Sunday, September 27, 2009

Freidman: The New Sputnik

In their normal sophisms, the GOP tells us that it is pointless for the US to combat global climate change, because countries like China will just keep polluting anyway.  Although it sounds right, this GOP rational is, as usual, flawed.

sputnik Most people would assume that 20 years from now when historians look back at 2008-09, they will conclude that the most important thing to happen in this period was the Great Recession. I’d hold off on that. If we can continue stumbling out of this economic crisis, I believe future historians may well conclude that the most important thing to happen in the last 18 months was that Red China decided to become Green China.

Yes, China’s leaders have decided to go green — out of necessity because too many of their people can’t breathe, can’t swim, can’t fish, can’t farm and can’t drink thanks to pollution from its coal- and oil-based manufacturing growth engine. And, therefore, unless China powers its development with cleaner energy systems, and more knowledge-intensive businesses without smokestacks, China will die of its own development.

What do we know about necessity? It is the mother of invention. And when China decides it has to go green out of necessity, watch out. You will not just be buying your toys from China. You will buy your next electric car, solar panels, batteries and energy-efficiency software from China.

I believe this Chinese decision to go green is the 21st-century equivalent of the Soviet Union’s 1957 launch of Sputnik — the world’s first Earth-orbiting satellite. That launch stunned us, convinced President Eisenhower that the U.S. was falling behind in missile technology and spurred America to make massive investments in science, education, infrastructure and networking — one eventual byproduct of which was the Internet.

Well, folks. Sputnik just went up again: China’s going clean-tech. The view of China in the U.S. Congress — that China is going to try to leapfrog us by out-polluting us — is out of date. It’s going to try to out-green us. Right now, China is focused on low-cost manufacturing of solar, wind and batteries and building the world’s biggest market for these products. It still badly lags U.S. innovation. But research will follow the market. America’s premier solar equipment maker, Applied Materials, is about to open the world’s largest privately funded solar research facility — in Xian, China.

“If they invest in 21st-century technologies and we invest in 20th-century technologies, they’ll win,” says David Sandalow, the assistant secretary of energy for policy. “If we both invest in 21st-century technologies, challenging each other, we all win.”

Unfortunately, we’re still not racing. It’s like Sputnik went up and we think it’s just a shooting star. Instead of a strategic response, too many of our politicians are still trapped in their own dumb-as-we-wanna-be bubble, where we’re always No. 1, and where the U.S. Chamber of Commerce, having sold its soul to the old coal and oil industries, uses its influence to prevent Congress from passing legislation to really spur renewables

Inserted from <NY Times>

In today’s open thread, I noted how sorry the employment market is.  A lot of this results from Daddy Bush, Clinton (to a lesser extent) and Crawford’s favorite idiot screwed US workers by using taxpayer dollars to finance giant corporations’ relocation of their manufacturing divisions overseas.  You can’t unring a bell.  Those jobs are gone and we can’t get them back.  The GOP decided that making money is more important than making products, especially when their corporate masters don’t have to share the profit with all those greasy workers.  We are now paying the consequences for their greed and incompetence.  The best way to restore our manufacturing base, so we can profit from value, not just paper, is to take the lead in emerging technologies, such as green energy.  If we fail to do so, our great-grandchildren will live in a third world economy.


the walking man said...

Actually Tom this goes way back to the Truman administration and the GATT (General Agreement on Trade and Tariff)brought into being in 1948, This agreement was in effect for almost 50 years and was the precursor to the WTO.

The idea was to make a global economy that would prevent war for territory and resources from happening again. Lower trade barriers and basically divide the world into different zones that would spread the wealth around.

Asia was destined for development and manufacturing beginning with the Japanese economy reliant on export to build wealth was the model.

The developed nations were to be the worlds bankers and service providers and the wealth would be built through the service industries such as insurance and business, stocks spurred by consumerism based on that wealth.

The problem starts when greed for money and power became the basis for the accumulation of wealth. The west in essence saw that manufacturing was going to be lost and their citizens would lose wealth because of it began to un-regulate the financial industries in the belief that the wealth created would be shared through the creation of local industries set up to fill local needs.

Of course that did happen for a little while thirty/forty years or so. But then The Japanese, Chinese got hold of heavy industry mixed with lower rates for labor, the Caribbean and other parts of Asia took the textile and furniture industries and the non protectionist Americans Industrial giants not based directly in defense industries gave themselves willingly over to profit over principle.

the walking man said...

The problem is not that China manufacturers everything but that they are dependent on the rest of the world to consume what they manufacture for their economy to thrive.

As long as the Yuan is still tied and floating below the US dollar there will always be a less expensive labor market there. Clinton tried to get the Chinese to float there currency relative to the world market but was rebuffed.

All US manufacturers were sucked into Chinese manufacturing agreements thinking that the people of China would be able to afford the product they built there but with the lower wages few can afford to drive what they build.

The problem as I see it is that when a manufacturer goes into China to open a factory is that the science and technology automatically becomes a part of China's manufacturing culture.

We can do all of the R&D we want but China reaps the ultimate jobs benefit from that technology because of their labor costs.

I don't know because the theory is getting a bit above my head but if we have a rapid deflation of the cost of goods and services in this country than a lower wage rate could prevail as a living wage but as long as the Chinese float the Yuan relative to the dollar they will also experience the same deflation.

Regardless of the how this all came to be there is still a solution, but it may now be too late to implement it. I doubt that anyone wants to go back to the territorial method of economics that spurred two major wars in the last century,

So what is the solution? I for one think that all science and R&D done in a country should be licensed to another nation when a factory is built in that nation. Not the proprietary science but simply the how to.

Second in America we have vast local economies that could be developed along the same lines as the world economy is now presented. Trade for goods and services to benefit the regional economies before international trade. In other words don't short the citizens here by importing what can still be manufactured here.

I am not an economist but I do believe that until we somehow look to our own first and rebuild our own infrastructure (which would provide millions of jobs)using American made product we will continue to fail because we no longer have the wealth that the rest of the world depended on for their import export ratios. Trade imbalances which powered the rest of the world.

Brother Tim said...

I don't totally agree about them lagging behind us in innovation. Have you seen the new cities cities they're building? Very green and self-maintaining.

TomCat said...

Mark, thanks. That's great input. Here's the problem as I see it. We already owe China so much money (around $800.5 billion) that, if we do not keep consuming their products, they will have no incentive to keep financing our debt. Were China to dump its $US reserves, the recession of 2008 would seem a minor dip. I don't have a solution to offer.

Brother, that was Friedman's opinion, not mine. I think you are probably correct.

Brother Tim said...

I should have been more clear. I was not implying that was your opinion. :)

TomCat said...

No problem, Brother. :-)