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For most investors alive today, economic growth has been the default assumption. Markets go up over time. GDP expands. Industrial output climbs. These are the axioms baked into every portfolio model, every retirement calculator, and every financial plan. But what happens when that assumption breaks? What happens when growth runs in reverse, and advanced economies begin an involuntary process of de-industrialization? That question, once considered the territory of fringe economists and doomsday preppers, is rapidly becoming a mainstream concern.
In a recent interview conducted by political commentator George Galloway, Prof. Jiang Xueqin, the Chinese-Canadian historian and geopolitical analyst behind the viral YouTube channel Predictive History, offered a sobering forecast. Speaking on the escalating conflict in the Middle East, the Strait of Hormuz blockade, and the structural consequences for the global economy, Jiang stated plainly: “The old world order of global trade is dead, and it will never return in our lifetimes.” He predicted that within a year or two, nations would be forced into massive de-industrialization and that a global depression is on the horizon. These are extraordinary claims. But the investment implications are serious enough that every contrarian investor needs to understand the underlying mechanics.
The Energy Shock Thesis: Why Oil Is the Lynchpin
At the heart of the de-industrialization argument is energy. Modern industrial economies run on cheap, accessible oil and gas. Supply chains, manufacturing, transport logistics, agricultural production, and even data centers all depend on affordable energy as a foundational input cost. When that input becomes prohibitively expensive or physically inaccessible, the entire downstream structure built on top of it begins to buckle.
Prof. Jiang pointed specifically to the Strait of Hormuz as the critical pressure point. Approximately 20 percent of global oil trade transits this narrow waterway, and with Iran having effectively closed or gated it in response to military strikes, the world is already experiencing the opening stages of an energy shock that could make the 1973 OPEC embargo look mild by comparison. He projected oil prices heading toward $150 to $200 per barrel, with the possibility of disruption so severe that price itself becomes a secondary concern. In a scenario where supply is physically unavailable rather than merely expensive, the usual market mechanisms for adjustment break down entirely.
Japan is the starkest illustration of this vulnerability. As Jiang noted in the interview, Japan imports approximately 75 percent of its oil from the region transiting the Strait of Hormuz, and Prime Minister Takayachi publicly acknowledged that the country could run out of oil and energy within 78 months under a sustained blockade scenario. Japan is the world’s fourth largest economy, home to global manufacturing giants, and yet it is almost entirely dependent on external energy. That kind of structural fragility, once exposed, does not stay confined to one country.
How De-Industrialization Actually Happens
De-industrialization is not a single event. It is a cascading process that typically begins with an external shock and accelerates through feedback loops. The sequence tends to follow a recognizable pattern that history has illustrated before, most notably during the 1970s stagflation era, though the current scenario involves both greater scale and greater speed.
The first stage is the energy price shock itself, which raises input costs across the entire manufacturing sector simultaneously. Factory margins collapse as energy, transport, and raw material costs spike faster than prices can be passed on to consumers. The second stage is demand destruction. As consumer confidence collapses and unemployment rises, households cut spending sharply, which reduces the revenue that businesses need to service their debt and maintain operations. The third stage is investment withdrawal. Capital becomes risk-averse, credit tightens, and new industrial investment stops. Factories that were marginal before the shock become unviable and close permanently.
What makes the current moment especially dangerous is that advanced Western economies were already structurally de-industrialized to a significant degree before any new shock arrived. Decades of offshoring, financialization, and the hollowing out of manufacturing capacity left the US, UK, and much of Europe dependent on just-in-time global supply chains rather than domestic industrial capacity. The pandemic was supposed to be the wake-up call that reversed this trend. Instead, as analysts at RSM have noted, the de-industrialization of both Europe and the United States is precisely what has been fueling the current wave of trade protectionism. The problem is that tariffs and rhetoric do not rebuild factories overnight. Industrial capacity that took decades to offshore cannot be reshored in a year.
The Return of Mercantilism: Every Nation for Itself
Perhaps the most significant structural shift Jiang identified, and the one with the deepest investment implications, is the collapse of globalization as an organizing principle and its replacement with mercantilism. He predicted that nations will increasingly abandon the integrated global supply chain model and instead pursue self-sufficient, closed-loop economic systems. As he put it, every nation will need to create its own supply chains, and the era of cheap, accessible global trade is over.
This is not a fringe view. Bridgewater Associates observed in early 2025 that a mercantilist consensus is now deeply established across the major economies, and that markets, which have been pricing certainty for years, remain dangerously unprepared for the implications. RSM’s chief economist defined the new mercantilism as the explicit state policy of accumulating wealth and power through favorable trade balances, backed by tariffs, currency management, and industrial policy.
The transition from globalization to mercantilism is inherently deflationary in terms of output and growth, because it breaks up the efficiency gains that free trade produced. Comparative advantage ceases to function when nations are each trying to produce everything domestically. Costs rise. Specialization falls. Productivity stagnates. When combined with the energy shock, this transition does not produce a standard cyclical recession. It produces the structural contraction that Jiang is labeling as de-industrialization, and potentially as a global depression.
What a Depression Actually Looks Like for Investors
The word “depression” is used loosely, but its investment implications are distinct from those of an ordinary recession. In a standard recession, asset prices fall, unemployment rises temporarily, and monetary policy engineers a recovery through rate cuts and stimulus. Central banks have well-worn playbooks, and investors who stay the course or buy the dip are usually rewarded within a few years.
A depression triggered by an energy shock and structural de-industrialization is a different animal. J.P. Morgan Research still placed the probability of a US and global recession in 2025 at 40 percent even before accounting for a full-scale Middle East escalation scenario. In a depression scenario, the challenge is that central banks cannot fix a supply-side energy problem by printing money. Rate cuts do not rebuild supply chains. Quantitative easing does not reopen the Strait of Hormuz. What investors typically reach for in ordinary recessions, including stimulus-sensitive equities, property, and high-yield bonds, can become traps in a structural contraction.
The historical precedent most relevant here is not 2008 or even 2000. It is the 1973 to 1982 stagflation era, where the energy shock triggered a decade of below-average real returns across equities, with inflation eroding the real value of bonds simultaneously. Both the traditional defensive options failed at once. Investors who survived that period well were those who held hard assets, commodity producers, and truly domestic businesses insulated from global supply chain disruption.
Where Contrarian Investors Should Be Looking
The de-industrialization thesis, if even partially correct, reshapes the investment landscape in ways that cut against conventional portfolio construction. Several themes deserve serious consideration.
Energy production itself becomes the most strategically critical asset class in a world of scarcity. Countries and companies that produce energy domestically, including oil, gas, nuclear, and renewables, gain enormous leverage. The IEA’s 2025 World Energy Investment report confirmed that global capital flows to the energy sector are set to rise to $3.3 trillion in 2025, and spending on the electricity sector alone is set to reach $1.5 trillion, 50 percent higher than total fossil fuel investment. The energy transition is real, but the energy transition and an energy crisis can coexist. Companies positioned at both ends, hydrocarbons in the short term and renewables infrastructure in the medium term, represent the most resilient exposure.
Gold and hard commodities function as the classic refuge when fiat monetary systems come under stress from simultaneous supply shocks and fiscal expansion. Nations trying to rebuild domestic industrial capacity while running large fiscal deficits will inflate their currencies. Gold has historically preserved purchasing power through exactly these kinds of stagflation periods.
Domestic-facing businesses in essential sectors, those selling food, medicine, utilities, and basic services within their home markets, become more valuable precisely because they are insulated from global supply chain breakdown. In a mercantilist world, the premium shifts from globally integrated multinationals to locally anchored necessity businesses.
Japan represents a significant short opportunity or at minimum a country to dramatically underweight. A nation that cannot access energy to run its factories is a nation facing an involuntary restructuring of its entire industrial base. As Jiang noted, the Japanese prime minister has already publicly acknowledged the timeline of this crisis. Investors still holding Japan exposure as a value play need to factor in this structural vulnerability.
Finally, reshoring and domestic manufacturing infrastructure plays become long-term growth stories regardless of which specific geopolitical scenario unfolds. The direction of travel toward self-sufficient supply chains is now bipartisan and global. According to the Roosevelt Institute, manufacturing construction’s contribution to GDP in the US is already at the highest levels on record. That trend has barely begun relative to the scale of what reshoring would eventually require.
The Contrarian’s Uncomfortable Conclusion
The mainstream investment community has not yet priced in the de-industrialization scenario. Markets continue to function as if global trade is merely under temporary stress, that a deal will be struck, that oil will flow again, and that the central bank playbook will work when needed. The contrarian read, informed by analysts like Prof. Jiang Xueqin, is that the structural conditions enabling the post-World War II global growth model, cheap energy, integrated supply chains, and a rules-based trade order, are all simultaneously under threat for the first time since that model was constructed.
As we have explored in earlier pieces on wealth inequality and elite financial strategy, the sophisticated investor’s edge lies not in following consensus but in seeing structural shifts before they become consensus. De-industrialization is not yet in the vocabulary of the average financial adviser. That is precisely why it should be at the top of yours.
This article draws on the insights of Prof. Jiang Xueqin as shared in a recent interview with George Galloway. This is not financial advice. Always conduct your own due diligence before making investment decisions.
