Corollaries From the Past in Today’s Great Power of Politics with Geoffrey Wawro

Author, Professor and Military Historian, Geoffrey Wawro offers information on how current events align with historical conditions of our world.

Author, Professor and Military Historian, Geoffrey Wawro offers information on how current events align with historical conditions of our world. When talking with Ryan Morfin, he discusses parallels in international relations, political motivators, and foreign affairs related controversies. Professor Wawro explains how our bizarre relationship with Russia and the disputes with China mirror pre-World War I conditions.

The debate on whether to exercise the United States’ power as a world leader or to focus primarily on domestic prosperity was at the forefront of conversations in the WWI era just as it is today. The Trump administration has made it abundantly clear which course they favor by bringing supply chains back to domestic soil and keeping a close eye on border security, but will that be sustainable and will it lead to conflict as it did in the early nineteenth century?

 


Sons of Freedom: The Forgotten American Soldiers Who Defeated Germany in World War I

View Transcript

Ryan:

Welcome to NON-BETA ALPHA. On today’s episode, we have professor, a military historian who’s going to talk to us about World War I, The Spanish Flu, where we are in this American moment, and a little bit about the corollaries from the past in today’s great power politics. This is NON-BETA ALPHA. (singing). Professor Wawro, welcome to the show.

Geoffrey Wawro:

Hey, Ryan, thanks.

Ryan:

Well, you’re a professor of military history and in some ways, the political leadership today has said we’re in a war against the virus and you’ve done a lot of good work on World War I and I wanted to talk to you about some of the parallels from World War I to today, and some of the lasting impacts that the pandemic of The Spanish Flu may have had during that great period of change. And so, thanks for coming on the show. And maybe you can give us a little bit of context of, where you see World War I’s corollaries to today and we can talk about some of the externalities that have become part of history.

Geoffrey Wawro:

I mean, there’s a lot of comparisons. And generally speaking, we have the same fraught international relations where you have increasing tension, I would argue needlessly between the United States and China. You have a bizarre relationship with Russia. You have these tangled international relations, you have a number of potential flashpoints that could lead to a great power conflict as in 1914 today. And this is like North Korea.

Geoffrey Wawro:

So you have the same dried tinder ready to burst into flame if it’s only nudged. And so you see this is the same just difficult international situation. Whereas other comparisons, you have the attempt to the end of the war by Woodrow Wilson to create a more lasting international peace by creating the League of Nations, by getting nations to settle their differences by arbitration rather than by resort to war. This was something that was hotly opposed by Republicans in Congress at the time, because they thought of the League of Nations, much as they think of the United Nations today, as being a foreign body that would take away from American sovereignty.

Geoffrey Wawro:

And so the Republicans answered Wilson’s call for League of Nations with carve outs for American sovereignty. So for example, saying, we wouldn’t abide by anything the League did. If we wanted to act in accordance with, say, the Monroe Doctrine in the Western Hemisphere, we could, that an American president could not contribute any troops or ships or planes to a League of Nations operation to punish an aggressor without Senate approval, that sort of thing.

Geoffrey Wawro:

So today you have the same, looking at the World Health Organization, the big kerfuffle about that. You have the same fears on the right in America about overreach on the left and overreach by international bodies like the United Nations. The war itself, grinding four years slaughter. Quite different from war today, but one could imagine that if we had a real war against, quote unquote peer competitors, you would have similar conflict with heavy casualties. Not in trenches but with big casualties. So that’s of course, a cautionary note.

Geoffrey Wawro:

We had, exactly 100 years ago, we had this, big flu pandemic, 1918, running into 1919. Two waves in 1918, the first wave in the spring and then a second wave in the fall, the winter, absolutely devastating to the armies in Europe. The German Army was, at least a quarter or up to a third of German troops came down with the flu. American troops ships coming over from the United States to reinforce the Allies on the Western Front full of flu victims. They had to have mass graves at the ports of debarkation in France when the ships arrived. Places like Brest, send us their share aboard, they would offload these ships and for every two healthy guys that came off, there would be a guy either with the flu or dead from the flu.

Geoffrey Wawro:

So absolutely, and then the same thing in all the training camps back in the United States. As they were sending reinforcements to Europe, the training camps were just riddled by flu and flu victims. So similar measures taken to the time, there was no therapy, there was no vaccine. So they practiced social distancing, they tried to avoid public places and that sort of thing to the extent they could. Of course, in troops ships going over to France, it was very difficult to practice social distancing, which is why the outbreak was so severe not only on the troop ships, but in the trenches. And the rear areas of the Western Front.

Ryan:

Well, and so one of the big areas of concern, I guess, is the lack of transparency from the governments during the Spanish Flu because we were at war. Could you talk a little bit about the use of propaganda or the use of concealing the pandemic back in the US and in Germany? Why both governments chose to take that tact and hence why we call it The Spanish Flu?

Geoffrey Wawro:

Well, I mean, it was Spanish Flu because it was thought to have originated in Spain, and then it found its way over the Atlantic and it got into some of the military camps and spread from there. But there wasn’t, I mean, people… Well, I read a lot of soldier memoirs of the war and people talked about people being sick, but nobody talked about The Spanish Flu. And often they didn’t even talk about the flu. They just talked about people being sick. So I don’t think it was, you were dealing with armies that weren’t exposed to the unblinking round the clock media that we are today. Troops, many of whom were partially literate or illiterate. So there wasn’t as much awareness about current events and about public health and all that sort of thing.

Geoffrey Wawro:

But generally speaking, armies in the winter fighting in the plains of Northern Europe in these cold, swampy, wet, just brutal conditions, they were going to be susceptible to illness anyway. So it wasn’t clear to me just reading the reports from… Because for the book, Sons of Freedom, I did research not only in US archives, but in all the European archives, the relevant European archives as well. And it wasn’t really clear to me that they necessarily knew that they were dealing with The Spanish Flu, they just knew that a lot of guys were getting sick.

Ryan:

And the trench warfare-

Geoffrey Wawro:

That was no different from any year in the war.

Ryan:

Yeah. And so the conditions that these poor soldiers had to go through, so they’re in the middle of a pandemic and you’ve mentioned a little bit in our previous conversations about some of the changes that we made due to World War I regarding nutrition. Maybe you could share a little bit information about that.

Geoffrey Wawro:

Well, one of the things that was striking, was if you look at pictures, same as if you look at pictures of World War II generation, how much thinner everyone is. And it just occurred to me that this is, in 100 years the American diet or American health and American… The robustness of Americans has changed so much. We’ve gone from being a nation of starvelings or people who are in many cases underfed or undernourished to being a nation where two thirds of the people are overweight and a quarter of the people are diabetic or pre diabetic. And when they introduced the Selective Service Act in 1917, when we declared war on the Germans, and then we brought in several million young Americans for military training via the Draft and many of them were underweight, many of them were poorly nourished. Many of them had all kinds of things like rickets and goiters and whatnot.

Geoffrey Wawro:

And so you saw this concerted attempt in the United States and elsewhere to create relatively cheap food that preserved well, very starchy carbohydrates with vitamins added. So you overcome these things like goiters and rickets. But that diet really hasn’t changed, we still get all this processed food, that’s very caloric and very easy to ship and very easy to preserve. We’re still eating as if we’re living 100 years ago, which is why you have something you didn’t have then, all the obesity, the diabetes, the heart disease, and everything else.

Geoffrey Wawro:

And so it just made me think that what we really need to have in this country is a another food revolution, not to cope with the problems of 1918, but to cope with the problems of 2020. And I think that’s where we’re headed, you’ve seen the younger generation with their emphasis on organic and everything else. You see the shift in preference for either supermarkets like Whole Foods or more upscale entries in place in the major supermarket chains. But you just see a change in the diet happening. It’s coming from the younger people, and it’s very interesting because the diet that was devised to overcome the health problems of the early 20th century, that diet has not been adapted to the realities of the early 21st century.

Ryan:

And, supply chain was critical then as it is now. What was the supply chain like in World War I? I mean, how were we getting the food and the bullets and the supplies to our soldiers? And what was that at risk? And then how was it during that period of time in the US, at home? Was there shortages like we hear about from World War II?

Geoffrey Wawro:

Well, the yeah, the two-part question, I guess. The first part is that the US showed an amazing, amazing ability to adapt its economy to the realities of the war. It really amazed the European powers. The United States had no domestic arms industry when the war broke out. We had a very small, professional army that was supplied entirely from government arsenals like the Springfield Armory in Massachusetts, limited numbers of rifles and shells and grenades and that sort of thing.

Geoffrey Wawro:

And then when the war broke out and then these big European armies, the British Army which grew from five half dozen divisions to over a million men, the multi million men French Army, the million men Italian Army, the multi million man Russian Army, they all needed supplies and they exhausted their own stocks. So they turned to the United States. As did by the way, Germany and Austria and Hungary because America was neutral. So the American industrial saw a big market here and they just completely reconfigured their factories to produce highly technical armaments, the artillery shells, the fuses, the gun sights, the field guns, everything was adapted for that purpose.

Geoffrey Wawro:

And they did a booming trade and they did not trade with the Central Powers, they only traded with the Allies, which was one of the reasons the Germans started torpedoing American ships, because they said, “You’re not really neutral, you’re supplying the Allies.” And the Americans replied, “Well, we would supply you but we can’t because of the British blockade of the German and Austrian ports.” And then that just becomes one of the causes of the American entry into the war.

Geoffrey Wawro:

But then once the US goes over, it’s such a crisis on the Western Front with the French and the British, with the Russians knocked out in 1917. The Italians effectively knocked out in 1917, the Germans massing everything against the very depleted British and French armies on the Western Front in 1918. And they just so desperately needed American manpower that’s why the argument in my book, Sons of Freedom, is that the US won the war. They won World War I because France and Britain couldn’t win it, they were on the verge of being knocked out. It was only this very hasty shipment of the big American Army that saves them. But because they needed the manpower so much they only sent American troops and they were equipped entirely in Europe by French and British factories.

Geoffrey Wawro:

So that’s why you see the American doughboys, that was what we call the GIs in World War I, the doughboys. You see the American doughboys wearing those British high tin helmets, wearing British khaki, using French light machine guns, French heavy machine guns, and carrying the British Lee Enfield Rifle, the famous incident where Sergeant York, wins the Medal of Honor and takes prisoner, basically a company of German troops, he does that with a British Lee Enfield Rifle. So that’s in the Battle of Meuse–Argonne in 1918, all described in the book.

Geoffrey Wawro:

So that was another act of tremendous improvisation. The the US first supplying the Allies against the Germans and the Austrians with lots of material, and then raising this big army from scratch, training everybody up very quickly sending them over and then equipping them with British and French stuff, and then going into battle and fighting extremely well under the circumstances. And as I argue in the book, really ultimately winning the war.

Ryan:

And so we won the war, and I guess President Wilson goes over to Europe to negotiate the peace. Is it true that he was sick when he was negotiating? Because I think one of the symptoms of The Spanish Flu was that it had some neurological effects and some people were saying that that may have placated his aggression, if you will, or diplomacy, and let some of the other Allies really carve up Europe in a way that that transaction and that deal really ended up causing World War II. Can you talk a little bit about that?

Geoffrey Wawro:

Well, I don’t think it had any… His health becomes a factor when he leaves Paris, when he leaves the Versailles negotiations and he goes back to the United States in order to barnstorm around the country and win popular support. Because the Republicans had taken control of the Senate in the midterm elections in November 1918, right as the war was ending, there were midterm elections, and the Republicans take control. And the majority leader, Henry Cabot Lodge of Massachusetts, he’s in no mood to ratify the Treaty of Versailles because Wilson has insisted on embedding the League of Nations covenant inside the treaty.

Geoffrey Wawro:

So then Wilson goes back to go around the country, he says, “I’m going to create,” using the bully pulpit, “I’m going to create this groundswell of support among all Americans for the League of Nations, and I’m going to defeat the Republicans and that way, they won’t be able to resist me.” And then he has a stroke in the midst of that barnstorming trip and he returns to Washington, he’s an invalid for the rest of his presidency, and very ineffective.

Geoffrey Wawro:

But in Paris, he had a lot of principles that he wanted applied. And he was deadly opposed to the continued survival of the British and French empires, for example. Deadly opposed to the idea of taking the old German colonies in Africa, in the Pacific and parceling them out among the victorious allies, chiefly Japan. He was dead set against the Japanese who had placed their infamous demands on China during the war, that the Japanese would essentially control Chinese foreign affairs, Chinese military affairs, Chinese financial affairs, Chinese commercial affairs and make China their hinterland. He was opposed to all of that.

Geoffrey Wawro:

The problem was, is that Wilson was really ahead of his time in some ways and was pushing an agenda that would be more successful after World War II, but not after World War I, when America had a relatively… Was still sort of a, even though they had played a massive role in World War I itself, ultimately winning the war for these fading allies, they weren’t really recognized as the premier power yet, as they would be after World War II. So their leverage was less.

Geoffrey Wawro:

And then Wilson was not the figure to achieve great things in Paris because he was too much a professor, he was too windy, he was too rhetorical, he was too aloof and had difficulty getting down and rolling up the sleeves and getting down in the trenches with people like Clemenceau, the premier of France or David Lloyd George, the prime minister of Great Britain, and cutting the really hard deals that needed to be cut. America wasn’t going to get everything it wanted, it was only getting some of what it wanted. And Wilson was an all or nothing guy. The same way he was with the Senate, he was with his allies. So his effectiveness as a world leader [inaudible 00:18:25].

Ryan:

And so the Treaty of Versailles is signed and the world’s carved up and you mentioned something interesting. And a lot of my background in history, I haven’t really spent a lot of time on World War I, but I’m doing a lot of research on it now, because I think there’s a lot of corollaries to where we are today in some respects. But you’ve said that Japan and China were at conflict. I mean, how did that set the tone for how Japan treated China? And now how China keeps arm’s length suspicion of Japan today? What happened in World War I between those two superpowers?

Geoffrey Wawro:

Well, Japan, they had their famous Meiji Restoration in 1868, where they basically overthrew the Shoguns and the old medieval order of where Japan had been in these little feudal castle towns, each with a little army of Samurai Warriors, the whole Tom Cruise story, where they bring in a European style leadership and they rebuild their military on the French model. And then after the Franco-Prussian war, on the German model, they rebuild their Navy on the British model, and they rebuild their economy very much on a capitalist model, modeled on the big European conglomerates and American conglomerates, the Zaibatsu like Mitsubishi and Mitsui.

Geoffrey Wawro:

But they see themselves very much as an island nation, like Great Britain. And they say where does British power flow from? Not from the rocky cold windswept British Isles but from this huge global British Empire. So the Japanese say, “We’re the new Britain, we need an empire.” So they look across at China and they see this nearby hinterland, Manchuria, just across from Japan is a natural field of expansion for the Japanese, it has raw materials, it has mineral resources. It’s got its very arable land to feed the Japanese people. And so they begin grasping at that, they fight the Russo-Japanese war in 1904, 1905. They claim a protectorate over Korea and over the Manchurian space.

Geoffrey Wawro:

And then during World War I, they join the Allies, they declare war on the Germans because the Germans have a big colony in the Shandong province of China. So they seize the German colony and then they take that presence, that foothold on the Chinese mainland to then extend these 21 demands to the Chinese government that I mentioned earlier in 1915, basically demanding control of the Chinese state and the Chinese economy. And they get partial control, and then Wilson tries to push back during and after the war, but you have this cold war between the US and Japan growing because the US sees itself as the Pacific power. And they basically, see that California and China are the two coasts of this American sea, the Pacific Ocean, and they don’t want Japan moving into that space.

Geoffrey Wawro:

And so this is going to build a lot of tension, you’re going to see this tension accelerating in the 1930s, when Japan annexes Manchuria in 1931. When Japan invaded China in 1937, which is the real start date for World War Two, and the US constantly pushing back, playing sanctions, all kinds of leverage, then as finally the sanctions imposed after they begin pushing south from China into French Indochina that causes the Japanese Attack on Pearl Harbor and then the US entry into the war.

Ryan:

That’s fascinating. So it was really setting the table for a lot of the dominoes that fell in the 20th century and a lot of the history-

Geoffrey Wawro:

And for the Chinese, it was always a history of weakness. They had all this population, all this territory, all this potential strength. But because of this sequence of weak emperors, The Qin Dynasty, they are unable to unify the country, the country is ruled by warlords scattered around, who would pay lip service to the emperor in Beijing. And so the great achievement of the Communists in 1949, when Mao takes over is to really unify the country and to defeat all these separatists.

Geoffrey Wawro:

And so to this day, the Chinese look at anything, integration like Hong Kong as yet another attempt to tear China apart, to sow division, and that’s why there’s so intent on taking back Taiwan. And they refuse to let other people even use the term Republic of China or even Taiwan. Now it has to be Taipei, because they see this as a renegade province that has to be brought back in. And they see every attempt by outside powers like say the United States to bolster Taiwan as being just an echo of what went on 100 years ago, when you had outside powers, whether it was the Japanese or before the Japanese, all the European powers, who had carved up China like the British controlled Shanghai and the whole Yangtze River, which was the main, the Mississippi River of China. They see any meddling with places like Taiwan as just being an echo of that past meddling.

Ryan:

So that definitely sets the historic context of I think the lens that they’re looking at the 21st century and trying to maybe make inroads to address those past, we’ll call it slights, being polite.

Geoffrey Wawro:

I mean, just think about, for example, it would be as if the Chinese became involved in Seattle today and said, “We support CHAZ,” The Capitol Hill Autonomous Zone. And, “In fact, it should break away from America because it’s a more pure expression of freedom than the tyrannical United States.” How would we feel? And that’s how they feel about us interfering in Hong Kong.

Ryan:

No, doubt [crosstalk 00:24:32].

Geoffrey Wawro:

That’s how they view it.

Ryan:

No doubt. We sometimes don’t like other folks messing around in our domestic affairs and I can only imagine the feeling’s mutual. So I think as it relates to what happened though, so we in 1918 we fought a war, we changed our manufacturing base, if you will, we really definitely modified our economy to compete for our war footing. How did some of those changes set America up for the raging ’20s? And a little bit about the soldiers coming home, some of the historical, we’ll call it injustices that were done to some of the soldiers of color that went to go protect our country. Could you maybe talk a little bit about that?

Geoffrey Wawro:

Yeah, well, one of the big decisions that the Germans had to make in the course of the war was what attitude to take towards the United States. Because the United States was such an economic giant, it had surpassed Great Britain as the world’s biggest industrial power, it had surpassed Germany and Great Britain as the biggest industrial power in terms of production. And so the Germans had to be very careful. The US was not supplying the Allies, it was technically an ally, I’m sorry, technically a neutral.

Geoffrey Wawro:

And so you had two periods of submarine warfare by the Germans where they would torpedo American ships. The first in 1915, when Lusitania sunk, nearly brings the US into the war, but such is the anti war feeling in Americans, many of whom are recent immigrants from Europe who left Europe to escape precisely this kind of a war. They were like, “We don’t want to go to war in Europe, we came over here to get away from European wars.” And of course, Wilson runs in 1916, as the guy who kept us out of the war.

Geoffrey Wawro:

And then the Germans resumed this undersea warfare in 1917, because their situation is so dire, they’re so heavily blockaded by the British, they’re living on starvation rations, they’re having to create all kinds of synthetic industries to replace lost imports. And the US economy is just out there bubbling this great, just great engine, potentially an engine of war. But they take the decision to resume the undersea warfare, sinking all the American ships heading over to British and French ports out of desperation. They feel like they have to basically cut off this supply.

Geoffrey Wawro:

And the arguments against are obvious, we don’t want to bring America into the war against us. And there’s several people arguing that. But the guys, basically the military leaders are saying we need to do this. And they say, we can get away with this because the Americans have a pathetically small army. And their fleet has not been mobilized for war. It will take them so long to get their fleet up and ready and get their army up to a European style strength, that, we’ll be able to beat the British and French before they’re able to put an army in the field.

Geoffrey Wawro:

So all this is a way to say that while all this was going on, the American economy is creating just prodigies of production for the European allies. And it actually causes a real crisis in America because all raw materials are diverted to the war economy. So all textiles are made into uniforms to be shipped over to the Italian Army, the Russian Army, the British Army, the French Army, and then latterly the American Army. So there’s no textiles for normal people. And the same thing goes for everything, copper, wire, steel, everything. And the prices of the raw materials just go higher and higher because there’s such demand for them because of the profits. You make a shrapnel fuse for the French 75 for five cents and you sell it to the French Army for 25 cents. And so the profits are just so enormous that everybody wants in, but only the big, big manufacturers, Bethlehem Steel, DuPont chemical can afford the prices.

Geoffrey Wawro:

So you have this agglomeration around the big, big players, small business is harmed, but then normal people don’t get it. They’re getting less food, there’s no consumer goods because all the raw materials are being sucked into the war industries. And people can’t even get on a train because all the trains are being basically given over to freight capacity to carry war goods from places like Cleveland or Detroit, to the ports on the East Coast for shipment to Europe. So the economy is really… There’s a great burst of prosperity but it’s a case of income inequality. It’s concentrated in very few hands. And so after the war, you see a great relaxation as you return to consumer production, you have the roaring ’20s, you see massive American exports, which are leveraged by the great economies of scale of the American production. And so you have this great economic take off.

Geoffrey Wawro:

In of the race relations that you mentioned earlier, it’s very interesting because the army was segregated in World War I. And African Americans were not allowed to fight alongside or serve alongside white Americans. Wilson was, despite his progressive credentials, despite being the first Democrat elected to the White House, essentially since the Civil War with the exception of Grover Cleveland, yeah, he’s very retrograde on race relations. He’s an out and out racist. He’s from Staunton, Virginia, he returns a lot of segregation restrictions to for example, employment in the civil service. African Americans who have been allowed to rise up to middle and senior ranks in the civil service are then pushed back down the ladder by Wilson. And he’s again trying to buy support. Well, he’s a southern racist himself, but he’s trying to buy support in the southern states for his… Because he wants to run again and get reelected.

Geoffrey Wawro:

And it’s always hard in this period for a Democrat to be reelected because their strength after the Civil War is really confined to the south and the West and the big, Northeastern and Middle West states are solidly Republican. And that’s where the votes are, the electoral votes and everything else. So he’s always trying to pander to get a bigger majority. And so he leaves the army completely segregated despite all of his highfalutin rhetoric about liberty and democracy and freedom and self determination and everything else, he’s a racist. And he happily leaves the army segregated.

Geoffrey Wawro:

So African American soldiers are really treated badly in the war, they’re treated as labor battalions, digging trenches, digging graves, repairing roads. And then when the first units go over, the French are demanding that Wilson give them American troops to put in French uniform, and the British are demanding that they give them American troops to put in British uniform. But Wilson says, “No, we need American troops to serve in American uniform under an American flag and an American sector. But I’ll tell you what, you can have some African American troops.”

Geoffrey Wawro:

And so he gives the equivalent of a division strength of African American troops to the French to dress in French uniforms, carry French rifles, obey French orders, fight under the French flag. So dismissive is he of African Americans. And then eventually, he assents to the creation of two African American combat divisions, the 92nd Division and the 93rd division in the US Army, who fight at the end of the war. But just really, for a guy who’s exalted as the great progressive president, just really not progressive at all. And remember there was some controversy some years ago at Princeton about renaming the Woodrow Wilson School there. And I think a lot of people have some real reservations about Wilson and the past he’s gotten on this question.

Geoffrey Wawro:

As for we’ve got the president of the United States planning to go to a rally next Friday in Tulsa, that big Tulsa Race Massacre of 1921 in the Black Wall Street was just one of a number of anti-black pogroms that were initiated across the American South, after the doughboys came home. And there was, in the south, there was this feeling that we had armed African Americans, we had sent them over, they had fought in Europe, they came back proud or more self sufficient, they came back having come into contact with the issues of the war, fighting against monarchy, fighting against tyranny, fighting for our freedom. And now we come back to the Jim Crow South, and we get put back in our place.

Geoffrey Wawro:

And one of the ways they were put back in their place was lynching. There was this massive wave of lynching across the American South in the years immediately after World War I, as white Americans down there tried to persuade African Americans who had come back from World War I with a greater sense of dignity and mission that, “No, no, you’re going to go back to the way things were before.” And so it was also, the war also had a real impact on race relations in America and expectations about one’s treatment in America.

Ryan:

Yeah, no doubt that was an inflection point in, I guess, as you mentioned, confidence and self sufficiency. And really I think in some ways World War I helped start really the current civil rights movement and gave birth to more confident leaders in that community. So we’re living in historic times today. In my opinion, I think these are going to be a period where we’re going to write a lot about. Can you answer two questions, one, what are the corollaries that we should be paying attention to from the 1918 to the 1920s period? And then two, what are some of the things that are evolving today and current events that you think are maybe micro trends that could become historical or could be things for us to watch?

Geoffrey Wawro:

Well, I mean, I think that the war really, World War I, thrust America into the mainstream of world affairs. It put America right at the pivot of world affairs. It really forced the United States to punch at its true weight class. It had been a retiring isolationist, aloof power that had not wanted to dirty its hands in world affairs. And then because of our intervention in World War I, and because of the power we discovered to shape the world at the Paris Peace Conference, which we failed to do, because there wasn’t a real consensus behind weighing in the Paris Peace Conference and creating a League of Nations and being a very active power in managing, being a system administrator for the world. Nobody really wanted that role. Or not, I shouldn’t say nobody. There were plenty of people around Wilson that wanted that role. But essentially, the Republican Party was very uncomfortable with it.

Geoffrey Wawro:

Well, that’s all changed, and as the Republican Party has become, generally speaking, although Trump’s a real outlier, Trump is a strange amalgam. He’s an isolationist, really at heart, with occasional outbursts of anger, where he will rattle the Sabre, but he’s not comfortable with foreign engagement, which he sees as a bad deal, as being not cost effective, it cost America more than we get back and that sort of thing. And that was never the point of being involved in the world. The point of being involved in the world was to try to manage the world and keep the peace and maintain this peaceful international economy so that American trade could prosper, and that there’d be calmity among the nations.

Geoffrey Wawro:

So, we’re back in that place right now where there’s a debate about the degree to which America stays involved in the world. And under Trump, we’ve certainly lost a lot of our global leadership and Trump tries to make a virtue of that and says, “Well, we’re better off making hard nosed bilateral deals with individual countries, than serving as the global system administrator.” But then when you do that, you lose that luster that you had and you lose that ability to bring a large groups of countries along with you to achieve whatever it is you’re trying to achieve.

Geoffrey Wawro:

So we’re having that debate all over again. A debate that happened during World War I, a date debate that happened in the interwar period when you had a large isolationist contingent wanting no involvement in World War II, a debate you had after World War II when you have people arguing for a very activist American role opposing the spread of communism, and you have others saying, “No, no, let’s tend to our own problems here at home and not spend massively to cure the world’s problems.”

Geoffrey Wawro:

So we’re back in that place. And we’ll see where we go. We’ll have clear choices in the next election. Biden looks like someone who’s much more internationalist in outlook. But it just goes to show that this is a continuing theme in American society and politics, whether one believes the US should lead or whether one believes the US should stand apart, take advantage of all its natural resources, but also its relatively secure positioning, separated from Asia and Europe by big white oceans, two safe land borders in the south and the north where we’re not going to be overrun by an adversary on short notice, and so we can stick to our own knitting and ignore the world’s problems. But I think that overlooks the fact that the world is now so globalized and interconnected, that that’s simply not realistic.

Ryan:

Well, it’s interesting. So we are going back to a nationalist mindset. And that’s not just here. I think it’s globally and China’s taking that approach as well. Is it that we’re trying to go back into our shell, or are we trying to reset long-term trajectory? Because I mean, the 20th century was great for America, bad for Russia. At the end it was great for China. And this last, call it 40-year period people are arguing that we’ve lost maybe some wealth or some relative wealth from an economic standpoint.

Ryan:

And so the question for you is, what do you believe the future of American-Chinese relations? You taught at the Naval War College, they’re building up their Blue Water fleet. We’ve got established Pacific Command. It seems like there’s a lot of tension building over the Pacific. What are your thoughts as we go into this reset of international structures? How does this play out, where you have two sides starting to have increased tension, withdrawal from international architecture, to more national footprints? Is this setting us up for a war? Are there indicators and macro drivers shaping up for conflict? Or do you think globalization will overcome and we’ll find ways to just make each other… The other argument is to make it so expensive economically to have a fight by entwining our economies that will be-

Geoffrey Wawro:

That was the idea before World War I. The world had become so interconnected in 1914 the economies were so reliant on each other, that they would never go to war because it would be too expensive, and then of course, they went to war, and had the bloodiest most expensive war in history to date. So no, it’s a… And we already are interconnected. That’s just a fact. But no, I think that, the US just needs to figure out what its interests are in the Pacific and defend those interests. But it needs to have a short list of key interests, not everything. And I think that’s where the… And this is where engagement with the region is so important. That’s why the Trans Pacific Partnership that Trump got out of, I mean, I thought that was just a absolutely essential initiative because it would have tied together all these Pacific economies with the United States that would have created huge economies of scale, and huge links of friendship between these allied economies to oppose a Chinese hegemony in the region, to oppose the spread of Chinese influence in the region.

Geoffrey Wawro:

And when we tore that thing up and withdrew, we forced a lot of the people that we would have been linked with in the Trans Pacific Partnership to make bilateral links with China to replace the American link. So things like that seemed pretty obvious to me. And so we just have to have a more robust trade and commercial presence there. We have to make these trade deals with the powers there that are threatened by the rise of China.

Geoffrey Wawro:

But then, most fundamentally, I think we also have to look at China in a different way, not as a out and out adversary, because it’s just another country and this is another country struggling for its own interests, and struggling to be taken seriously and respected. And if you just look at its history, some of which we talked about earlier, where they were carved up by the European powers. The French had a sphere down in southern China just north of Vietnam. The British, had Hong Kong, Shanghai, the Yangtze River Valley. The Germans had the Shandong Peninsula, the Japanese move into Manchuria, it’s like they’ve been partitioned. And then before that, they were partitioned among warlords and then even when they had a nationalist republican movement under Sun Yat-sen at the beginning of the 20th century, it was still just very badly done, and there was a lot of separatism in the region.

Geoffrey Wawro:

And so the Chinese have been obsessed with unity and national security, and the wholeness of China. And I think that we have to understand that, and we have to take it seriously the same way we would be concerned if some other power came in and said, “Hey, look, it wasn’t right the way you guys took over Hawaii in the 1890s.” Or, “You have no right to Puerto Rico, which you took over in 1898. So we’re just going to help ourselves to it. We’re going to fan the flames of separatism there.” We would have the same reaction they’re having. So we have to have a understanding of where they are.

Geoffrey Wawro:

And then we also have to look at, we have to stop making a cartoon version of our differences and how we have free internet and they don’t. We have free news and they don’t. Well, I mean, look how much of our news in air is just complete trash? If we [crosstalk 00:44:30].

Ryan:

This show excluded. This show excluded.

Geoffrey Wawro:

Yeah. Well, you know what I’m saying though. It’s just-

Ryan:

Yeah, I do. I do.

Geoffrey Wawro:

… honestly just entertainment life there, gossip, or just intentionally tendentious programming that makes a mockery of serious issues. How is that a free press? I understand, it’s free, but it’s really entertainment created by big media companies to get a lot of clicks and to get a lot of attention and get a lot of people fighting and talking. And so I imagine that Chinese look at this landscape, this media landscape and they’re like, “Well, if that’s the best they can do with a free press, that’s pretty pathetic.”

Geoffrey Wawro:

So I think we have to be a little bit more just understanding of who and what we’re dealing with. And we need to proceed a little more humbly. And we need to figure out what our… Thinking about the Vietnam War, we get into that war for a country which most strategists in Washington said, “Why are we fighting in Vietnam? The country’s not worth a major American war.” And yet we go in anyway. Because we’re like, “Well, we just can’t lose it to Chinese influence. Well, we can’t stand the loss of face. The loss of American prestige.” So we go to war, the longest war in history till Afghanistan for a country that wasn’t even deemed strategically significant.

Geoffrey Wawro:

So we need to figure out, “What are our real strategic interests?” And we need to really stand firm for those. We need to reconnect ourselves to the region. It really, this really is the growth area of the world economy, in terms of population, in terms of production and in terms of exports and everything else, we need to be there. But in what form and how do we compete with China, which is growing in strength, growing in power, growing in confidence, and even undertaking big loss leaders like that road belt initiative.

Ryan:

Yeah, no that is interesting. I think we’ve got to compete and get more strategic of how we approach this. It just can’t be outright street fight. One question, just as we were leaving World War I and going into World War II, and people were enjoying economics in the ’20s, and then we had the Great Depression so people then focused insular. Do you worry that we might be headed back into another depression? Is that something that you think is possible?

Geoffrey Wawro:

Well, I don’t know because you hear that’s a possibility but nobody knows. Even economists and the Fed chairman don’t know. So much, is just contingent on what happens with the coronavirus, what happens with a vaccine? What happens to people’s attitudes? Do they go back and shop and eat at restaurants and drink at bars and go to sporting events? Are sporting events even going to be open? So many contingencies that we just can’t say. But certainly, the way it’s suppressed economic activity and lead to major unemployment is not hopeful and we can only hope for the best.

Ryan:

Yeah. So as America was in the ’30s, and we were getting through our tough times, one question for you is what was going on prior to the Holocaust here in the country? Were people talking about what was going on about rounding up the Jews in the 1937 period, 1938 period. Were people trying to say, “Hey, this is not right, we need to do something about this?” And the reason I’m asking is, I feel like we’re in a similar time right now, albeit they’re Muslim Uyghurs in China. I know China is another country, and it’s a growth area. But what what shocks me is that more people aren’t more outright verbal or addressing historical concerns about how that’s been playing out in these reeducation camps. I don’t know if you have thought about that. But is there a corollary between America in 1935, ’36, ’37 and today?

Geoffrey Wawro:

Well, first of all, I wrote a book called Quicksand: America’s Pursuit of Power in the Middle East, which I also highly recommend to listeners. And this deep dive into how the US got involved in the Middle East, from about World War I and it ends in the Obama administration. So it goes right through the Arab-Israeli wars and Operation Enduring Freedom and the Iraq War and right up to essentially the present day. And when I looked into how we responded to the Nazi pogroms against the Jews Kristallnacht and then the rising persecution of the Jews, I would say, Americans, they weren’t indifferent, but it was not a huge issue. Remember, America had a real opportunity to change its immigration laws at the time and allow Jewish refugees in and Congress said, “No.” They weren’t going to do it.

Geoffrey Wawro:

There was the same nativism that you see being propagated by the Trump administration, Stephen Miller, people like that today. That was a big movement in the United States at the time, in the interwar period between World War I and World War II. A sense that America had opened its doors too wide between the 1890s and World War I, we’d let in this horde of European immigrants. And the immigrants had come largely from the poorer regions of Europe, Southern Europe, Italy, and particularly southern Italy. But also a lot of Eastern Europeans. And among the Eastern Europeans were a lot of Jews, from Poland, from Russia. And so that’s when the Lower East Side in New York City becomes this big Jewish neighborhood because of the million or so Jewish immigrants who come over in this period.

Geoffrey Wawro:

And so there was a lot of Antisemitism in The United States. This feeling that America which had always been a Protestant country, was now becoming too Jewish, too Catholic. And so we put in these very strict immigration laws in the 1920s where basically we confined immigration to the United States to countries from Scandinavia, Trump would love this because he always mentions Norway. So it had to be from Scandinavia and the United Kingdom and Germany, and it had to be Protestant.

Geoffrey Wawro:

And so when Jews were being viciously persecuted in Germany, and were looking for a place to escape, because the Germans were going to expropriate all their assets and then throw them in concentration camps and then eventually killed them, they were desperately trying for a way out and not only did the United States close its doors, but so did powers like Great Britain, so did dominions like Australia and South Africa, they all said, “No, we don’t want any more Jews.”

Geoffrey Wawro:

And so that’s why Palestine becomes the biggest asylum for Jews trying to get out of Nazi Germany because it’s the only place they can go but of course it’s controlled by the British and the British tried to prevent them from going to Palestine too, and that’s why you have all these attempts by the Jews to land in Palestine, the British trying to drive them back into the sea. So the point being that there was a lot of heartfelt Antisemitism, there was a lot of fashionable Antisemitism where people affected to be anti-Jewish because they would apply all these stereotypes to Jews. But put it all together and there was really nowhere for Jews to go. They were really trapped. And so this made it all the harder to get out and all the easier for Hitler to trap them and then transport them to death camps.

Ryan:

And I mean, do you… So I guess, and then similar today, I mean, it’s shocking to me that, these camps still exists in places like the northern provinces of China. And I think it’s going to be an interesting historical footnote. I hope it’s just a footnote and not something that goes wider and broader in China. But well-

Geoffrey Wawro:

I mean, just quickly on that, again, we take a very American view of that. And the Chinese view is, “Look, this is how we deal with terrorism. This is an area where there’s a lot of…” Because Xinjiang is out there on the border with all these Central Asian states which have a lot of Islamic extremists, there’s a lot of traffic between these regions. They feel that people have been radicalized, they’re trying… And I don’t know enough about it to take a stand on it either way, but I am aware of the fact that the American media looks at it a certain way, just the way they looked at the Hong Kong demonstrations. They don’t look at it the same way that Chinese do it.

Geoffrey Wawro:

And to be effective in international relations, you’re going to have to get inside their mind and figure out, are they 50% right? 20% right? 80% right? And then go from there. But right now again, we have a cartoon version of what they’re doing out there. I’m not really seeing good reporting on how much of a threat there is from Islam in Xinjiang. And how many of the Uyghurs are Islamic extremists. And how many are completely innocent. I feel like we don’t get enough information on that. Nor do we even look that hard for that kind of information.

Ryan:

Yeah.

Geoffrey Wawro:

It’s another thing to thumb our noses at China over it without necessarily understanding it.

Ryan:

No doubt, there’s a lot of information out there and it’d be good to know more about what’s going on there. So-

Geoffrey Wawro:

And also, they’re not going to really tell us anyway.

Ryan:

Right. Yeah. Well, they didn’t really share much information out of Wuhan, coming out through the virus. I think there’s not a lot of trust there right now. And probably rightfully so. I mean, we called them out for a lot of the intellectual property theft, and I’m sure great powers play by all sorts of dirty tricks through the history of the 20th century. But are there any things that you see a silver linings in the American experience in the moment where we’re in today that are positive for our future?

Geoffrey Wawro:

Yeah. I mean, lately, I look at what’s happening right now with the Black Lives Matter movement, I look at what’s happening with food in America at the moment. And those two examples. And I really feel like the death of George Floyd really galvanized a lot of people and I think it’s made people take seriously this whole issue of policing, which we had just gotten used to. And the more we hear about it, the more reprehensible it is.

Geoffrey Wawro:

It’s, why are police unions so powerful? Why don’t we have the power to just deconstruct police departments and then reconstruct them in a much healthier, more transparent, more effective way? Why don’t we have the ability to build capabilities around police departments in vital areas of social work, that would help intervene in all the… The fact is that most police calls are for things that don’t involve a police officer, they involve a social worker. Why don’t we have those capabilities? Why are we locked into this paramilitary mode? Why are departments still being trained using methods of killology? “Double tap. Center mass, take the guy out if you feel any threat at all.” So you have needless killings going on all the time. So I think that we’re going to be safer and happier when we have better policing. So let’s just go for it. And I feel like the younger people are driving this and I think that’s important.

Geoffrey Wawro:

I think the Confederate monuments debate is really interesting. And it’s been raised before, and now it’s gotten a new burst of life. I think that I always found that strange, that people were driving around with Confederate flags on their cars. That we had statues to these guys, who were traitors. They were traitors. They resigned their commissions in the US Army. They threw away their West Point educations and joined a rebel army to fight against the United States, and we’re naming bases after them? We’re flying their flag? It makes no sense to me.

Geoffrey Wawro:

So I think this all, I think that we need to do something intelligent with these monuments, they’re a big piece of history, they should be put in a museum, where they should be surrounded by science, putting them in some historical context, explaining the pros and the cons. But it’s definitely a debate we should have. And again, Bragg, Benning, Hood, why are we naming these forts after these guys? They were traitors, they were rebels, and they weren’t even good generals for the most part. So I think that’s another very interesting debate that we’re having.

Geoffrey Wawro:

And I think the whole thing about food. I mean, Americans are not metabolically healthy. Because we’re poisoned by the food we eat. And if we’re not metabolically healthy, then we’re chronically sick. Even when you’re not sick, you’re sick because you’re not eating the right kinds of food, you’re being poisoned by a food industry that just shoves fats and sugars and hydrogenated vegetable oil down your throat at every turn. So I think that thanks again to the younger generation for clearing all this sclerosis out of the way, and we’re going to head back to a better diet, which is the basis of everything. So yeah, I am hopeful.

Geoffrey Wawro:

And then on climate, not only do we need to do better, but the rest of the world needs to do better. I mean, I see this as being a massive threat. I think other people do too, and people are proceeding. I hope that the doomsayers aren’t right, I hope that we have a good long run ahead of us. I hope we can do better and I hope that we can stave off the worst of climate change, but we’ll see.

Ryan:

Well, are there… I know you write books that people like me love to read. And are there any books though, that you’re reading that are interesting to you or any documentaries or even movies for that matter? I’d love to know what you think is interesting. What piques your brain.

Geoffrey Wawro:

Well, right now I’m reading the last volume of Hilary Mantel, The Mirror and the Light. It’s the Wolf Hall trilogy, about Thomas Cromwell, this servant of Henry the Eighth. And it’s just the most fascinating depiction of the reign of Henry the Eighth. There’s three volumes. So that’s what I’m reading now. And then I’m just reading a lot of Vietnam history because I’m working on a history of the Vietnam War now. And so most recently, I read The Best and the Brightest, by David Halberstam, that old classic about how the war got started.

Ryan:

Well, the Sons of Freedom is a book that you wrote that I’m going to be picking up and sending out to a bunch of our advisors and professor Geoffrey Wawro, we appreciate you coming on, and talking to us today, educating us about some corollaries of what’s going on. And we’d love to have you back as you’re finishing your book. We’ll want to talk more about Vietnam. There’s a new Spike Lee movie coming out, Da 5 Bloods. We’d love to have you on and talk about Vietnam. That’s another very important historical inflection point of America in the Pacific. So thank you so much for your time and we appreciate you coming on.

Geoffrey Wawro:

Thanks, Ryan, I’ll talk to you later.

Ryan:

Talk to you soon. If you want to pick up a copy of Sons of Freedom, you can do so at the Amazon link below. Thanks for watching our episode today. And before we go, please remember to subscribe and leave us a review on Apple Podcasts or our YouTube channel. This is NON-BETA ALPHA, now you know.

Speaker 3:

All price references and market forecasts correspond to the date of this recording. This podcast should not be copied, distributed, published or reproduced in whole or in part. The information contained in this podcast does not constitute research or recommendation from NON-BETA ALPHA Inc, Wentworth Management Services LLC or any of their affiliates to the listener. Neither NON-BETA ALPHA Inc, Wentworth Management Services LLC nor any of their affiliates make any representations or warranty as to the accuracy or completeness of the statements or any information contained in this podcast. And any liability therefore, including in respect of direct, indirect or consequential loss or damage is expressly disclaimed.

Speaker 3:

The views expressed in this podcast are not necessarily those of NON-BETA ALPHA Inc, or Wentworth Management Services LLC and NON-BETA ALPH Inc and Wentworth Management Services LLC are not providing any financial, economic, legal, accounting or tax advice or recommendations in this podcast. In addition, the receipt of this podcast by any listener is not to be taken as constituting the giving of investment advice by NON-BETA ALPHA Inc or Wentworth Management Services LLC to that listener nor to constitute such person a client of any affiliate of NON-BETA ALPHA Inc or Wentworth Management Services LLC.

Speaker 3:

This does not constitute an offer to buy or sell any security. Investments in security may not be suitable for all investors and investment of any security may involve risk and the potential loss of your initial investment. Investors should review all risk factors before investing. Investors should perform their own due diligence before considering any investment. Past performance is not indicative of future results. Investment products insurance and annuity products are not FDIC insured, not bank guaranteed, not insured by a federal government agency, may lose value.

 

Download Transcript

Share This Episode

Subscribe To Our Podcast!

COPYRIGHT 2020 ALL RIGHTS RESERVED. THIS DOES NOT CONSTITUTE AN OFFER TO BUY OR SELL ANY SECURITY; INVESTMENTS IN SECURITIES MAY NOT BE SUITABLE FOR ALL INVESTORS. AN INVESTMENT IN ANY SECURITY MAY INVOLVE RISK AND THE POTENTIAL LOSS OF YOUR INITIAL INVESTMENT. INVESTORS SHOULD REVIEW ALL “RISK FACTORS” BEFORE INVESTING. INVESTORS SHOULD PERFORM THEIR OWN DUE DILIGENCE BEFORE CONSIDERING ANY INVESTMENT. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INVESTMENT PRODUCTS, INSURANCE AND ANNUITY PRODUCTS ARE NOT FDIC INSURED/NOT BANK GUARANTEED/NOT INSURED BY A FEDERAL GOVERNMENT AGENCY/MAY LOSE VALUE. SECURITIES OFFERED THROUGH CABOT LODGE SECURITIES, LLC [CLS] MEMBER FINRA / SIPC 200 VESEY STREET, 24TH FLOOR, NEW YORK, NY 10281, 888.992.2268.

Recommended For You

View Transcript

Ryan Morfin: Welcome to Non-Beta Alpha. I'm Ryan Morfin. On today's episode, we have Pini Althaus, CEO of USA Rare Earth, talking to us about the supply chain glut in rare earth minerals. This is Non-Beta Alpha.

Ryan MorfinPini, Welcome to the show. Thank you for coming on today.

Pini AlthausThank you for having me, Ryan. Good to be here.

Ryan Morfin: So you're an investor and a miner in rare earth minerals. Can you share with our listener base, what are rare earth minerals? Why are they important and why is there a geopolitical race going on globally?

Pini AlthausYeah, I mean, rare earths are an extremely ubiquitous part of all advanced manufacturing or technology manufacturing today's day and age. Several years ago, I had not heard too much about rare earths myself. I was not that familiar with it and being involved in this sector, in this company, for the past few years has given me an education of course. And I mean, I was sad to hear that 50% of all imports into the United States contain are earth elements and it runs the gamut from consumer electronic devices that we use every day. Our cell phones, our laptops, most communication devices, medical equipment. So there's a tie with COVID, which we can touch on at your discretion. Electric vehicles, defense equipment. So pretty much anything or everything high tech today has a rare earth element or critical minerals contained within them.

Ryan MorfinAnd what are some of the names of some of the more important rare earth? I know there's lithium for batteries, but what else is considered in this category, critical?

Pini Althaus: Yeah, so lithium is a separate category to battery material. The rare earths are 17 rare earths. The four, let's call it, key rare earths that we're focused on at our company, the four rare earths that go into the permanent magnets. And these are the magnets that are found, there are a number of them in your back of your cell phone or an iPad. But if you look at an F35 striker jet, you've got about a ton of rare earth magnets in those. And we've got two heavy rare earths and two light rare earths is part of the permanent magnets. You've got dysprosium, ytterbium are the heavies, and then you've got neodymium, praseodymium as the two light rare earths. So those would be key rare earths that are the focus.

Ryan MorfinAnd you use these in, I guess, in military applications as well, but historically, where has the United States sourced the rare earth for supply chain?

Pini AlthausYeah. And that's the shocking part. We've been securing those materials from China. So China controls the rare earth sector and has done so for the past 30 years or so. And it was a significant misstep on the part of the United States, allowing China to have this control. And actually this wasn't a question of China coming in and doing anything nefarious as far as stealing IP or anything. The US government made a conscious decision about 30 years ago to allow China to come to the United States and acquire the processing capabilities for rare earths. So just as part of some background, you've got the rare earth materials containing various mining projects, but once you extract them, you have to then process them and they go through certain phases before they get to the magnet phase. And China, the thought process was let China do the mining, let China do the processing.

Pini AlthausWe don't need to do that here. And we'll buy the materials from China cheaply and the premier of China at the time, Deng Xiaoping made the comment, he said, "The Middle East has oil. China has rare earths." And unfortunately we weren't smart enough to understand what he was saying. And the Chinese understood that the future of manufacturing is going to revolve around control of the rare earth and critical mineral supply chain. So if you think about it today, Ryan, we cannot build... Forget about consumer electronics and medical equipment. We cannot build the equipment that the US Pentagon or the US armed forces require, whether it's F35 fighter jet, Tomahawk cruise missile, communications equipment, without going to China and obtaining those materials. And it's obvious to all that this should be extremely alarming. We've seen China use this as a weapon, if you will, as far as how it interacts with other countries back in 2010, when there was a dispute between China and Japan on the East China Sea.

Pini AlthausSo China cut off rare earth exports from Japan for 40 days. Japan obviously being a significant user of rare earth elements for their high-tech manufacturing sector, that was stopped after 40 days. But in fact, it was President Obama that first made the United States aware of this, formed a division within the Department of Defense to handle this issue, but not much has happened. And we continue to be relying on China for these materials. And what has been made about trade war with China and whether the trade war is really the impetus for China withholding rare earth exports. And that is a huge misnomer. Whilst China had been talking or implying that they would cut off rare earth exports, the truth of the matter is that China, under it's made in China, 2025 mandate, its belt and road initiatives and others. And you seem to control the critical minerals and rare earth supply chain so that it can continue its dominance as a manufacturer or a global supplier of these materials and finished products.

Pini Althaus: It's the backbone of its economy. And in fact, China has become a net importer of rare earths from different countries like Miramar and others. So with that, they are decreasing the exports to countries like the United States, Japan and others.

Ryan Morfin: And was it ever a risk that the Chinese were going to turn off the exports of rare earth to the US during the trade war? How close were we to that? And was that ever some saber rattling that went down during trade negotiations?

Pini AlthausYeah, I think it was saber rattling. I think it would be paramount to an act of war. I can't say with any authority that that would not happen, but it would be probably, aside from war itself, it would be one of the most significant acts of war cutting the United States off from the ability to procure rare earths. But that being said, I mean, if you look at, as an analogy, the oil and gas sector and the reliance of the United States had for many, many years on OPEC countries to supply us with the oil. And we had embargoes and we had price manipulation by OPEC. This is far more significant given the ubiquity of where these rare earths go. And yes, we're always under the threat that China can cut off exports under the guise of a trade war or for any other nefarious reasons.

Pini AlthausBut I think even more importantly, to just as the natural run of the course of things with regards to their business and their desire to maintain themselves as the global leader in manufacturing and exporting of goods, China is in a position now where it actually requires these materials for their own domestic consumption and can legitimately cut off rare earth exports by stating that they need it for manufacturing and that would actually be somewhat correct. So we're in an extremely dangerous position here with this reliance on China. And it wouldn't just be China. If it was another country, it would be similar issues, not to the same extent, but reliance on one country for these materials is dangerous.

Ryan Morfin: And it's been mentioned in the past that in 2010, China flooded the market to really kill all the competitors in the rare earth mining industry. Where was the World Trade Organization during this period? And how did that play out and how does that set the chess board for China to run the tables?

Pini Althaus:

Yeah. So the WTO stepped in when China cut off rare earth exports from Japan, I think it lasted for about 40 days because the US and Japan protested the WTO, and they stepped in and China resumed exports. While I'm not an expert on these trade matters, one thing that I am aware of is that one of the reasons why China had to resume the export of rare earths was it did not legitimately need all the rare earths for domestic consumption. So therefore it was a nefarious act, if you will, to cut off rare earth exports. Now that has changed, which means China have to cut off rare earth exports today, they have a legitimate case to say that they require these materials. There's a shortage of these materials and they require them for their own domestic purposes. It is the backbone of their economy and there's very little we could do about this today, which is why it's becoming an even more urgent issue.

Ryan Morfin:

And the US government started stockpiling some of these after that incident. Can you talk a little bit about what DOD and DOE has done to start making sure that there's not a critical supply shortage going forward, and is it enough?

Pini Althaus:

Yeah, again, there is a national defense stock pile, and there are materials still that the United States needs to procure in order to shore up its stockpile. There are magnets, the finished magnet products as well, the United States government needs to stockpile. Again, there's a limited amount that the United States government has. It requires approval from Congress, whether it's in the NDAA or other approvals from Congress, to allocate monies for the national defense stock pile of these materials. That being said, there's no endless supply of these materials. And unfortunately, the apparatus, the way it's set up right now with the US government, it's going to continue to require having a secure supply chain of those materials for many, many years to come. So it's not a question of stockpiling for 10 or 20 years, and then this complacency and saying, we'll kick the can down the road. But keep in mind as well, Ryan, that US government accounts for low single digits of overall rare earth imports into the United States.

Pini Althaus:

We're talking about defense contractors, we're talking about the manufacturing sector. The direct impact this has on the economy, jobs, the automotive sector, and others is significant. So it's not just limited to the United States government. If you look at over the past couple of weeks, the sanctions that China have put on Raytheon, Boeing, Lockheed, et cetera. I mean, the question is where are they going to get those materials? And if we go beyond that, you need rare earths for the 5G network. Now that Huawei has been banned from installing the network, not only in the US but other countries, we have to have the ability to get a secure supply of these materials as well. Which currently, again, trying to control the hundred percent. So it runs across the board, both for government, defense and manufacturing in this country.

Ryan Morfin:

Well, and so help me paint a picture for our audience. Does China have all the mines for rare earth, or they're the only ones who started mining it? Or are their mines globally dispersed and nobody's been doing the actual infrastructure to do the mining?

Pini Althaus:

Yeah. So finding rare earth projects or rare earth elements is not the difficult part. It's finding them in significant quantities that makes a project economically viable. And part of that consideration are the environmental rigors that companies in the West have to adhere to. And China, even by their own admission, have had a complete disregard for mining these materials and even for processing these materials. And in fact, just the last week or so, the BBC did an expose on this, 60 Minutes has done an expose on this. But the Chinese have not denied this and have talked about cleaning up their act, but it has an effect on the bottom line for what the costs of mining and processing are if you have no environmental standards to adhere to. So China have exploited those rare earth projects they have, primarily in inner Mongolia, and have brought a number of projects online and quite quickly, and in a significant way, with a complete disregard for the environment.

Pini Althaus:

So it was seen as an environmental no-no in the West for many years. Now, what's happened over the past few years is you're starting to see rare earth projects in different parts of the world sprout up. You've got the Mountain World project in Australia owned by Linus, which is a producer of Nd and Pr, neodymium and praseodymium. So two of the light rare earths. They may have some heavy rare earths coming online at some point in time. And you've got Arafura, which is another company in Australia that we're working with to assist them with their processing so they don't have to send the materials to China for processing. But really these are a drop in the bucket for what the requirements are for the United States. And certainly what the requirements are for allied countries, the EU, et cetera. So there is a race, if you will, worldwide to start bringing projects online. The Chinese are very active in trying to secure assets outside of China.

Pini Althaus:

So in Africa. They have ownership of a project in Greenland. So there is somewhat of a race. The Australian government has stepped in and has started limiting the ability for China to own, or have ownership in, or off takes for the Australian rare earth projects. And that's part of the strategic Alliance between Australia and the US. Canada, similar thing as well. There are a number of projects that are looking to come alive, but these projects are, for the most part, will take many, many years to come online. We have to expedite the process. We have to assist with a [inaudible 00:14:41] supply chain and the domestic rare earth sector, because previously investors have been scared off by things like China flooding the market, which is not a possibility at this point in time, given that China can't actually afford to flood the market. They are already very heavily subsidizing their mine to magnet supply chain there.

Pini Althaus:

This is more now a case of being able to get production from non-Chinese sources so that the United States and allies have a viable, secure supply chain of these materials. And it's a concern worldwide. We speak to governments all over the world, and we're all facing the same issue. Some more than others, especially countries like Japan, that don't have their own rare earth projects there and are reliant on Australia where they've made some investments there. And in the United States, they've made an investment recently in Africa. So there is this race, if you will. And I think we've got a five-year window here to at least stand up a few projects worldwide. Otherwise we've lost this race and we will be dependent on China for many, many years to come. And Ryan, it's a bit of a hypocrisy. If you look at it where you've got materials going through clean, green energy applications, like electric vehicles, wind turbines, et cetera.

Pini Althaus:

That we're sourcing these materials from China, where they've, again by their own admission, has been complete environmental devastation to water bodies around these mines and processing facilities, to the communities. People have been getting sick around these projects yet we're putting these materials into our electric vehicles or wind turbines. It makes no sense at all. And people are starting to wake up to this. And that's why the sector is starting to see a lot of support come out of Congress and bi-partisan support. And in fact, it's one of the only bi-partisan issues right now in Washington. And it's good to see that some things decided to move in the right direction.

Ryan Morfin:

And is there a special process? You talk about the expense, is it really difficult to mine these? You have to go through a special chemical process to extract and clean and purify. Is it a lot harder than, say, gold or silver or some of the other, we'll call, more traditional elements?

Pini Althaus:

Yeah. It's all about the processing to some extent. So if you look at MP Materials in California, which used to be Molycorp before they went through their bankruptcy. They are a miner of Cerium and Lanthanum, which are two of the light rare earths, the lower valued light rare earths. Given that they do not currently have processing technology, they are sending those materials to China for processing where China is tariffing those heavily. Linus is also, they're doing their processing work in Malaysia and elsewhere. So it's really about the processing at this stage. One of the things that we've done, after we put out our PDA last year with our upgraded resource, which now includes a significant amount of lithium. We make a decision that, based on the test work that we had done around our processing methodology, that we were not going to send our materials to China. That it's paramount for us to do this work in the United States and in a collaborative effort as well.

Pini Althaus:

We've been asked by some of our investors, "Well, why would you be looking to help other projects with their processing?" And the answer is simple. There's no one project or one company that's going to put China out of business or make a dent, or somehow be able to take care of the overall demand worldwide for rare earths and critical minerals. And it's very important for us to have processing capability in the West. So that was the impetus for us opening up our own rare earth and critical minerals processing facility earlier this year, which we did in Wheatridge, Colorado. And in fact, we've made some significant progress on the method that we're using for this. And we're starting to collaborate with Australian companies, Canadian companies. We're currently talking to a group over in Europe as well, because this has to be a collaborative effort.

Ryan Morfin:

How does Europe solve for these problems? Do they have this better under control than the US?

Pini Althaus:

No, they're in a far worse position than we are. The EU commission recently put out a report, I think, a couple of months ago that the requirement for rare earths is going to increase tenfold within a short period of time. Lithium 18 times. They don't really have rare earth projects. Again, there are the Greenland projects, which people have heard in the news recently. Those need to further development work so they don't have rare earth projects ready to come online there. There are a couple of lithium projects that are spread around Europe, but for the most part, Europe is in an even more precarious position. If you look at Germany with the auto manufacturers, you look at the big companies like ThyssenKrupp and others, all these countries and companies are looking for alternatives to China, because we've already seen in the news about China withholding or reducing exports of some of these rare earths that are required for these industries.

Ryan Morfin:

And you mentioned earlier the regulatory posture of the US makes it difficult to mine. Is it becoming a more bi-partisan issue that we need to maybe relax some regulation around the mining exercise, to incentivize private sector to come in and start producing this? Or is the Republican party versus the Democratic party on two separate pages of music?

Pini Althaus:

Yeah. Good question, Ryan. I mean traditionally the Republican party is obviously being more pro-mining and in favor of less regulation when it comes to these things. With regards to our project, we're on Texas state land. So we don't trigger federal environmental permitting at this point in time. And obviously Texas being Texas, a mining state and oil and gas state, things are a lot easier in Texas than they are on projects on federal land where the Bureau of Land Management controls the environmental process around that. But the thing is here, and I don't want to step into what other companies are doing, et cetera, but we do need to be reasonable about allowing projects to come online if they're adhering to environmental standards that are acceptable worldwide. And what we do know, is that China is destroying the environment and cities and water bodies around their mines and processing facilities.

Pini Althaus:

We have standards here in the United States, and I think what we need to do is make it easier for companies to mine, while at the same time protecting the environment. And there are ways to do that. And we're definitely seeing buy-in from Congress, from both sides, with regards to looking how we can stand up a secure supply chain. And, obviously under the Obama administration, they had very strict regulations when it comes to mining. And that's changed under the Trump administration. Hopefully what we start to see is some normal middle ground that'll allow other projects to come online.

Ryan Morfin:

And typically in these rare earth mines, is it amalgamation of different minerals that are all consolidated together and you have to separate them out? Or do you ever find pure play, Europium, I can't even pronounce some of these. Gadolinium, Cerium. I mean, are they all mixed together and you've got to filter and sift them through, or are they pure play mines?

Pini Althaus:

No, they're generally they have a mix. So they're polymetallic projects. They have a number of different materials. Some projects, you more to what we call the light rare earths like MP in California or Linus in Australia. Our project is actually on the opposite end of the spectrum. We have a very high concentration of heavy rare earths. That being said, we do have to go through a process of separating these materials. But the case of our project where we've got 30 materials. We're not going to produce 30 materials. We're not going to market 30 materials. So what we're doing is we're focusing on the key materials that are marketable, that we need for permanent magnets, lithium as well, and working on the separation and the optimization of those materials in particular. But we're all faced with the same processing challenges and that is something that can't be set.

Pini Althaus:

There's no easy way to do this. There are different technologies that have been used in different parts of the world. So predominantly there's a process called solvent extraction, but it's big, it's bulky, it's not benign. It's a bespoke solution for one particular project. So it doesn't work for feedstock from other projects. What we've done is we're using a processing technology that's actually been around since the 1940s. It was part of the Manhattan Project. It's called continuous ion exchange. In fact, the Chinese use it to increase the purities from 99.99 to four nines, five nines, and even six nines. So for some applications you require higher purity levels. It's a far easier processing method to scale up and to take feedstock from other projects. In fact, we've demonstrated for the Department of Energy that we can take coal waste from Pennsylvania and do high purity separation of rare earths using our processing methods. So it's not a step that can be skipped unless one needs to send it to China for processing, which is not going to help us with our objectives here.

Ryan Morfin:

How many other, we'll call it, going concerns on any other businesses that are doing this, that are trying to, I guess, start the development of these mines. Are you guys one of a few or are you one of many? And is it an international or just a US game? Who's leading the charge at going after this?

Pini Althaus:

Yeah, well, I'd say the Australians are leading it outside of China right now. You've got some really good projects in Australia. Again, more skewed toward the light rare earths. There's one more heavy rare earth project in Australia, which is not yet producing. The United States, you've got MP Materials, you've got Ucore in Alaska, you've got the Bear Lodge project in Wyoming, which is also another light rare earth project. So as far as a heavy rare earth project that looks like it will come online in the near term, that would be our project. In Canada there are a couple of projects there as well, and again, more skewed toward the light rare earths. But we really need to get as many of these projects online as possible. Because again, I don't see it as competition. We all have a problem doing supply agreements or offtake agreements for our materials.

Pini Althaus:

In fact, one of the things that we're going to have to consider is looking at potentially scaling up our production, based on the demand that we're already starting to see. And I think other companies would find that as well. So it's all about the economics of the project. You have projects that were economically viable back in 2012 or rare earth prices with 35% or so higher than they are today, and are not necessarily viable today. So that's the challenge as well, economically viable projects. And we've got to get as many of them online as possible. It takes many, many years. I mean, our project has had over $70 million put into it to get to where we are today, and we're close to getting to the production scenario. It all revolves around processing at this point in time.

Pini Althaus:

We'd be very happy to see another couple of projects come online, because this is extremely important for national security and for the economy as well. I mean, if you think about it, Ryan, if you've got a billion dollars of rare earth materials, that translates into a trillion dollars or I should say trillions of dollars of finished product. So you've got a magnet in your phone there that's worth a couple of dollars and the cell phone's a thousand dollars. And electric vehicles and defense applications even more.

Ryan Morfin:

Yeah, everyone has one of these iPhones now, and there's tremendous amounts of rare earth on the circuit boards here. And I think people take it for granted that that supply chain is not secure right now. So one question for you, there's talk of this maybe medium term to longterm, but there's talk about mining in space. Do you think that's a feasible option in the longterm, medium term? What are your thoughts on that?

Pini Althaus:

No, that's just ridiculous. I mean, we're trying to find ways to make mining on earth economically viable. I think the cost of going up to space would be more than what our capex will be bringing our entire project into production. I mean, we've got about a 350 to $400 million capex to bring 130 year mine life into production. I'm not an aerospace expert, but I think sending a rocket, building a rocket ship and sending it up, I think maybe on the fuel alone, you could bring a couple of projects into production. So unless we have a fortunate situation or an asteroid lands on earth, and fortunate if it lands somewhere where we don't care, I don't see how that happens. And if it's big enough, it's a problem as well. It's nonsense. And even, options aside of the deep sea mining for rare earths, I mean, you've got all sorts of environmental issues around that as well. I think we need to look at projects that we can bring online, that can be done so in an economic way, that can be done so in an environmentally responsible way.

Pini Althaus:

I mean, one of the things that we've done at our project is we've got in excess of 60% of the materials that have come out around top, will have a clean green energy applicability to them. So we're using the benign processing method. We're going to be using renewable energy on site. In fact, we will likely be putting a solar farm on site as well. We've talked to a couple of companies that have approached us about that, and we'll be a net producer of power for the surrounding area. So there are ways to do it which don't affect the environment. Obviously if there's a project that's situated on a sensitive area, that's a unique situation for that specific project. We've seen it with the Pebble project, which is not a rare earth project. The Pebble project in Alaska where their environmental concerns is we've been recognized by both Republicans and Democrats, but we have to be reasonable about the projects that don't have environmental concerns.

Ryan Morfin:

So Pini, in season two, we ask all of our guests a series of six questions. They're usually, yes, no questions, but trying to take a survey of our conversations. And if you want to add a little context to the yes or no, feel free, but here goes the first question. If there was a COVID vaccine available today, would you take it?

Pini Althaus:

Yes.

Ryan Morfin:

Who do you think is going to win the election?

Pini Althaus:

Which election?

Ryan Morfin:

The US election.

Pini Althaus:

Well, I think it looks like Joe Biden's going to win it, but I think what happens, if we go past January six from my understanding is that the house will vote on it and it's one vote per state. But I don't know if I see it getting there at this point in time. I really don't have a crystal ball.

Ryan Morfin:

Third question. What type of economic recovery are we in? What type of shape is it taking? A V-shape, W, U, L?

Pini Althaus:

Yeah, I think 2021 is going to be challenging. I think we've been, and rightly so. I mean, we've had no choice as of almost every other country. We've been printing money for the past year because of COVID. And I think we've got to brace ourselves that, at some point in time, the chickens come home to roost. It was a necessary step. People needed it on an individual level. Businesses needed it as well, but I think we've got to do whatever we can to stimulate the economy, give people confidence to go out and work again, employ people. So I think we've got to watch ourselves, especially in 2021. And I have some concerns, but long-term, I think the approach in the United States is a healthy one.

Ryan Morfin:

During lockdown this summer and quarantine, was there anything in particular that you accomplished that you're particularly proud of?

Pini Althaus:

Yeah. A great amount of family time, which, if you would've asked me a few years ago if I could sit at home and be at home for six months, I would have told you absolutely not. I wouldn't be able to do it for six days, but it has... I'm sure it's done this with a lot of families as well. It's brought families together. We had a baby actually last year on Thanksgiving. So I was doing a lot of travel at the time and thought I wouldn't get to see my daughter in her first year or couple of years too often. And being home with her every day is actually been just the most amazing experience. So thankful at least for some silver lining in COVID.

Ryan Morfin:

Are there any silver linings that you see in the economy going into 2021?

Pini Althaus:

Yeah, I think we've gone through an absolute beating and it looks like we've got the ability to come out of it. And I think that's a testament to how strong the economy was built up in the years preceding COVID. So overall I remain an optimist. I mean, we are a country built on opportunity and going out and making it happen. And we're not a socialist country sitting and waiting for people to send us paychecks or wealth distribution or anything like that. I think the American dream still lives on. I think if you go out and you're willing to work and put your head to it and heart in it, I think we do have the ability to climb out of it. So if we look at what the economy is doing over the past few weeks, it looks like it's starting to rebound. And to me, that's assuring because it could go completely one way as well.

Ryan Morfin:

And the last question is, is there anything that you're watching, or listening to, or reading today that has been impactful on your thinking that you'd like to share with our audience?

Pini Althaus:

Yeah, that's a good question. I think it's been more personal stories. The news, I sort of take that in context or with more than a grain of salt. In some cases stay off the news channels for a number of days at a time, it became quite repetitive. But I think on the personal side, talking to friends, my family's all back home in Australia, they've just come out of 110 day lockdown, which we can't relate to that. It's been very trying on them and seeing the fortitude that they've had to come out of that and stay intact. I think the mental health issues that will come out of COVID are going to have a far longer effect than the economic issues. I think we're going to have to focus on mental health issues in this country for a long time to come.

Pini Althaus:

The impact on kids has been significant with regards to lockdown or remote schooling, et cetera. But to see people come through it. I think it's a testament to people in general and to the country and other countries as well, to see got that fortitude and survival instinct to try to get through whatever adversity we can. So hearing the personal stories, the challenges that people have gone through, I think it's made me a lot more aware of things that I have to be thankful for and where we can help out other people as well. I think we have to be united going forward because there are things...

Pini Althaus:

I think one of the things that COVID has shown us is we can get into this complacency and life goes on and we go one day to the next. And all of a sudden we get hit by something that affects everybody equally. I mean, COVID, whilst there were groups of people, whether it was the elderly or people with underlying health conditions, that got hit the worst. I mean, we all got hit in some form or another. So really, this should be something that unites us, not divides us.

Ryan Morfin:

Well, Pini, I appreciate you coming on today to talk to us a little bit about the supply chain crimp on rare earth and we'll definitely keep an eye on it and would love to have you back in the future.

Pini Althaus:

Thank you, Ryan. Thanks for having me.

Ryan Morfin:

Absolutely. Thank you. Bye-bye. Thanks for watching Non-Beta Alpha. And before we go, please remember to like, and subscribe on Apple podcasts and our YouTube channel. This is Non-Beta Alpha, and now you know.

 

The unique history of a Maryland based distillery and craft secrets on how to make great American Bourbon w/ Admiral Scott Sanders Founder of Tobacco Barn Distillery

The unique history of a Maryland based distillery and craft secrets on how to make great American Bourbon w/ Admiral Scott Sanders Founder of Tobacco Barn Distillery

The unique history of a Maryland based distillery and craft secrets on how to make great American Bourbon w/ Admiral Scott Sanders Founder of Tobacco Barn Distillery

read more

Want to join our show?

Would you like to be a guest on the Non-Beta Alpha Podcast? Please click below and let us know that you are interested in being a guest on the podcast and we will get back to you shortly.

Skip to content