peter Ravella 50:25
me think, Zachary, the that ever given was sailing from Malaysia on its way toward Rotterdam, as we said, with 20,000 containers of goods manufactured in, in that Southeast Asian region of the world. But the point you're making there brings to mind your recent episode on what could go right your podcast that you host, and the Canadian authors that you had on talking about the population growth of the world, and the fact that the assumptions that the world is simply going to continue to expand and we're going to get to 11 billion and then 12 billion is fundamentally not true that there's this transformation of our demand on the planet. And perhaps this is a potential pathway toward a more sustainable future. What do you think?
Zachary Karabell 51:19
Yeah, so again, that's part of the argument for peak stuff, right? That this this moment and the crown, we may be at peak stuff, because not only is the population, the planet, aging, it's not being replaced, it is still being replaced in parts of sub Saharan Africa, and parts of Asia. But the rate of replacement, ie the rate of actual population growth, by virtue of new births, has declined radically and dramatically, to the point where most population estimate estimates haven't factored in just how many fewer births There are over the past 10 years, largely, because when middle class life becomes more prevalent, and women are more educated, and people are living in cities, women cease to have so many children. And that's happened much more quickly in Nigeria, and in Bangladesh and Pakistan than then people thought even 10 years ago. So the I've often thought about this as sometime around 2050 between technology and just population contraction. Many of the issues of climate change carbon and stuff will almost ineluctably resolve themselves. So we will have much better battery and renewable technologies and wind and you name it cheaper, more prevalent, more widespread, and there'll be fewer people demanding fewer stuff, and and a lot of the people who are still there will be older, and we know just observationally that the older you get, the less stuff you you tend to need want or consume.
Peter Ravella 52:50
You sound like
Zachary Karabell 52:50
is more can we get can we get through the next 20 to 30 years without destroying the ecosystem permanently? And there are plenty of people who say, Nope, we can't we're toast. Unless we radically, you know, I don't know, turn everything off and figure out a different way in the next 10 years, then the pathway is is tectonically destructive. And then of course there are others who feel like progress is being made and it just happening. And the window is not getting narrower, but actually becoming more open.
Tyler Buckingham 53:26
Do you put yourself in one of those groups?
Zachary Karabell 53:29
Like I tend to believe that human history has been a neck and neck creation between our unbelievable capacity to create and are equally unbelievable ability to destroy. But the fact that we're sitting here having the debate suggests that at least at a 5149 sense, our ability to create has narrowly edged out our capacity to destroy it. That's neither. I'll take it. I'll take
Peter Ravella 53:53
5149 we're on the poor lean into the right side of the equation.
Zachary Karabell 53:58
So I tend to believe that that's likely to be true in the future. But as I said in the investing world past, performance is no guarantee of future results. So the fact that that's been true till now, it doesn't in any way suggest that it has to be true in the future. It just means that's kind of where I reside. And the reason why I created this progress network recently, which is the progress network.org. That's an advertising for a free nonprofit site. So just so people know, and that that future is unwritten. Right. And I don't know, what could we do ourselves by believing that we're going to go to hell in a handbasket. So, the other part of that question is, what can we do now to create the future that we want to live in, given that that future remains to be written? When it's kind of up to all of us to it's not like the end of the Life of Brian where we always have to look on the bright side of life. It's just, we are I think all of us obligated to try to create That future.
Tyler Buckingham 55:01
Well look, Zachary, I know that we are running out of time. And there's still so much more I wanted to ask you about your another one of your books, the leading indicators, a short history of the numbers that rule our world. And I'm gonna I think I'm just gonna save it Peter, but a man on in the coastal space, right understanding our world understanding climate change on the coast. We Peter run into so many numeric models and expressions for that world and man, Zachary, I would I would have loved to have had the opportunity. But let's talk about his new book.
Peter Ravella 55:44
Yeah, exactly. Can we please. And if you still have the time, and the inclination, we'd like to ask about the book coming out in May, in a couple months from now inside money brown brothers Harriman and the American way of power. The breadth of subjects that you cover is immense. Can you tell us about your new book? And also tell us more about the progress network when you get a chance?
Zachary Karabell 56:07
Yeah, so the new book kind of came out of two questions. How did money make America and what's the current state of American capitalism, told to the story of the oldest investment bank in the United States called brown brothers Harriman, which still exists as a partnership did not the white goldman sachs and Lehman Brothers and Morgan Stanley go public in the 1980s, and therefore never became too big to fail, but also remained kind of a quiet presence in the financial world rather than a dominant public one. And separate from this idea of paper money in the 19th century was a kind of like the canal building and kind of like the internet today, its own human innovation that unlocked a lot of human potential and also created a lot of economic crises. But I was really interested in this idea of what's a sustainable form of capitalism and the degree to which, even in the financial world which is not have doesn't have a lot of public favor these days, the idea of staying a partnership, not taking on risks that you can't afford, being kind of small c conservative, particularly with money and finance has a great virtue that our modern definition of stock market, shareholder capitalism has disdained, and somewhat downgraded and that I think, we need to re examine. If you really think capitalism is a destructive benighted system, it's unlikely you'll like the book I just wrote. But if, if you think there's something redemptive, or there are alternate modes of capitalism, that could be where the rewards could be more distributed. And greed could be held in check some grades. Okay, right, if it leads to creativity and speculation, of course. So that's where that book comes from. And I hope people will look at it with a with an open mind. Accordingly,
Peter Ravella 58:08
it sounds like and I don't know how much you want to the book is coming out in May has not been released. But you can order it now on amazon.com. Inside money brown brothers Harriman and the American way of power. sounds really interesting to me, it almost sounds like what you're suggesting is the old way, is the new way that we've got to get back to this small c conservative capitalistic idea of sound management, sound investment kind of thing, and that we know how to run a capitalist economy in a way that is less risky, and doesn't involve inventing things like credit default swaps, and esoteric vehicles of finance that make no sense to anybody, including the people who make them.
Zachary Karabell 58:49
Correct. And I, you know, I don't want to be too black and white about it. And that I think it's more about where the balance exists, that the core of the financial world should be small, see, conservative, and the periphery should be risk taking innovative, you know, bet at all lose at all, because you do need some of that as well. Right? You do need the dreamers you do need the risk takers. And if you have a world that's too dominated by the conservative solid bankers, you get no change, no innovation, it's a matter of where the where the balance lies. And in too many ways the American capital system, flipped that equation unhealthily where the dominant portion was, the risk takers will create crazy financial instruments and level them up 10% of 10 times versus the more conservative, we're just going to invest what we know we can afford to lose. So I think it's it's a matter of what is currently the core should be the periphery and what is currently the periphery should be the core.
Tyler Buckingham 59:48
Sounds like a fascinating book, go buy it now. preorder it and it'll be out soon.
Zachary Karabell 59:55
My plug for the progress network which I'll do is is basically What I just said before, but it's our responsibility to write the future. And that we, in a political media, even pop culture have focused way too much on everything that's going wrong and not nearly enough of what's potentially going right. And that there are hundreds of really interesting thinkers writers out there, whose whose work points in a more constructive direction. It doesn't mean that they're all optimists, it just means that they are not animated by outrage, and they're more focused on solutions than hammering endlessly about problems. And then unless those voices cohere into some sort of meaningful identifiable phalanx, they'll always be atomized no matter how prominent a part of this network are, Steven Pinker and Fareed Zakaria and Tom Friedman and Erik brynjolfsson and Andy McAfee, and, you know, people, you know, Emory slaughter and Diane Coyle, I mean, it's an interesting group, and outstanding, why I started to try to make sure that if, if things are going downhill fast, it won't be for lack of people warning about it. So that waterfront is pretty well covered. But if we're doing a better job than we think of either solving problems we've created or generating human progress, we're not paying enough attention to that. And it may be to our detriment in our ability to actually make it true.
Peter Ravella 1:01:25
That is really interesting. And I think there's a common theme here that I've picked up throughout the conversation, we've had this utopian versus dystopian dichotomy, this anti polarization, anti black and white, the nuance of issues how we describe history in the past, and how we project into the future is not one dimensional. But the true thinking requires people not of identical persuasion, or identical ideology, but who are thoughtful and engaged in the world and can handle complexity and nuance. And it sounds like the progress network and the people that you've put together, is trying to create that foundation of different thinking in this highly polarized damn environment we're in right now, which frankly, I'm tired of hearing about it
Tyler Buckingham 1:02:15
Zachary Karabell 1:02:17
Well, thank you. That is a really nice concluding encapsulation of what I'm trying to do.
Peter Ravella 1:02:23
Well, ladies and gentlemen, it is Zachary carrabelle. Author, writer, brilliant thinker. I'm not going to list off all the books. Check out the latest book coming out. From Zachary inside money, brown brothers Harriman and the American way of power coming out and made 2021 look at the progress and network.org. Is that the correct URL for that? Yep. And follow him along. Zachary. We couldn't be more thrilled and privileged to have you on and spending this much time with us. It was absolutely interesting conversation. We thank you very much for being on the American Shoreline podcast.
Zachary Karabell 1:03:01
Thanks, Peter. And thanks, Tyler.