Saudi farms are exporting Arizona water back to Saudi Arabia
Arizona is exporting alfalfa, a massive water consumer, grown on Saudi-owned American farms back to Saudi Arabia. This is happening because of the loose rules around water use in Arizona and because the Saudis, since 2018, have banned the growth of thirsty crops like alfalfa. But they still produce dairy and so they need to find their alfalfa from elsewhere. You can read more here.
Why Arizona? During World War 2, America wanted to set up air bases in Saudi Arabia and Arizonan dairy farmers (I know, this just gets weirder) knew how to grow thirsty crops like alfalfa. Saudi, which has even less water than Arizona, found learning these techniques useful and so this friendship was born. As I understand it, alfalfa grows well in desert climes as long as you can give it enough water, and the rules of water usage in Arizona allows farmers to suck as much water out of the ground as they like. And so the Arabia / Arizona Alfalfa Arbitrage was born.
Americans are freaking out and looking into rules around farm land owned by foreigners, with specific concerns about Chinese owners. Chinese investors, it turns out are the tenth largest foreign owners of agricultural land in the USA, but the rules being considered may not only impact investment from China but also Chinese green card holders living in the USA.
The world is growing older, larger and more expensive
Between Covid, the war in Ukraine and the USA / China trade war, we are seeing a world getting bigger again as countries close off to the rest of the world. In polite company this is called ‘friend-shoring’, but this could also be called de-globalisation. Just as globalisation kept global inflation in check, so de-globalisation will see the opposite happen.
The combination of Trump starting a trade war, an ever more insular China under Xi , Covid-19, and Putin invading Ukraine, has begun to slowly reorganise the world. In this new world, an young fecund Africa matters and not just for our mineral wealth, although for that too. The combination of a decline in birth rates and improved elderly health, means the average age in most countries is rising.
Japan, currently the world’s oldest country, has a median age of 48.4 years old. This means, that if you lined everyone up from youngest to oldest, when you got to the half way point, that person would be 48.4 years old. In China they would be 38.4 and in Africa they would be half that at 19.7 years old. There are simply more productive years of work left in Africa than elsewhere.
Japan, saw this problem years ago and exported its capital to where the workers were, using the dividend flows back to Japan to support its ageing population. Japan’s GDP growth flattened (it got exported to the car factories), but they remain a wealthy country (dividends back home). Africa needs to be position itself for these capital flows from an ageing Global North.
China’s population plummets
China, no longer the world’s most populous country, will see its population plunge over the next few decades, to a third of where it is now by the end of the century. This problem is exacerbated by 40 years of China’s one-child policy, which has now become a one-child norm. If you’re a Chinese teenager, you probably don’t have siblings, uncles, aunts or cousins. This is a family stick not a family tree.
The sex-selective abortions in the one-child era means there are a lot more men than women, further exacerbating an already bad problem (only women have kids, so if you have fewer women, each one has to have even more kids to maintain a stable population).
China has tiny immigration numbers, partly because the CCP cares more about social harmony than diversity and so doesn’t encourage immigration, and partly because life in a police-state is just not that appealing.
Ageing populations become less productive, simply because, well, people are older. You can compensate for this to some degree by immigration (Germany bring a million Syrian refugees in, is an extreme example). You could use technology and (of course), this has been tried in Japan, with some unexpected outcomes. Robots to assist with elderly care are helping care workers move the elderly around, but for the most part, people are not wild about the idea of being taken care of by a robot. If you are up for a long read, this article is interesting. Japan, seeing the limited success of robotics, has started loosening its immigration policies. The effects of the new wave of AI is yet to be determined.
The global population decline is unlikely to reverse or even stabalise for a long time. This is Africa’s moment to draw in capital from the wealthy North and become the factory floor of the world.
While you watch Netflix, we think of Arabia / Arizona alfalfa arbitrage and Africa covered in factories.
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