For the past three decades, Western democracies have operated under an intellectual mirage. Elites, blinded by a neoclassical bias, assumed that control of intellectual property, financial instruments, and software code constituted the pinnacle of value creation.
In this worldview, physical processes—the “dirty work” of mining, refining, and manufacturing—were considered low-margin commodity services that could be outsourced to low-cost jurisdictions without strategic risk. As Gillian Tett explains in his Financial Times columnthis cognitive bias allowed China to dominate global supply chains with little protest.
The material deterioration of the West. The essence of the current problem is defined by investor Craig Tindale in his essay “The return of matter”. In it he argues that the West has suffered “strategic disarmament” by dismantling its national productive economy in favor of quarterly financial efficiency.
As Tindale details, he fell into the “raw material paradox”: believing that possessing the raw mineral is equivalent to possessing the usable material. While the West possesses vast geological deposits, China has monopolized the “Midstream,” that is, the heavy industrial capacity to refine, smelt and purify these materials into useful forms. Without this capability, a lithium mine in Australia or a copper mine in Arizona are simply quarries for a Chinese smelter; They are not strategic assets for the West if Beijing has the keys to access them.
The data is there. The data of the Chinese industrial domain are, as investor Craig Tindale describesoverwhelming and unprecedented in history, consolidating what he calls “processing sovereignty”:
- Gallium: China controls approximately 98% of global production, a material that is essential for AESA radars, 5G networks and the semiconductors of the future.
- Rare earths: The Asian giant dominates 90% of chemical separation capacity – the true technical “separation wall” – and more than 90% of the production of NdFeB magnets, vital for electric vehicle engines and defense systems.
- Graphite: Control more than 90% of the production of graphite anodes, the indispensable component of virtually all lithium-ion batteries.
- Magnesium and Polysilicon: Your control extends to 90-95% of magnesium casting (key for aluminum alloys) and 95% polysilicon necessary for solar energy.
As Tett points outwhile the West became obsessed with software and services, China was quietly building the physical infrastructure that today gives it a massive competitive advantage in the race for artificial intelligence and the energy transition. This physical reality is what has forced the Trump administration to try to redraw the energy map by taking Venezuelan crude oil, desperately seeking to regain control over the “matter.”
The electric wall of AI. This physical reality has revealed that the race for Artificial Intelligence It’s not just a question of code or chips. The digital leadership of the West is now encountering the physical limit of cheap energy. Satya Nadella, CEO of Microsoft, and Jensen Huang, director of Nvidia, agree that the biggest current problem is not the excess of chips, but lack of electricity to connect them.
On this board, China has gone from being a dependent petrostate to becoming the first “Electrostate” in the world. Beijing now produces 2.5 times more electricity than the US and builds 74% of all current solar and wind projects on the planet. By investing massively in electrification, China is expanding an infrastructure that could give it a definite advantage in the AI race.
The Venezuelan trap. Against this backdrop, Donald Trump’s administration has accepted the importance of physical matter, but seems determined to fight with tools from the last century. The taking of Venezuelan crude oil seeks to consolidate the reserves of Venezuela, Guyana and the United States are under US influence, which would represent close to 30% of the world’s oil reserves. according to a JPMorgan report.
However, Venezuelan oil alone cannot solve the AI problem. As Gillian Tett warnswhile Washington asks the world to buy 20th century infrastructure (fossil fuels), Beijing offers 21st century infrastructure (renewable energy and high voltage networks). In addition, Venezuelan crude oil is “mortgaged”: The country owes up to $60 billion to China under the oil-for-loans model, and its infrastructure is in ruins.
The skills gap and the clash of “clocks.” Rebuilding industrial sovereignty is not just a question of money. The West has closed its heavy industrial capacity for thirty years, causing a “human bottleneck”. Metallurgists and process engineers who know how to adjust an unstable furnace or a chemical separation train are retiring without relief.
Tindale further postulates a conflict of time horizons. The “Western Financial Clock,” which requires quarterly profits, has destabilized the “Industrial Clock” (which requires decades of investment) and the “War Clock” (which requires immediate reserves). While China’s clocks are synchronized by the state, the West remains trapped in short-term financial efficiency.
Towards a rematerialized sovereignty? The JPMorgan report suggests that the US has won the short-term battle for Venezuelan crude oil. But, as Gillian Tett concludesrisks losing the global strategic war for the energy that will power AI.
Tindale’s thesis is blunt: a civilization that financializes everything ends up sacrificing the material base that keeps it independent. If the West does not rebuild its foundries, refineries and factories, it will renounce the material sovereignty that sustains democracy, becoming a simple “quarry” rich in resources but poor in capacity in the face of a rival that already holds the keys to the physical world.
Image | freepik
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