August 16, 2013

Could U.S. rebuild manufacturing by not exporting fracked gas?

Dow plant in Freeport, TX
uses cheap American gas
Here's a fascinating NYT story about hands-on economic policy that doesn't involve the abstractions of macroeconomics. In short, should the U.S. start to quickly export its new wealth of natural gas to the manufacturing giants of Asia, or should the feds restrict natural gas exports to rebuild our manufacturing base by nurturing an American advantage in manufacturing that requires cheap power?
Foreseeing Trouble in Exporting Natural Gas 
By CLIFFORD KRAUSS and NELSON D. SCHWARTZ 
MIDLAND, Mich. — As Dow Chemical’s chief executive, Andrew N. Liveris has made himself into something of an outcast among his fellow business leaders.
The reason? He is spearheading a public campaign against increased exports of natural gas, which he sees as a threat to a manufacturing renaissance in the United States, not to mention his own company’s bottom line. But many others say such exports would provide far more benefits to the country than drawbacks, all part of a transformation that promises to increase the nation’s weight in the global economy. 
The debate has grown personal. In the words of Charif Souki, an energy industry executive promoting a new natural gas export facility, Mr. Liveris is both “self-serving” and a “hypocrite.” 
Now it seems that one constituency where Mr. Liveris had gained a sympathetic ear, the federal government, may also have turned against him. Last week, the Energy Department approved another planned project to export natural gas, the second such proposal it has accepted since May. 
The battle over natural gas exports reflects just how starkly the nation’s economic landscape is being reshaped by newfound energy supplies — much of the discoveries in the form of oil and gas being freed up by unconventional methods like horizontal drilling combined with hydraulic fracturing. 
As environmentalists and industry advocates debate the merits and risks of fracking, as the practice is frequently called, its consequences are increasingly visible. Last week, the government reported a sharply improved trade balance for June, largely because of lower oil imports. 
By 2020, new oil and gas production could increase the country’s economic output by 2 to 4 percent beyond what it otherwise would be, add as many as 1.7 million jobs and perhaps reduce the bill for energy imports to zero, according to a report by the McKinsey Global Institute. 
... To nurture the nation’s good luck, [Liveris of Dow] says, the government needs to plan an energy policy that carefully balances the interests of the oil and gas companies that want to freely export natural gas with those of industries like Dow Chemical that fear that an export boom could outpace domestic gas supplies and bring higher energy prices. 
An Australian by birth and citizenship, Mr. Liveris has emerged as the principal opponent of unfettered natural gas exports.  
... After spiking in the last decade, natural gas prices in the United States have hovered between $3 and $4 per million B.T.U.'s this year. That is down from a high of $12 before the recession, and a fraction of what it costs in Asia and Europe.

The last time I bought some propane and propane accessories for my barbecue grill, the price had fallen 30% from last year.
That price differential is one reason exports are so appealing for domestic energy companies, who are willing to spend billions to build export facilities to ship liquefied natural gas in tankers in the hopes of selling it overseas. 
On the other hand, cheap domestic supplies mean Dow — one of the biggest private consumers of natural gas in the country — and other chemical companies are now paying much less than their foreign competitors for the raw material they turn into products like plastic, raising profit margins. It could also bring back jobs to the United States as manufacturers that use natural gas for energy benefit, Mr. Liveris says, although that renaissance is just in its infancy. 
... In an interview, Ken Cohen, an Exxon Mobil vice president, said that having a major business leader like Mr. Liveris supporting “protectionism” is so incongruous that “it’s almost like man bites dog.” 

Isn't it weird how "protectionism," which, prima facie, sounds okay -- "protect" is good, right? -- has become an invective? But knowing that "protectionism" is a swear word is the symbol that you got at least an A- in Econ 101: You remember that Protectionism Is Bad. (Remembering about supply and demand, however, is wholly optional in status terms: if you want to be taken seriously as a pundit, never point out that "Shortages of Farmworkers" or "Shortages of Programmers" are, in economics terms, gibberish.)
... But there is increasing pressure to move more quickly, because Canada is planning to build a few export terminals on the Pacific Coast, which could compete for Asian markets. 
In the United States, roughly 15 proposed gas projects await regulatory approval; if all were approved they could export the equivalent of more than a third of the domestically consumed natural gas. Along with an expected future increase in natural gas consumed by vehicles and industry, such an export boom would undoubtedly push prices up. 
... Not surprisingly Mr. Liveris has become a lightning rod among economists and business leaders, particularly those in the oil and gas drilling business, who say he is espousing protectionism merely to promote the interests of his own company. 
“He is coming across as a hypocrite and a self-serving person,” said Mr. Souki, chief executive of Cheniere Energy, which won the first permit to export gas, from its Sabine Pass, La., terminal. “He wants free trade for everything he manufactures but no free trade for anybody else.” 
Mr. Liveris concedes that the interests of his company coincide with his views. But he says that as the chief executive of Dow Chemical he also represents the interests of energy consumers at large, and he understands better than most what high gas prices can mean for the economy. 
He says he remembers the impact of escalating domestic natural gas prices between 2001 and 2005, when the company was forced to cancel plans to build a $4 billion chemical plant in Texas. 
“I’m protecting my shareholders,” he said, adding that $5 billion to $6 billion in new Dow Chemical investments were depending on the continuation of low gas prices “and not repeating the ‘01-to-'05 movie.” 
“What would make that repeat movie occur?” he asked rhetorically. He pointed to his native Australia, which he said exported 90 percent of its gas. That has caused, he said, “the collapse of the manufacturing sector — and, by the way, the retail sector’s paying through the nose. We’re paying Japanese electricity prices in Australia, yet Australia is gas-rich.” 

When natural resource exports drive up the price of your currency too high to make your manufacturing or tourism affordable, that's known as the Dutch Disease, which refers, interestingly enough, to a post-war Netherlands boom in natural gas drilling.

Now, Australia has a lot of natural resources per capita, so Australia's decision to concentrate on serving the Chinese economic dragon can make sense, even at the expense of an unbalanced economy. America still has a fair amount of natural resources per capita, too, although Senators Schumer and Rubio are working hard on solving that problem.
Dow Chemical has assembled a list of more than 120 manufacturing projects, representing investments of $100 billion, that are being planned or are already under construction in the United States at least partly because of lower gas prices. 
The beginnings of the manufacturing renaissance Mr. Liveris imagines for petrochemicals, fertilizers, steel, aluminum, pulp paper and cement can be seen at its giant complex of plants in Freeport, Tex., the largest of its kind in the world. 
The complex is a wonder of chemical engineering that has 6.5 million miles of pipe, employs more than 8,000 people and consumes enough electricity to power a city of three million people. And it is growing bigger. 
The company is investing $4 billion to build a ethylene plant to manufacture a vital building block for adhesives, plastic packaging and sealants; a propylene plant that will produce a chemical used to make mattresses, toys and shampoo; a chlorine plant; and a herbicide plant. More could come — if prices for natural gas, the vital feedstock for all the chemicals, remain low. 

Peter Schaeffer told me a few years ago that one area where America retains a comparative advantage is in giant scale manufacturing -- off-shore oil rigs, huge turbines, that kind of thing. These vast chemical plants might fall in that area, too.
Mr. Liveris says that he also favors free markets, but that energy, like defense and food, requires special care to protect the national interest. Exporting natural gas is fine, he says, but not at the price of importing it back in the form of goods made with cheap gas elsewhere. 
“The paint ingredients need the paint can,” he said. “The paint supply chain needs trucks. The trucks go to warehouses. Warehouses go to retail. I’m not importing finished goods. I’m making them in the United States of America.” 

I'm in over my head here, but my vague hunch would be that the U.S. should not rush to export its new natural gas bonanza by shipping it to the Chinese, but should instead use it to capture a larger share of more value-added businesses than just natural resource exports.

One reason is that I'm not in that big of a hurry to use up the newly available domestic energy supplies. The future is long, the supply of fossil fuels is, ultimately, finite, and alternative energy sources are not making edifying progress -- witness the shuttering of the San Onofre nuclear power plant on the Pacific next to Camp Pendelton after 50 years.

Nor at present does there seem to be any particular strategic reason to go for the quick bux: it's not like Washington must, say, goose the domestic economy in the near term to show Third World peasants that Capitalism is better than Communism. And, while the economy, is bad at present, it's not horrible. So, we seem to be at a point where we can take steps for the long term national interest, rather than just do whatever is easiest in the short term.

Moreover, slowing the exploitation of frackable resources a few years until domestic industry can make better use of them, rather than just sell it to China as fast as possible, ought to allow technical improvements in domestic fracking to make it less environmentally dubious.

My point is not that the U.S. should follow one macro-strategy or another regarding the new era of energy, but that we should have an open national debate on this topic, without one side being able to close off discussion by hissing "protectionist" as if that were a one-word trump card.

105 comments:

Anonymous said...

You are correct: heavy equipment and chemicals, especially resins, are two areas where U.S. exports are still highly competitive. Been that way for a very long time.

Anonymous said...

The "manufacturing renaissance" is actually about cheap labor and immigration. There's been so much immigration that there's enough cheap labor for manufacturers. And execs believe that this cheap labor inflow in the US will continue.

I support protectionism, but there has to be protectionism of the labor market.

Anonymous said...

U.S. manufacturing output is at or near an all-time high. Employment is down. 'Unit labor costs' in the U.S. are about as low as they get, your real beef is with robots. Selling this gas to the highest bidder is the best way to benefit all Americans. If it is exported, it will boost our current account, strengthen the dollar, and allow us to import oil and copper more cheaply. The protectionism you advocate was tried in Argentina and Brazil and didn't work out too well (I realize this is not a water tight refutation).

-Jostein

Anonymous said...

The Dow CEO is from Australia and he promotes immigration. He has urged more immigration into Australia for its resource mining industry, since the unions there were against more immigration.

His book "Make It In America" also promotes more immigration for the US.

Steve Sailer said...

"The protectionism you advocate was tried in Argentina and Brazil and didn't work out too well (I realize this is not a water tight refutation)."

Right, but it was tried in Japan and South Korea and did work out well.

So, it's a tough call, and my contribution is mostly to point out that we should stop treating "protectionist" as an epithet that instantly wins debates, just like certain other "ist" epithets are treated.

Eric Falkenstein said...

Look at protected industries in the USA today: sugar, various agricultural products, sneakers. These are all the result of effective lobbying by crony capitalists, and all the monopoly rents go to unsympathetic rich guys.

The fact that open borders is nutty, does not imply higher quotas and tariffs on imports is a good idea. In practice, these are applied selectively to favor insiders, which encourages corruption and disingenuous patronage systems. If they are applied more broadly, they invite a broad compensatory response, and thus creating simple waste with no relative gains in trade balance other than everyone trades less.

Not everything economists believe is bat-shiat stupid...

Steve Sailer said...

Sure, but think about the distinction between tactical tariffs like the sugar one that keeps the Fanjul family so rich versus strategic protectionism. It seems quite reasonable to have a national debate on the cost of energy. Whichever way the country chooses, the beneficiaries will vastly outnumber the Fanjul family.

fnn said...

In an interview, Ken Cohen, an Exxon Mobil vice president, said that having a major business leader like Mr. Liveris supporting “protectionism” is so incongruous that “it’s almost like man bites dog.”

All the GOP presidents from Lincoln through Hoover were protectionists-and most "major business leaders" seemed to like it just fine. The Dems were then the party of free trade and white supremacy.

Whiskey said...

Steve a resurgance of manufacturing would spoil views of trustafarians and politicos and threaten their power by introducing new corporate titans hostile to green shakedowns.

Smart money is on squandering gas by massive exports to keep the elite like Matt Damon, star of a anti fracking movie, happy.

Anonymous said...

What's left unsaid is that Dow chemical manufactures intermediate industrial feedstock, not end products. If they get this proposal passed, I highly doubt that they will consent to the government restricting their export of propylene in turn, to help American plastics manufacturers. No, they will turn around and export their cheap propylene to China's plastics manufacturers.

Anonymous said...

Right, but it was tried in Japan and South Korea and did work out well.

So, it's a tough call, and my contribution is mostly to point out that we should stop treating "protectionist" as an epithet that instantly wins debates, just like certain other "ist" epithets are treated.


And it was tried out when America first industrialized. In fact after the UK, every successful industrial country followed this method. It's called the American System.

Anonymous said...

One of the biggest advantages we are allowing to atrophe is our massive expertise in space operations. The future of energy is in atomic and direct-solar capture industries-- everything else is just feel-goodism. The moon is constantly illuminated on the near side. Peaks near the 'North Pole' of the moon are in intense direct sunlight, unmitigated by atmosphere, for millions of years at a stretch. Robots could use the silica substrate of the moon to create solar arrays hundreds of square miles across and stirling engines that run from these 'peaks of eternal light' into the dark, bitterly cold craters on the dark side. Then the energy could be beamed via microwave back to the planet. All of the technology to do this exists today, although it is too expensive to compete with natural gas, etc. But that real estate is finite. If the Chinese or Indians capitalize on the area before we do- that's it. It's not something you can replicate. But if we get there first, lay down a blanket of the latest nanotube solar collectors and a microwave transmitter, we could supply a huge fraction of the world's energy at essentially no ongoing cost, forever. As you state, having all your factories run off free electricity is a big deal, and will be even bigger in the future. Especially since you can use a massive glut of power to make up for inefficiencies elsewhere. Too bad we signed the Outer Space Treaty of 1972... which now really only applies to us. We should repeal it and begin aggressive resource extraction of the moon and asteroids. China won't be able to match us in this field for decades, even if their spending in space operations continues at such a high rate.

anony-mouse said...

1/ 'Right but it was tried in Japan and South Korea and did work out well'.

But since America is becoming more like Argentina and Brazil and less like Japan and South Korea (source: iSteve), wouldn't it be better to assume that we shouldn't go protectionist?

2/ So Dow Chemical wants us to change our natgas policies to benefit Dow. I assume Dow will give similar advantages to its US customers over its foreign ones, right?

Anonymous said...

I can claim no expertise in economic theory. Still, to me, restrictions on natural gas exports sounds like a straight government-ordered wealth transfer from producers ( who would be forced to sell below the worldwide commodity price for their product) to manufacturers using natural gas for fuel ( who would be able to purchase natural gas at a below worldwide commodity price). I do not even disagree that, for public policy reasons, we may wish to preserve high manufacturing jobs. However, wouldn’t the “fairest” way to do this be to impose tariffs on competitive imported high value job products? That way, the subsidy, in the form of the higher protected domestic product price, would be borne more generally by society rather than one narrow section. Also, would not a low domestic price for natural gas result in exploration and production expenditures by companies being themselves shifted overseas, reducing high value domestic jobs in those sectors? Ooops. I just realized I used the “T” word. My bad.

Luke Lea said...

There is also the point that our natural resources are national resources: can't the nation and its representatives allow private development of these national resources without giving them away? It might require a change in the law -- but that is what legislatures are for.

albert magnus said...

The oil/gas industry built a lot of humongous ethylene plants in Asia recently during the economic downturn when construction is cheaper. Singapore, Korea and China have all been building them. Also, places like Algeria and Saudi Arabia have been upgrading their plants. American engineering and construction companies are leaders in these sorts of projects, but a lot of them take place overseas.

Natural gas is not efficient to transport or to make into ethylene and the most efficient use is to put it in a pipeline somewhere or leave it in the ground if possible.

bjdubbs said...

One industry massively aided by cheap natural gas and oil is the refinery business. Refineries in the "Atlantic basin" from East coast US to Europe are shutting down, as well as Latin America and Asia, and US producers from LA and TX are stepping in, especially in diesel. I don't think exporting that nat gas would really change the equation. It's expensive to liquify gas and export it, and the larger the scale of US production, the cheaper it is. Plus, if the US doesn't export nat gas, Canada or Russia or the ME will. Nat gas is plentiful everywhere, and much of the US advantage is in fracking technology, not in the gas itself.

Titus IV said...

"Moreover, slowing the exploitation of frackable resources a few years until domestic industry can make better use of them, rather than just sell it to China as fast as possible, ought to allow technical improvements in domestic fracking to make it less environmentally dubious."


Hey, so Obama (inadvertantly) did something right for once. I guess the sun does shine on a dog's ass every once in a while.

Marcus of Old said...

"You are correct: heavy equipment and chemicals, especially resins, are two areas where U.S. exports are still highly competitive. Been that way for a very long time."

I guess it depends on how you define heavy equipment. I keep seeing construction equipment with a Japanese or Korean name on it.

First Hour said...

"U.S. manufacturing output is at or near an all-time high...."


Maybe if by all-time you mean all-time since Obama took office, but manufacturing is a hollow shell compared to historic levels. Especially if you measure it in terms of proportion of global output.

Anonymous said...

What fnn said.

Advanced industrial economies are always and everywhere the result of calculated pro-industrial policies, some of which fall under the current pejorative "protectionism."

Cholesterol Jones said...

I don't know, but based on the recent US track record, I have a feeling they'll find some way to screw it all up no matter how they dice it.

notsaying said...

Surely whatever elevated "free trade" into something that is treated as an absolute, like it's a forgotten commandment from the Old Testament or a forgotten law of physics has to be wrong.

While rampant protectionism can end being bad for the world and self-defeating for the US, I see no reason to be made a slave to the "free market."

See how well we are manipulated and robbed by other countries who mouth "free trade" to our faces and act in their own interests behind our back.

Honestly, it's as if the US created a "Free Trade Club", made up the rules by itself and then insisted all the smaller kids go along. Oh, actually that's sort of how it did come about, right?

We can't afford to keep being so naive and dumb. When are we going to get another chance to rescue ourselves from the mistakes of 1980-now?

Eric Falkenstein said...

Steve: "quite reasonable to have a national debate on the cost of energy"

On an academic level, yes, but as a practical matter, we discourage internal oil exploration, nuclear, but subsidize solar, wind, and corn as a way to solve the long run problem.

As a practical matter, do you really think giving more export-import control to the government would do anything but help corn-farmers, coal producers, and ephemeral windfarmers? Corn is a really inefficient way to generate a BTU, btw.

James Candor said...

Here's an interesting question- why is it that Australians tend to make more than US citizens, when their overall GDP per capita is below the US? It suggests the elites are getting alot less of the pie than here, kind of how things used to be in the US, when we had a stronger middle class. Solve that little dilemma first or it won't matter.

Five Daarstens said...

Malcolm Forbes has a not too dissimilar idea in the 1970's. That we should use foreign oil first and save American oil for future use.

Eric Falkenstein said...

The energy debate gets co-opted by the insiders right away, why libertarians are wary of this approach. If you think you can develop a politics-free infant industry/sustainable growth agenda, I'm guessing you are an 11 on the naivotemeter. Competition is the only solution, not some ham-handed, naive regulatory scheme.

Lenior Rel said...

"The protectionism you advocate was tried in Argentina and Brazil and didn't work out too well (I realize this is not a water tight refutation)."

"Right, but it was tried in Japan and South Korea and did work out well."

Economist have never explained why mercantilism works in Asia, but is so in disrepute among economists.

Anonymous said...

We live in a time of rapidly changing economic relations, where the available data to test hypotheses lags the need for testable hypotheses.

Estimating the value of "Protectionism" may require a tremendous amount of data, at least some of which must be recent and particular.

Might be better in this case to hope for some decision makers with good intuition in the first instance, and who can also ride the wave and not panic if things take a turn for the worse.

I think it would be a good thing under current circumstance if our leaders put the export of natural gas on a back burner, along with increased immigration/naturalization, until we get fundamental issues such as unemployment, wealth disparity, and efficient skill development solved to satisfaction.

I know the gas folks are in a big hurry to make beau coup on the Frac Bonanza, and I know that The Street says that the Average American Worker is untrainable and unreliable, but maybe we should give it another shot.

Neil Templeton

A Working Class American said...

the USA would never have formed without the promise of protecting artisanal output (e.g., shoemakers, other crafts, etc) from british imports. The federalists got votes by protecting american middle class artisans from british imports, and in return they got votes, the votes needed to ratify the constitution.

AP said...

"Australia has a lot of natural resources per capita"

Australia has the highest median wealth in the world according to this report. These figures are per adult. Australia is on page 60.

2012 Median Wealth
US 38,786
Canada 81,610
France 81,274
Switzerland 87,137
Singapore 95,542
UK 115,245
Japan 141,410
Australia 193,653

Very impressive. Of course it might all unravel any day now, Australia has been described as "a credit bubble built on a commodity market built on an even bigger Chinese credit bubble, Australia looks like leveraged leverage, a CDO squared."

wren said...

Just watch Liveris get his gas export halt to lower his material costs and then claim he can't find enough workers (at his desired costs) for his mega plants.

Anonymous said...

"The protectionism you advocate was tried in Argentina and Brazil and didn't work out too well (I realize this is not a water tight refutation)."

Right, but it was tried in Japan and South Korea and did work out well.


Protectionism in the form of the American School was our policy from shortly after the Founding until about WW2. It turned us into the greatest economic and manufacturer on Earth.

Germany also benefited from protectionism from the late 1800s on as they emulated the American School.

Meanwhile Great Britain, the great economic power from the 1800s, introduced free trade and watched as the US and Germany surpassed her.

Anonymous said...

This question is ultimately moot. The shale gas resource is not a large as it's been made out to be. I doubt that the price for natural gas will stay low enough for its export to be profitable much longer.

Mountain Maven said...

Why don't we let the market decide? Every time the government thinks it knows better the economy is damaged, jobs are lost and income goes down. I've been hearing about energy shortages my whole life and the US has far more energy than ever. China is the new Japan economically, they will fade under the weight of their own regulated and corrupt economy. BTW when the climate alarmists start *acting* like it's a crisis I'll start listening.

Anonymous said...

This is cluelessness on a grand scale. Why should energy producers subsidize energy consumers? Why should Dow Chemical get a profit subsidy at the expense of Exxon?

Who decides these? Do you really trust President Obama to decide it?

As for Japan, last time I checked, they had lost 2 decades, struggling to contain further marketshare losses to the Koreans and (god forbid) the Chinese. Apple could not have happened if the US government had protected Intel in memory chips.

Stop bashing black and brown IQ. You need an IQ supplement first, before you go finger entire races as low IQ.

master_of_americans said...

Personally, I'm basically in favor of free trade on economics grounds. I'm opposed to immigration basically for other reasons. That said, it occurred to me that I'm really not too sure what the best policy is (as far as protectionism/free trade), and I doubt anybody else really knows for sure, either. That being the case, maybe it's a feature rather than a both to try some of one and some of the other, such as by allowing trade goods but not people to cross borders. It's a way of hedging bets rather than going all in on either free trade or protectionism. Not too satisfying to an ideologue or intellectual systematizer, but perhaps a pragmatic course.

PS: My mom has described every job I've ever had as "selling X and X accessories". So, for example, right now my gig is apparently "selling student loans and student loan accessories."

Anonymous said...

Protectionism is anti-Globalism, so the elite will not like that. Yet, if it were to succeed, a body like OPEC should be formed, call it ONGEC.

Failure and success of protectionism in Argentina, Brazil, Korea, and Japan, can largely be attributed to two factors, exports of value-added consumer products and US trade policy.

Anonymous said...

The big problem with free-trade is that overpopulated countries are the winners, the nations that we run trade deficits with are not poor, and the nations we run trade surpluses with are not rich. they are over and underpopulated respectively, and this is because consumption is more efficient as population density goes up, while production remains the same. These overpopulated countries have to have somewhere to dump their overproduction, and that is going to be us in a free trade world.

The ultimate end game of this is that the countries and nations that absolutely pack themselves with human beings are the free trade winners and that is simply not a desirable end. Likewise the countries with the worst legal system for the common man are also the ones that win the non-tariff barrier wars, whilst those with relatively open legal systems are going to get rolled. Bring on protectionism.

Dave Pinsen said...

"Competition is the only solution, not some ham-handed, naive regulatory scheme"

My pick would be for option #3, a non-naive national industrial policy. Also, re your point about protectionism incurring foreign compensatory measures, that's not necessarily all bad, e.g., if it involves foreign manufacturers building factories here to avoid tariffs.

Re Brazil: that question isn't settled. The country is capable of world class manufacturing (e.g., embraer jets), and a few years ago, if memory serves, the government forced the resignation of the CEO of a part government-owned integrated steel giant because he was content to export steel to ship builders in Asia rather than facilitate ship building in Brazil. It's not obvious that the Brazilian government was wrong about that.

Anonymous said...

I guess it depends on how you define heavy equipment. I keep seeing construction equipment with a Japanese or Korean name on it.

Komatsu and Daewoo sell well, but they don't dominate. Caterpillar does well.

Anonymous said...

The energy debate gets co-opted by the insiders right away, why libertarians are wary of this approach. If you think you can develop a politics-free infant industry/sustainable growth agenda, I'm guessing you are an 11 on the naivotemeter. Competition is the only solution, not some ham-handed, naive regulatory scheme.

This is not a good argument. "The insiders" manage to benefit disproportionately under any policy regime. The point is to try to align interests and benefits as much as possible and minimize the damage done by "the insiders" as much as possible. To try to encourage sybmiosis and limit parasitism.

Anonymous said...

Stop and Print

http://newyork.cbslocal.com/2013/08/16/bloombergs-public-housing-fingerprinting-idea-stuns-infuriates-residents/

Anonymous said...

As for Japan, last time I checked, they had lost 2 decades, struggling to contain further marketshare losses to the Koreans and (god forbid) the Chinese. Apple could not have happened if the US government had protected Intel in memory chips.

http://www.forbes.com/sites/eamonnfingleton/2013/08/11/now-for-the-truth-the-story-of-japans-lost-decades-is-the-worlds-most-absurd-media-myth/

"Under the headline “Japanese Optical Illusion: The ‘Lost Decades’ Theory Is A Myth,” Cline records that whereas the U.S. labor force increased by 23 percent between 1991 and 2012, Japan’s labor force increased by a mere 0.6 percent. Thus, adjusted to a per-worker basis, Japan’s output rose respectably. Indeed Japan’s growth was considerably faster than that of Germany, which is the current poster child of economic success. (Japan’s workforce numbers began falling about a decade ago in a development that reflects a long-term policy: in common with China, Japan is morbidly concerned about food security and, even earlier than China, adopted a policy of population reduction. This was kicked off with the Eugenic Protection Act of 1948. Japan moreover backstops its population reduction program with some of the world’s tightest immigration controls.)

Cline, a senior fellow at the Washington-based Peterson Institute for International Economics, also points out that Japan’s much lamented deflation is not a problem. Quite the reverse: in the last twenty years the Japanese economy has actually done better at times when prices were falling than when they were rising. He adds that Americans make a big mistake in assuming that Japan’s gentle deflation bears any resemblance to the highly disruptive deflation the United States suffered in the early 1930s. In reality Japanese deflation is similar to the sort of “good deflation” in an earlier era of American history, between 1880 and 1900, when rapidly rising U.S. labor productivity consistently reduced consumer prices and rendered America the miracle economy of the era."

Anonymous said...

Well, the prevailing economic orthodoxy - which the political class has largely stitched-up over the heads of everyone, (as an aside they keep on trying to do the same over immigration, but keep getting found out when trying to sneak it out like a silent fart, Britain's New Labour is the text-book example) - is of unrestricted 'free trade' or 'globalism'. Of course, this means what it says on the tin ie governments are not only completely indifferent to having whole industries gutted, and running up ridiculous traded deficits, but more or less they are actually 'forbidden' (by democratic agitation or otherwise), from doing anything to interfere with 'free trade'. In short, they have rendered themselves in this enormously important area of policy as about as useful as a eunuch at an orgy.
Well so much for democratic accountability and bully for 'economic dogma'.

Anonymous said...

Not sure about the merits of the arguments but I enjoyed the King of the Hill reference.

Lex Corvus said...

"When I grow up, I want to sell propane and propane accessories... if my grades are good enough."

notsaying said...

People who don't believe the government can do anything right seem to have a lot of faith in the private sector and competition.

But look at what the private sector is doing: moving the gains of productivity gains from workers to management and shareholders and owners; creating bubbles and doing all they can to keep them growing until they pop, then turning to the taxpayers for a bailout; dong all they can to avoid paying taxes here in American and hiring as many foreign workers as they can.

It seems the day when American business saw itself in partnership with its American customers and employees is gone. Now they are just sitting ducks to be exploited.

And these are the folks we are supposed to run to keep us safe from government regulation?

And by the way, it seems lots of these businesses and their supporters feel very entitled to all kinds of government help when their risky behavior should be punished by Mr. Market.

What good to the rest of us is free trade that is not fair trade? I for one have had quite enough of the "profits to business and shareholders, costs to labor and taxpayers."

Orthodox said...

Yes. It is absolutely stupid to export cheap energy, when said cheap energy will lead to high paying manufacturing jobs.

This isn't about protecting American companies or American jobs, it's where the jobs are located. Usually protectionism fails because the government builds an artificial barrier to imports (see Brazil). They try to do everything at home instead of specializing. Whereas with cheap energy, this is exactly the situation China has with cheap labor, where global manufacturers all want to locate in China. Cheap energy makes America the low cost producer.

It also differs because there's nothing artificial about the cheap energy: it is coming cheaply out of the ground. Whether you export it or force the chemical companies to come to the U.S., demand will increase and push the price up. The issue is really about where the jobs are located.

Anonymous said...

"Apple could not have happened if the US government had protected Intel in memory chips."

First, what?

Second, who cares about Apple? It's the Pepsi of computing. If it didn't exist, nobody would be any worse off in reality.

Orthodox said...

This is solely an issue of jobs, not competition. It's about the structure of the economy, whether you sell off the natural resources (Saudi Arabia) or you vertically integrate and have more economic activity within the United States.

Most protectionism fails because it requires keeping out foreign competition. But there's no blocking of foreign competition: Americans can import foreign energy and foreign companies can build chemical factories. It is about securing a competitive advantage for the American economy.

Think of it another way. Imagine America invested $100 billion in a slew of advanced nuclear reactors that gave the American economy the lowest energy costs in the world. Would you suggest exporting those reactors to foreign countries, or do you think they should stay in the U.S. and give the entire economy a competitive advantage? With cheap energy, it is the luck from nature that delivers this advantage.

Anonymous said...

production of nat-gas will decrease if trade is restricted, and prices will go up. Wells are made with the expectation that one day the gas will be sent all over the world, to the highest bidder, which funds further expansion. Let the world benefit from our plentiful gas. In 10 years, most countries will have cheap gas by fracking their own shale, the time to make money is now.

Hunsdon said...

Various and sundry:

There's much to say for a wood fired oven, smoker or grill, but it's hard to beat the convenience of cooking with propane and propane accessories.

In commentary to a later post, someone mentions Yglesisas' use of "density"; it's odd, then, to read Krauss and Schwartz write about a plan to "increase the nation’s weight in the global economy." Odd phrasing, wot?

When discussing protectionism, it is important to realize that every tariff ever is Smoot-Hawley, or was Smoot-Hawley, or will be Smoot-Hawley.

Steve said: So, we seem to be at a point where we can take steps for the long term national interest, rather than just do whatever is easiest in the short term.

Hunsdon said: ! If only it proves to be so.

Ninja Visser said...

Think about it this way. If its sold off to fuel China, the profits go into 1 set of hands only, the oil companies. I guess in a round about way, it comes to Americans in the form of higher tax receipts to the gov't, but we can count on them pissing all that away on welfare, money to special interests, teacher benefits, etc.

If it instead is used to strengthen manufacturing, the proceeds get spread out into many more hands within the US.

Julio Goldstein said...

Even if this boost to our economy does come about, don't look at it as restoring America back to its past glory.

Because our population is growing at a faster rate than, say Japan,and the growth is mostly low IQ folks, we have to keep cheap energy at home to bolster the economy just to keep from further sliding down the economic hole.

Engineer-Poet said...

"my vague hunch would be that the U.S. should ... use it to capture a larger share of more value-added businesses than just natural resource exports."

Or use it to displace expensive petroleum.  The trucking industry is starting to switch from diesel fuel at $30/million BTU to liquid natural gas at maybe $8-10/million BTU at retail.  Compressed natural gas can do the same for gasoline in personal vehicles.

"slowing the exploitation of frackable resources a few years until domestic industry can make better use of them"

Unfortunately, the industry locked itself into many "drill or forfeit" contracts and cannot slow down.  Such contracts are part of the valuation of the company, and letting them lapse means bankruptcy (and suits against the board and management).  Of course, drilling gas that doesn't pay back the cost of the well means bankruptcy too, but there's a chance that prices will go up and rescue them if other companies go bust and stop producing first.

Rod Adams (who blogs at Atomic Insights) opines that the oil majors, who bought into gas in a very big way a few years ago, are selling it at a loss to use combined-cycle natural gas generators (with some greenwashing from wind farms) to kill the nuclear power renaissance.  Once the nuclear industry has been put down again, they'll bring prices back up.  The moral of THAT story is that Liveris should be looking back to the original idea of splitting uranium to get his process steam, not burn gas as in the fallback scheme which became the Midland Cogeneration Venture.

Difference Maker said...

Personally I am inclined toward more protectionism, and not just because I read Sailer.

America is a continental country, (formerly) the greatest and most powerful in the world. Free trade is predicated on each country doing what it does best, but for that to benefit all each country would actually have to have something to contribute.

It is not a mere case of bananas versus textiles as may be found in our textbooks; fundamentally, the inequality goes further, to the unmentionables, to become a matter of human capital.

The United States already had perhaps the best human capital in the world; the rest of the world, especially the third world, offers only what amounts to little more than slave labor, which is why our rulers are so eager to import them.

Leaving aside the philosophical questions of what benefits a nation, who, whom, and what constitutes a nation, it is plainly the case that the greatest power and strength, the greatest wealth and advance comes from the difficult, rare, and complex products, the 'value-added' goods such as only an advanced first world nation can create, and for the nation within whose geographical boundaries we dwell to prosper, these are the products we should aspire to do.

Indeed, allowing other nations to make them only gives them a competitive edge against us. If there are truly advantages then perhaps the happy dream of free trade may then have been realized, but in the meantime, the despoiling of our natural resources, our human capital, our manufacturing base, can hardly be good for the future strength and power of the nation.

Jill said...

"In the United States, roughly 15 proposed gas projects await regulatory approval"

What they are referring to is the regulation that requires DOE approval for natural gas exports to countries that do not have a Free Trade Agreement ( FTA ) with the United States.

Under current law ALL natural gas export requests to countries that have a Free Trade Agreement with the US MUST be immediately approved.

http://tinyurl.com/knp7ca7

Japan does NOT have a FTA with the United States but they are a huge investor in projects that for which approvals for natural gas exports have already been approved or are pending...

"Japan's major trading houses Mitsui, Mitsubishi, and shipping company Nippon Yusen Kabushiki Kaisha or NYK have agreed to take a combined 33.2% stake in the Cameron LNG project in Louisiana..."

http://tinyurl.com/m5loybk

U.S. Approves More Gas Exports ( Non FTA ) FREEPORT PROJECT Conoco Philllips, Dow Chemical, Osaka Gas Gas and Chubu Electric Power $10 billion facility in Quintana Island, Texas permit the Freeport LNG Expansion and FLNG Liquefaction to export up to 1.4 Bcf/d over 20 years from the multi-billion-dollar facility on Quintana Island,Texas.

http://www.news-to-use.com/2013/05/new-view-20-may-2013.html

"The US state of New Mexico is one of the North American gas-producing provinces being eyed by Japan's national oil company as a potential future source of natural gas for the energy-hungry island nation.

Hidehiro Muramatsu, general manager of the Washington office of the Japan Oil, Gas and Metals National Corporation, last week toured gas fields in New Mexico's San Juan and Permian basins, and met with producers and their industry association representatives and state officials."

http://tinyurl.com/m8ndn96

"LNG export applications that the Dept. of Energy has approved or is in the process of reviewing includes a contemplated 29.93 billion cubic feet per day of export capacity equivalent to 43 percent of U.S. natural gas production and almost 96 percent of global LNG imports in 2012."

http://tinyurl.com/mq7thap

What or who are behind all these approvals?

Bankers.

Profits for exporting natural gas are HUGE.

Which bank is the biggest shipper of commodities?

Morgan Stanley.

On just one shipment of LNG from the Sabine Pass terminal ( one of the first to win approval for shipments to non-FTA countries ) Morgan Stanlet earned 16-2 million dollars...

http://tinyurl.com/6lk9wyh

Merchants know no borders.
Alexander Hamilton





Anonymous said...

"Could U.S. rebuild manufacturing by not exporting fracked gas?"

Yes. They could trade cheaper energy for cheaper labour.

If the elite were interested in the long-term health of the American nation as a nation it would be a complete no-brainer.

I actually thought for a while that the oncoming USUK economic collapse - caused ultimately by their both being controlled by and for the sole benefit of their financial sectors - was going to be averted by fracking.

Silly me.

Anonymous said...

Mercantilism has two forms.

1) Protectionism is the form for everyone who isn't top dog.

2) Free Trade for the top dog.

"Free Trade" is the top dog's version of protectionism i.e. if your nation has most of the competitive advantage then you *force* people to trade with you.


When Britain was top dog exporter Britain supported Free Trade and America was protectionist. When America took over as top dog exporter they switched to supporting Free Trade.

Once America lost the top spot they should have switched back to protectionism again as promoting and enforcing free trade when you're not the top dog exporter basically lets your country to be looted or more accurately in this case lets the elite loot the country under the guise of free trade.

Sam said...

Economics is an analytical tool but not a normative one. Any economists who says "pursue policy x" is favouring one group or another. All policy therefore is about trade offs and is an ethical choice NOT value free.

I would respect a protectionist who admitted that their policy is a social welfare scheme and not a way to boost GDP. I might even support that but don't pretend it creates wealth. Likewise any economists who says we need more immigration from third world countries should admit they are only valuing GDP and are not discounting social and cultural factors. Then at least we can have a real debate.

Energy policy can be handled by the market and is handled by the market in a sofisticated manner. Don't forget that market signals also give signals to the inventors who find new ways of getting energies. This is a crucial part of innovation. But sadly American elites thought that the energy problems of the 70's was down to not having an energy policy. http://wiki.mises.org/wiki/1973_oil_crisis

Anonymous said...

"Why don't we let the market decide?"

Because the "market" doesn't exist as a market most of the time.

Cartels exist and call themselves a market but they're not.

So whenever a corporate shill (or a youngster with no understanding of human nature yet) says "why don't we let the market decide?" you should always translate that mentally into "why don't we let the cartels decide?"

The most important sentence in economics is:

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public"
Adam Smith

Anonymous said...

"I would respect a protectionist who admitted that their policy is a social welfare scheme and not a way to boost GDP."

I'd call it a national cohesion policy rather than a social welfare policy but otherwise yeah, the primary purpose is something other than boosting GDP.

poolside said...

I lived near Dow's Freeport plant in the '80s. It employed thousands of white guys -- including managers and engineers with college degrees -- and many, many blue-collar employees who were highly paid (to keep unions out).

The county used to be one of the wealthiest per capita in the U.S., amazing considering that it was so industrial and not a banking or insurance center.

Two years ago I visited the Freeport/Lake Jackson area. Latinos were everywhere; the white "bubbas" who used to dominate the community were in short supply -- or maybe they were just hiding.

My guess is that a lot of the blue-collar jobs at Dow are now held by guys named Juan or Rodrigo and not Bubba or Billy Bob.

Anonymous said...

Lest we forget, the wealth of industrial Britain was built on coal. Of course, enlightenment era Britain was brimful of enquiring minnds, inventors and improvers and subscribers to scientific societies, but the key invention that really heralded the modern era of wealth creation was the steam engine. For the first time grunt drudgery could be surpassed by the magic of steam pressure pushing against a piston. Britain, an island built on coal was able to fire these engines up and se them to do all sorts of things. Continental nations not blessed with coal perpetually moaned that their carbonless status was keeping them poor and backward and at a permanent in-built disadvantage, Hence fascism. It was the coal fields of Pennsylvania that made America great, later it was the discovery of oil in that same state which propelled the USA to its unbeatable first place position. The oil shocks of the 70s (gosh, how we've forgotten them!), really showed that oil was the lifeblood of the modern economy.
Many rational analysts looking at the problem (whether to conserve or to export?), will make the call that ultimately GDP is based on energy. Yes I can hear the quibbles already 'human factors!','trade solves everything!' etc etc. But the fact is that the trend-line of historic economic growth in western nations is more or less a mirror image of the prevailing oil price. Basically our cars and trucks run on gas - and not hot air spouted from theoretical economists. The question is whether to sell the shale gas for bucks today or conserve it for growth tomorrow.Yes, yes, yes I know that cold hard cash pays for imports strenghthens investment etc etc, but the role of energy is analogous to the role of glucose in the human system. In a world where energy eating machinery does all the work, (and therefore makes all the GDP), any reduction in the energy supply has the effect of killing off the generators of wealth in the first place. It is a dynamic system in which the energy burned is crystallized as wealth produced.Blah, blah, blah, I don't know what I'm talking about and in the 'new economy' we can all sell sub-prime portfolios, by I-pods off the Chinese and having Mexicans mow the lawn. Nothing actually 'produced' and nothing so ante diluvian as oil burned.

Anonymous said...

"Eric Falkenstein said...

The energy debate gets co-opted by the insiders right away, why libertarians are wary of this approach."

Based on your many posts on this thread - by a person, I might add, whom I have seldom if ever seen post here - I would conclude that this debate is already being co-opted.......by libertarians such as you.

Mr. Anon said...

You are forgetting, Steve, that we exist to serve the economy, not the other way 'round. And the Economy, like Kali, is a jealous God - she demands frequent human sacrifice. Glory in the highest to the Economy!

jody said...

it's just a matter of making the most money.

liveris wants to make the most money, so he wants a reliable and steady supply of cheap materials supply to produce ethylene for lower costs than his competitors.

the energy companies want to make the most money, and they can make more money by exporting natural gas than by selling it to domestic buyers. so they will export.

it's that simple.

good point by steve about existing nuclear reactors not even being around in the elysium time frame. 100% of all commerical reactors in operation in the US today will be long gone by 2100. that's 20% of current US electrical generation, gone. and almost no new ones are being built. see my comments in the 'soviets in LA' thread for more. the future day to day life for the average guy in 2154 is not looking good, under current projections.

as far as natural gas goes, the only relatively unknown factor is what the production of shale gas will be outside the US, once george mitchell's horizontal fracturing gets all around the world. poland was thought to have a lot of shale gas, but turned out to not have it, though other nations in eastern europe may have large deposits. china seems like it has some projects in the works, which simply strengthens their resource grip even more.

jody said...

what's depressing is how when conservatives do stuff, like invent horizontal fracturing or lock all the violent criminals in prison for years or lower federal income tax rates for all income brackets, it helps everybody, but when liberals achieve their political goals, it mainly hurts their political opponents (conservatives) but doesn't really help anybody or the nation in general. you get to the point where you almost start hoping that various projects fail, or even that the nation fails, just so the current democrat in office can't take credit for it's success, while at the same time smashing the people who came up with it.

national increases in oil production becomes "I did that" from hostile democrat presidents while at the same time they mock their republican opponents "LOL these stupid Replicans and their drill baby drill rhetoric, that doesn't work" when that is exactly what is working.

GDP growth in red states becomes "I did that" from hostile democrat presidents, celebrated as economic growth spurred by the president and subsumed into national GDP growth that, without it, falls below 1%. meanwhile at the same time they toil endlessly to smash that growth with socialist legislation like PPACA, locking future generations permanently into 29 hour a week no benefits jobs.

declining violent crime rates in cities become "I did that" from hostile democrat mayors while at the same time they toil endlessly to paint their republican opponents as racists and figure out ways to get the violent criminals more lenient sentences and shorter prison stays, and seeking to disarm all americans (which would cause the violent crime rate to soar).

however democrat victories, like open borders, creates huge wealth disparities and a permanent 'the 1%' situation, become a tool to bash republicans with. "The Republicans are destroying the middle class. The middle class! The middle class! We need to strengthen the middle class!" by opening the borders wide, i suppose.

Anonymous said...

Steve Sailer should be careful what he wishes for. He wants to ban energy exports so as to provide an advantage for US manufacturers (who would presumably create higher paying jobs).

If the manufacturing jobs boom were to materialize, the US would face a shortage of labor, and it would start importing labor. This has always happened, *even in China*. China has of course imported them from interior provinces to coastal provinces (some coastal provinces saw 40% population gain). The scale of migration involved in a manufacturing boom would be huge, because each manufacturing job would involve many services jobs.

Immigration would become a hot issue again - this time, there would be "keep them coming" crowd will win.

If you don't believe in this, look up what even relatively small manufacturing booms do to regional economies.

Sailer thinks energy export restriction would create a manufacturing boom that would help only "his" in-people, but US *will* import people on a large scale, most of whom, ahem, Sailer won't approve.

Law of unintended consequences.

David said...

>I would respect a protectionist who admitted that their policy is a social welfare scheme and not a way to boost GDP. I might even support that but don't pretend it creates wealth<

Creates (or doesn't create) wealth for whom?

"Protectionism" helped to create the wealth of the United States.

Old Odd Jobs said...

"Any economists who says "pursue policy x" is favouring one group or another."

I agree. Protectionism protects producers at the ultimate expense of the consumer. There are your groups. I say, pick one!

Dan Kurt said...

re: "The moon is constantly illuminated on the near side."and " Then the energy could be beamed via microwave back to the planet." ANON 8/16/13, 6:31 PM

Nonsense.

The moon is tidally locked to the earth not the sun. The moon has a moon day, a synodic period, of 29 days, 12 hours, 44 minutes plus (approximately), half of which is in full sunlight and the other half in darkness.

Beaming microwaves from the moon to the earth* as a means of supplying the earth with power fails secondary to beam dispersion among other physical hazards.

Dan Kurt

*221,600 mi at perigee and 252,500 mi at apogee.

Dan Kurt said...

re: "The future is long, the supply of fossil fuels is, ultimately, finite, and alternative energy sources are not making edifying progress" iSteve

The future is unknown. It may not be "long" but quite short for a variety of problems including: societal collapse, being conquered, catastrophe, or even The Singularity arrives. Given the uncertainly, why not exploit the natural resource of methane as it is needed now by the country and the world.

That "the supply of fossil fuels is, ultimately, finite" is debatable and probably false. Most methane probably is not of biologic origin but is likely abiotic, perhaps a remnant from the earths formation or secondary to a heat and pressure driven reaction of carbon deep under the crust; carbon entrapped during the earth's formation. You are aware of the methane of Titan the largest moon of Saturn, no? Lakes of methane there certainly are abiotic. With the volume of the earth being so vast and assuming methane outgassing will continue apace, methane for all practical purposes is closer to being an infinite resource given a human life span and the life span of a human enterprise or civilization.

As to "alternative energy sources are not making edifying progress," tell the Chinese and Indians that and they will laugh. Atomic power is being pursued full speed ahead. If the anti-nuclear crowd continues to stifle the atom produced power, methane will truly be needed along with coal to keep the USA supplied with power.

Personally, I would like to see the chemist's reactor developed: the thorium reactor. My undergraduate P. Chem professor had worked on the development of the Navy's nukes. He was convinced that the Thorium reactor was destined to eclipse the Uranium ones. Thorium has three advantages: 1) hard to make bombs from its cycle, 2) Thorium >20 times more abundant than Uranium and it doesn't need to be enriched (no isotope separation), and 3) radioactive "waste" is minimal as it is burned up by neutron capture during the cycle including "nuclear waste" from standard nuclear plants if so desired. Molten Salt Thorium Reactors are not being built because of politics, there is no other reason.

Dan Kurt

notsaying said...

Given the way productivity has increased -- so that usually dozens (or fewer) do the work of former hundreds -- I do not believe any manufacturing boom would lead to a labor shortage.

We have tens of millions who are idle or working part time. Many never did manufacturing work but could be trained to do so, and would much rather make $15-$20-$25 an hour, say, than $10 or less doing retail or fast food work.

Is anybody expecting we're going to have another 30-40 million factory jobs in the next 20 years? If so, then maybe we'll have a shortage of people who could do those jobs.

i think the problem is that even a big manufacturing boom, in this age of computerization and the use of robots, would probably not give jobs to even 10 million more Americans.

The chronic shortage is good jobs, not people available to do them. That's what we should be worrying about.

David Davenport said...

Natural gas is not efficient to transport

Nope, gaseous natural gas, whose active ingredient CH4, is quite transportable in pipelines. There are nat. gas pipelines all over the USA.

Natural gas is exportable across oceans in the form of liquified nat. gas. natural gas tankers

Although I too have doubts about free free free enterprise cant.

///////////

"Apple could not have happened if the US government had protected Intel in memory chips."

First, what?

Second, who cares about Apple? It's the Pepsi of computing. If it didn't exist, nobody would be any worse off in reality


Development of all electronic integrated circuits, including microprocessors, happened because the Dept of Defense, and, to a smaller extent, NASA, subsidized infant integrated circuit firms, including Fairchild ( maker of the CPU for the Apple II), and Also Intel's earlier generation CPU's.

Electronics, along with aircraft, exemplify the success of 20th century American industrial policy -- not pure free enterprise.

Anonymous said...

If the manufacturing jobs boom were to materialize, the US would face a shortage of labor, and it would start importing labor.

We had a manufacturing boom beginning with making armaments for WW2 and the post war boom. Yet we did not open to mass immigration until 1965. During this boom we only took in around 150K immigrants per year.

This is the period that NumbersUSA refers to as the "Golden Age" of immigration. Very few immigrants led to labor becoming more scarce which led to higher wages and a better standard of living.

Technological innovation would come about to compensate for any labor shortage.

Anonymous said...

I agree. Protectionism protects producers at the ultimate expense of the consumer. There are your groups. I say, pick one!

The point is that more people become producers and earn high wages, with which they consume.

whitehall said...

When Ed Markey (D-MA) came out early for restricting gas exports, my mind was made up - do just the opposite. Markey was hoping to keep gas prices low to disadvantage nukes. I'm with the commercial nuclear power industry so I know when I'm getting screwed.

If Dow Chemical wants government action to keep its inputs low, I want government action to keep MY purchases of chemicals LOW.

One energy economist I know and respect, Ferdinand Banks, would argue that energy export protectionism can be be a good thing. He argues that Sweden's big economic advantage was it early hydroelectric industry followed by early nuclear program. Both kept Swedish electricity prices very low compared to its neighbors. Swedish economic advantage disappeared once the leftist government allowed the Swedes to join the grid with Germany, rising Swedish prices. The profits went to the Swedish welfare state at the cost of jobs.

But let's get calibrated. First, current domestic gas prices at $3.50 are below the fracking production cost of $6 to $7. That's why the gas production companies are not getting rich.

Gas at the import terminal in Tokyo goes for $13 but it costs $4 to liquify and transport it leaving a small but useful profit margin. The US has supply competitors too - like Australia and Russia.

We have plenty of options at reasonable cost for our electricity and for our natural gas. No need to dick around by government.

I see no reason to not become an energy exporter once again. Those profits by the gas producers turn into dividends that fund my pension and 401k as well as getting invested in new opportunities.

We can live with and prosper by exporting our resources to the world. Bring it on.

Robert Huang said...

I'm Chinese and I agree with you that Hank Hill is a good role model of manhood. I definitely understand why you have a soft spot for him.

Anonymous said...

"Australia has the highest median wealth in the world according to this report."

A report that shows median wealth in UK is much higher than median Swiss wealth - probably because property prices have inflated so much. No one could argue that the median Brit is actually better off then the median Swiss.



Anonymous said...

http://www.salon.com/2013/08/05/home_depot_founder%E2%80%99s_quiet_10_million_right_wing_investment/

"FDD’s second largest contributor is hedge fund billionaire Paul Singer, a major fundraiser for Romney’s presidential campaign and a significant campaign contributor in his own right. Singer, who gave $3.6 million to FDD, infused $1 million into Restore Our Future and over $1 million into the American Unity PAC, a Republican Party PAC that supports gay marriage."

Anonymous said...

"Many rational analysts looking at the problem (whether to conserve or to export?), will make the call that ultimately GDP is based on energy."

That's what this guy thinks.



http://ftalphaville.ft.com/files/2013/01/Perfect-Storm-LR.pdf

Anonymous said...

"Technological innovation would come about to compensate for any labor shortage."

And ultimately technological innovation is where real wealth and prosperity comes from.

Anonymous said...

"If the manufacturing jobs boom were to materialize, the US would face a shortage of labor, and it would start importing labor." - Under the American system they would be unable to do this, and would have to invest in labor saving capital and technology instead.

Anonymous said...

"You are aware of the methane of Titan the largest moon of Saturn, no?" - The relevant question is how long did those take to form? A source of energy that takes thousands if not millions of years to form is no good if we use it up in decades.

"1) hard to make bombs from its cycle" - This is probably the number one reason why no one is wasting time with Thorium.

Sam said...

David said:

"Creates (or doesn't create) wealth for whom?

"Protectionism" helped to create the wealth of the United States."
If protectionism is so great why not apply it to each individual state? That way all states can become rich.

Protectionism protects producers who can't compete with foreign producers. It hurt producers who rely on importing materials for their production. So in reality you might prefer to protect American steel producers but you will hurt all the producers who need steel. Those parties will be hurt. Not to mention all consumers are hurt because of a lower living standard.

So perhaps instead of saying "protect American jobs" protectionist could specify what American jobs they want to sacrifice.

On the flip side I think free traders are wrong to point to the protectionist policies as being the reason for Japan's "lost decades". In reality they haven't been as lost as the WSJ wants it to be. The cause of Japan's problem lies in the monetary bubble of the 80's which the government handled by protecting the banks who refused to let their banks restructure. This has strangled economic life. We would be wise not to protect our banks and big industries too at the expense of everybody else. Somehow I don't bringing the likes of Summers, Yellen, Geitner, etc will change much.
http://www.lewrockwell.com/2010/12/gary-north/the-zombie-banks-feast/

Engineer-Poet said...

"the Dept of Defense, and, to a smaller extent, NASA, subsidized infant integrated circuit firms, including Fairchild ( maker of the CPU for the Apple II)"

NB:  The 6502 which powered the Apple ][ was made by MOSTEK, not Fairchild.

Anonymous said...

Falkenstein is a finance guy. He wants an economy that produces high stock prices and dividends for his portfolio. Not an economy with high wages. High wages eat into profits hence stock prices and dividends and his portfolio.

Just think about how terrible an economy with high wages would be for guys like Falkenstein. Not only would their portfolios be smaller due to the inability of firms to raise profits by slashing wages, but with high wages, people might start acting more independently, using their higher wages to invest in human capital, in themselves, in their children and families, in their neighborhoods and local economies. They might not desperately dump their money into the financial market for guys like Falkenstein to skim off and to bid up stock prices and fatten his portfolio.

Philip Neal said...

Is what Liveris proposes protectionism? The word usually refers to a ban on imports but he wants to ban an export. This is not a new idea. At one time, Australia banned the export of iron because of a groundless fear that its reserves were near exhaustion, and when North Sea oil was discovered there was serious debate in the United Kingdom whether we should export it or reserve it for our own use.

Liveris claims that the effect of this measure would be to make shale gas cheaper for Americans in general and specifically for American corporations such as his own. Is it a general principle that export bans lower the price of goods? I am not an economist but I find it hard to believe that their general effect is to raise the standard of living.

A Working Class American said...

jody said...
what's depressing is how when conservatives do stuff, like invent horizontal fracturing or lock all the violent criminals in prison for years or lower federal income tax rates for all income brackets, it helps everybody, but when liberals achieve their political goals, it mainly hurts their political opponents (conservatives) but doesn't really help anybody or the nation in general.

==============================



Who appointed most of the judges sitting on the supreme ct right now? Conservatives. And this supreme ct just upheld affirmative action. That's a bad thing.

The last two leaders of the GOP (bush and romney) both paraded their pro-immigration stances proudly. That's a bad thing.

The Dems at least instituted some sort of national healthcare. That's a good thing.

The Dems raised the taxes on the rich. That's a good thing.

By at least one metric obama has deported more illegal invaders than Bush. That's a good thing.

Anonymous said...

It worked well in Japan.

Yes and no. Japan is sitting on a ticking time bomb that is going to be the mother of all crises to come.

Anonymous said...

http://topconservativenews.com/2013/08/asian-issue-of-time-magazine-calls-for-majority-non-white-australia/

Time magazine calls for majority non-white Australia.

Anonymous said...

"I am not an economist but I find it hard to believe that their general effect is to raise the standard of living."

It would be a simple trade-off, cheaper energy in the US compensating for cheaper labor elsewhere.

Dave Pinsen said...

"If protectionism is so great why not apply it to each individual state?"

The point isn't that protectionism is great, but that unilateral, unregulated free trade is naive and stupid. Within the United States, we have regulations that prevent a race to the bottom in wages and environmental standards.

Engineer-Poet said...

Also, the people who are convinced that Earth's natural gas is abiotic because there's so much of it on e.g. Titan...

FOR PETE'S SAKE, STUDY SOME SCIENCE!  On Titan, water is a mineral which is harder than steel!  Titan circles a gas-giant planet which is substantially composed of molecular hydrogen gas, captured from the primordial solar nebula.  This can only happen where it's very, very cold.  There is NO comparison to small, hot, rocky bodies like Earth.

If Earth's oil and natural gas were abiotic, they would pop up everywhere.  Every volcanic vent would catch fire from the combustible gases.  This does not happen.  Oil and gas are exclusively associated with organic-rich precursor rocks from ancient shallow seas.  Coal has recognizable parts of trees in it.  IIUC the end of the formation of coal coincides roughly with the evolution of termites, which does not appear to be a coincidence.

David Davenport said...

The point is that more people become producers and earn high wages, with which they consume.

But what if some of the USA's additional peepul, such as Mexicans, stay poor for generation after generation north of the border?

NB: The 6502 which powered the Apple ][ was made by MOSTEK, not Fairchild.

That is true. I stand corrected.

The last two leaders of the GOP (bush and romney) both paraded their pro-immigration stances proudly. That's a bad thing.

No, Romney made several statements that were immgration restrictionist, such as encouraging illegal immigrants to "self deport." Who knowsif Mittens would have actually restricted illegales hadhe wonthe election?

"If protectionism is so great why not apply it to each individual state?"

It's unConstitutional for American states to have tariffs on interstate commerce. Violatesthe 10th Amendment. A bit from http://en.wikipedia.org/wiki/Interstate_commerce>Wikipedia: Interstate commerce

In Gibbons, the Court struck down New York's attempt to grant a steamboat monopoly to Robert Fulton, which he had then ultimately franchised to Ogden. Ogden claimed river traffic was not "commerce" under the Commerce Clause and further that Congress could not interfere with New York State's grant of an exclusive monopoly within its own borders. Ogden's assertion was untenable: he contended New York could control river traffic within New York all the way to the border with New Jersey, that New Jersey could control river traffic within New Jersey all the way to the border with New York, leaving Congress with the power to control the traffic as it crossed the state line....

Dan Kurt said...

re: "Abiotic 'fossil' fuels--FOR PETE'S SAKE, STUDY SOME SCIENCE!" Engineer Poet

Must have touched a nerve. Take it up with Mendeleev of the Periodic Table of the Elements fame and an army of Russians since Mendeleev proposed the abiotic theory as well as the late Thomas Gold who even explains the formation of coal by an abiotic process: akin to how petrified wood and petrified fossils come about. BTW, the formation of the planets and their moons is far from "settled" science.

Dan Kurt

Sam said...

Dave said:
"The point isn't that protectionism is great, but that unilateral, unregulated free trade is naive and stupid. Within the United States, we have regulations that prevent a race to the bottom in wages and environmental standards. "

There is no race to the bottom when it comes to wages. If that was true then you should expect all American based jobs to be tending towards the minimum wage. Obviously that isn't happening. People's wages don't rise because of protectionism. I don't think you understand what makes wages rise.* I agree with Sowell, Hoppe and Borjas and others who point out that supply and demand also holds true of immigration. So while being a libertarian I strongly support immigration restrictions.

* How wages actually rise
http://www.tomwoods.com/blog/the-fast-food-protests/

David
I'm well aware of what the law says. My point was more trying to get people to understand that the same reason we don't want protectionism at a local level is the reason we don't want it at national level. If protectionism creates wealth then 50 American states having protectionism would be great and we should move to make that new law. I doubt anybody really thinks that but it is the logical outcome if you believe protectionism=wealth.

Anonymous said...

"There is no race to the bottom when it comes to wages. If that was true then you should expect all American based jobs to be tending towards the minimum wage. Obviously that isn't happening." - Because people are opting to not work at all, which is why the participation rate is crashing. Once peoples options are work or starve, wages will crash hard.

Engineer-Poet said...

"Must have touched a nerve."

I've had enough stupid nonsense thrown at me to last several lifetimes.  This goes double for politically-motivated nonsense aimed at getting people to disregard elementary science to support the goals of the likes of OPEC.  What's most amazing to me is that there are seemingly intelligent people who take it seriously enough to repeat it, as if they believe it.

"Take it up with Mendeleev of the Periodic Table of the Elements fame and an army of Russians since Mendeleev proposed the abiotic theory"

Right, because a 19th-century chemist must have known everything, whereas a few obvious and required consequences of the abiotic hypothesis (such as volcanic vents belching combustible fuels) NOT BEING THERE are ignored.  Know what science calls a hypothesis that says we should see things we can test for, and do not see?  A failure.

There are actually some abiotic fuels created through geological processes.  The hydrogen sulfide that comes out of hydrothermal ocean vents is an example.  Something you might notice is that it's not methane, it's not oil, and it's nothing close to abundant.

"as well as the late Thomas Gold who even explains the formation of coal by an abiotic process"

Right, because all the carbonaceous stuff containing recognizable leaves, branches and roots must be abiotic in origin.  (That was sarcasm.)

"akin to how petrified wood and petrified fossils come about."

Petrified wood results when precipitated minerals replace cell walls and such.  Petrified wood is NOT carbonaceous.

"BTW, the formation of the planets and their moons is far from "settled" science."

Then tell me why there's negligible free hydrogen or methane in the atmosphere of any planet inside of Jupiter.

Please feel free to go to Titan to pick up all the "free" methane you can find.  If you base US policy on nonsense ideas, you can take the country out of the frying pan into the fire.  I ridicule these ideas because they ARE ridiculous, and I'm constantly amazed that people cannot see this even after having it explained to them.

Dan Kurt said...

re: "Petrified wood results when precipitated minerals replace cell walls and such. Petrified wood is NOT carbonaceous." Engineer-Poet

You totally missed the point, totally.

As to your other comments, enjoy your manufactured reality. Debating you would be a waste of time as you assume too much and lack the imagination to break free for your logic tight understanding of science.

Enjoy your poetry.

Dan Kurt

Engineer-Poet said...

"You totally missed the point, totally."

WHO has missed the point?
The best you can do is teach
"Handwaving for Fools".

"As to your other comments, enjoy your manufactured reality."

Constructed from what?
Straight answers foreign to you?
Typical sophist.

"Debating you would be a waste of time"

The classic excuse.
Your problem is that you have
No answer to give.

"you assume too much"

That's a funny claim.
Sharper minds' consensus is
You know too little.

"Enjoy your poetry."

Oh, indeed I do.
Now and then I do indulge.
Mock you very much.

Anonymous said...

Well, the biggest growth in Blue Collar jobs seems to be Truck driving not everyone likes to travel across the US but Trucking is growing faster than manufacturing.

David said...

>So perhaps instead of saying "protect American jobs" protectionist could specify what American jobs they want to sacrifice.<

Offshoring has not been a net job creator in the United States.

And, more broadly, the wealth of a nation is not equivalent to the stock market.