So this is how it worked: Instead of greening our manufacturing base, amping up our recycling system, and competing on the basis of better production technology, we shipped our production to China, which is busy polluting itself and spewing carbon dioxide. In return, the Chinese took the hundreds of billions from sales to the U.S. and reinvested the money here, helping to make our sprawl even spawlier and our military even more wasteful.
According to an article from The New York Times, “Chinese Savings Helped Inflate American Bubble”:
In the 19th century, the United States built its railroads with capital borrowed from the British ... But Americans did not use the lower-cost money afforded by Chinese investment to build a 21st-century equivalent of the railroads. Instead, the government engaged in a costly war in Iraq, and consumers used loose credit to buy sport utility vehicles and larger homes. Banks and investors, eagerly seeking higher interest rates in this easy-money environment, created risky new securities like collateralized debt obligations.
So China and the U.S. are caught in a death spiral—well, maybe that’s too strong a phrase. By undercutting our manufacturers, in the long run the Chinese are destroying the very market that they are selling to. But they are terrified of upsetting the model that is “working” in China, creating the world’s biggest middle class and decreasing pressure for democratization. Meanwhile, the Americans desperately need the savings from China in order to keep the economic system afloat, and need to import cheap goods for the formerly well-employed working class.
This would be called colonialism, or imperialism, on the part of the U.S. if the U.S. owned China: they send us their goods for very little in exchange, in effect. And like all empires, we are concentrating on destruction and consumption, not production.
The rational solution for China, which the U.S. and Chinese governments have been trying to sell to the Chinese public, is to spend some of their own money at home instead of saving so much of it, creating pressure to park the saved money somewhere—like in the U.S. However, as the article states:
Chinese save with the same zeal that, until recently, Americans spent. Shorn of the social safety net of the old Communist state, they squirrel away money to pay for hospital visits, housing, or retirement.
In other words, it seems to me, the Chinese could solve this problem by providing the population with a safety net, with a national health system, social security system, and unemployment benefits. And then they could even buy U.S. goods and services.
The rational solution for the U.S. is to create a green manufacturing base, one that will employ millions in well-paying, high-skill jobs, instead of relying on financial shenanigans and real estate. As Michael Hudson has argued, higher prices for already-existing things does not add wealth to the economy; only creating goods and services adds wealth to the economy. And in order to avoid climate change, ecosystem destruction, and resource exhaustion, an entirely new production infrastructure needs to be put in place. And then the Chinese would have someone to sell to, and they might be able to get their ecological act together.
Obama administration may (finally) offer greenhouse-gas targets
City preps and countries posture ahead of Copenhagen talks
Comments
View as Flat
JMG Posted 5:06 am
27 Dec 2008
How about the US provide those things in the US? We have no national health system and skyrocketing health problems, we have destroyed our public health infrastructure, we have an overall health index score that ranks down below Cuba, and the lack of a real health system is distorting and destroying our economy as people are impoverished by any job interruptions that make them "pre-existing conditions" if they are able to find work with health coverage again.
Our social security system is pretty good at keeping the poor alive, barely.
Meanwhile, our unemployment system is no longer seen as an insurance benefit to help people weather the ups and downs of capitalism (and to help allow them to keep spending, which moderates those ups and downs) --- rather, business has succeeded in turning the system into an adversarial one where the unemployed are presumed to be lazy cheats trying to milk the system for the oh-so-generous benefits.
The 5% Project
Let's live on the planet as if we intend to stay.
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hapa Posted 6:56 am
27 Dec 2008
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Colin Wright Posted 6:59 am
27 Dec 2008
Now that's a campaign I could support (instead of timid requests for our leaders to fly to Poznan). As Mark Z Jacobson, Stanford genius, writes:
How many wind turbines, though, are necessary for the large-scale deployment of wind-BEVs? Assuming an RE Power 5 MW turbine (126 m diameter rotor),116 the US in 2007 would need about 73,000-144,000 5 MW turbines (with a 126 m diameter rotor) to power all onroad (light and heavy-duty) vehicles converted to BEVs (Fig. 9, ESI)... This number of turbines is much less than the 300,000 airplanes the US manufactured during World War II and less than the 150,000 smaller turbines currently installed worldwide.
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Jon Rynn Posted 8:31 am
27 Dec 2008
Actually, there's another serious savings problem that the Chinese government is responsible for. It turns out that the Chinese government forces the businesses that get all of those U.S. dollars to deposit them in government-owned banks, and it's those banks that then invest in the U.S. (this answers a question I once had for Patrick in Beijing, wish he would come back!).
Apparently there is some debate in the higher circles in China about giving the U.S. so many goods for cheap, when their own people are obviously much poorer. They could raise their incredibly undervalued currency, which would mean that their people could afford to buy things from other countries. They could also spend much of their bank savings on public goods like infrastructure (sound familiar?). They are doing this to some extent, and they may be forced to do it more and more as the U.S. sinks down and down.
And to get somewhat at Colin's point, there are large wind resources in China, they are quickly creating a wind turbine industry, and it would be a no-brainer for the government to put up hundreds of thousands of windmills.
So, hapa, the domestic market is big enough -- particularly with government investment -- that they should be able to produce most of their goods for the Chinese market, not for export.
Of course, if the Chinese go on the same kind of personal consumption binge that the US has, they'll just tear up the planet and the global economy will go boom (the bad kind). So that's probably another argument for large-scale government investment as opposed to the big houses/big cars kind of spending.
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Sam Wells Posted 9:36 am
27 Dec 2008
We all know that large steel components are made in foundries such as in Poland, Korea, Japan, and China, just to name a few key areas. Thing towers for wind turbines, solar refractories, and bridges and rails for mass transit.
Last I checked, the US does not have the ability to come up with hundreds of thousands of tons of high quality steel. To make steel, one must first make pig iron, a nasty process involving coal, coke, sulfur, and lime. Then you need to heat it up in an electric arc furnace to remove the carbon content (I'm thinking CO2 and waste slag here). True, a small amount of steel is recycled in the US, just using the arc furnace method.
But I think you got my point. I doesn't make sense to run basic industry here in the US with all its draconian environmental laws, so we import the steel, glass, and all kinds of nasties. Reverse the laws? I don't think so.
So we're in something of a jam. What bothers me is that we're facing a monumental crisis on the electrical side, yet we don't have the wherewithall to fix it because we need more steel for new power generation stations. Personally, I think we're shafted but in this time of peace and hope, I beg you to prove me wrong. -sammie
Onward through the fog
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hapa Posted 9:38 am
27 Dec 2008
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Jon Rynn Posted 10:40 am
27 Dec 2008
Electric arc furnaces, which are used to process scrap steel, use much less energy than making steel from iron. Much of the capacity to make steel from iron (I can't remember the term) moved from the U.S. to China. Now, the atmosphere doesn't care where the carbon comes from, so it wouldn't make things worse to make the steel here. Also, since the U.S. could more easily impose controls, it would probably be cleaner; we've been exporting our pollution. But basically, the need is to recycle steel as much as possible -- and let me point out that it's much, much easier to recycle steel than plastic.
However, steel and aluminum and concrete production, although they are big CO2 emitters, are not large percentage-wise. According to data I'm trying to figure out, from the IPCC, worldwide steel produces 3% of CO2 equivalent, and concrete the same. That's not great, but it's not a reason to not build wind turbines, particularly if it's from scrap, because if you replace all of the fossil fuel inputs for electricity, you eliminate 20% of CO2 equivalents.
Hapa, that would be quite a trick, eh, if decreasing trade between China and the US was mutually beneficial? It's supposed to be the other way around, of course. But the Chinese are investing in the US very unwisely, and they are sending us their goods for less than they should be, which both destroys our manufacturing sector and warps theirs.
Their currency is a good 50% above where it should be -- but we don't know, because it's not set by market forces. Much of this would work itself out if they just let their currency be set by the market. But they should also work to increase domestic demand -- which both the US and China recognize-- and they should invest more wisely, which is a subject that has yet to be broached.
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hapa Posted 12:23 pm
27 Dec 2008
so "unwise" is one way to put it, "harried" and "cornered by policy" is another. i thought it was plain that if they wanted to raise money fast they'd have to undersell. the whole "finance is reality" thing got started because there were too many cooks in the kitchen, it seems like. the low road was an easy choice, that and knowing japan's experiences starting up at the low end and stalling at the higher end and getting into carry trade....
anyway it's not all china's choice. their regional partners would also have to agree to shifting to selling into china and of course we never really heard the end of the oil story, in terms of chinese industry, at whatever scale and whatever cleanliness.
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Pangolin Posted 6:19 pm
27 Dec 2008
Another property of solar panels is that if the average chinese worker is counting on getting some portion of his/her income from solar panels then they have an incentive to agitate for a reduction in particulate emissions. That would include hassling coworkers, local businesses and neighbors who light smokey fires or otherwise ignore pollution control measures.
Finally, in the event a solar panel quits producing power entirely it's still a lump of high-grade silicon with significant residual value. A lump of gold is just a lump of gold in thirty years. A savings bond depends upon the issuer to honor it and the currency to not inflate beyond use. A stock depends upon the CEO to not loot the company. But a solar panel will produce an income as long as the sun is shining on it. That income will decline over the years but the panel will pay for itself several times before it ever reaches zero.
Of course all of this depends upon the relative cost of electricity in China adjusting to account for the effects of coal pollution but that has to happen anyway. Any significant fraction of a billion people with lung disease gets too expensive to support very quickly. If we could sell solar panels as a hedge against retirement people would buy them.
Put the Carbon Back
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Pompey Road Posted 1:08 am
28 Dec 2008
Traditionally these jobs are the higher paying jobs for the middle class and in fact this is the sector that created and sustains the middle and working class. You can't survive as a superpower for long without a strong manufacturing base and you can't survive as a country without a strong middle class. I am not really interested in seeing us try to revive the old smoke stack industry's but there is an opportunity here to create an alternative energy and transportation manufacturing sector that will support real growth and not just artificial bubbles based on Chinese credit.
I don't know if we are going to have to go to a more socialist capitalist model with the government picking up Health Care and Retirements thus allowing us to compete with the countries that follow that model. This is a question that will soon be answered by the big 3 U.S. Auto Corporations. The government funding for infra structure and upgrading the power grid will not spend us out of a deep recession or depression. Easing the pain with more borrowed money may be the compassionate thing to do but will do little to restore the health and vitality of the middle class. This may serve as a bridge but as the WPA and CCC government works projects never got us out of the 29 depression the Obama's new deal will not have the long term effect of restoring the middle class and our manufacturing base.
Corporate lobbyist reform will have to be the initial reform attempted if any of the other reforms and programs are to be successful. Outsourcing and the unfair trading practices of our trading partners will have to addressed in a more meaningful way especially the Chinese practice of devaluing their currency. We need to start turning out more engineer's and fewer liberal arts degree's. If you look at the ratio of engineer's produced in India and China now and look to where we have fallen in this regard one can see how and why we are losing our technological edge. We should be at the forefront of green manufacturing and those jobs should be geared toward rebuilding a strong middle and working class again.
The eons of time and nature was good to us down here. It was not until we become civilized that destroying our habitat become fathomable or fashionable.
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hapa Posted 3:47 am
28 Dec 2008
keynesian economists think, "because it was too small."
who's right? [tik tok, tik tok, tik tok]
THE KEYNESIANS. why? because when everything is kaput and only the government is willing to take risks, government spending is the demand-of-last-resort that kicks everything back into action. but the new deal didn't aim to meaningfully make up the difference between the supply and demand so it couldn't serve as a full kicker. the war, however, put government spending into the stratosphere.
this has been another installment in the ongoing series, "safety nets and protecting the commons are not a communist plot."
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Jon Rynn Posted 5:30 am
28 Dec 2008
hapa, there's a large debate about how we got out of the depression -- some think we were well on our way out before WWII. But if WWII was necessary to do it, then that means that the Feds would have to do quite a bit of central planning, because that's what WWII was effectively about. I think we need someplanning to get to a green society (at least one trillion per year), but we're not there yet politically, obviously.
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hapa Posted 6:23 am
28 Dec 2008
but "stimulus" and "planning" need only be remotely related by standard thinking because of the severity of interlocked tumbling fortunes at the moment. same folks who exploded it, doing the repairs. who's ready to give up on bubbles and currency games? so we pump in money to reset pieces, then we debate resources and assets and the future, maybe.
can compound interest fix the planet? that's an embedded assumption, not directly responsible for the crash, harder to question.
i think "green recovery" and "clean energy economy" are pretty big gains, considering.
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Pompey Road Posted 12:29 am
29 Dec 2008
Even if the government is only priming the economic pump and providing the bridge or transition money I feel that the private sector money will follow if government leader ship can create the demand. The push for alternative energy related technology and implementation can leave us with and energy independent economy and long term solutions or trillions of dollars of more debt and nothing tangible to show for it. Hoover Dam was brought in under budget and well before the deadline because of competitive bidding and penalties for not meeting deadlines for each stage of construction. We have a hydroelectric-system that will last another 1000 years.
It would be nonproductive to spend to much time on the employment and infra-structure portion of Roosevelt's New Deal or the German Socialist Parties early success for easing the misery and lifting the people out of abject poverty. Both left well engineered infra-structure projects that have paid for themselves a hundred times over and have withstood the test of time. The Germans fast track to a war based economy precipitated the need for the U.S. to follow. Neither of the early central driven economic models had the chance to prove their long term viability because of the war. What we can learn from the era is that German and U.S. engineering knows no limits when given an objective and direction. The old business model of competitive bidding and setting deadlines even in a depression economy will insure you get the most out of your tax payers dollar.
The latest raiding of the treasury to me was more about stealing the silverware on your way out of power than rescuing capitalism. Rewarding incompetence and graft plus covering Wall Streets bad gambling decisions did nothing to ease the tight lending environment that is strangling any capital investment right now. This is the worst environment to spur private capital investment even in viable alternative energy related projects. The need for government to implement the stimulus package is based on the best obvious choice of actions. The way it is implemented will determine the success or failure of the program.
The eons of time and nature was good to us down here. It was not until we become civilized that destroying our habitat become fathomable or fashionable.
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Jon Rynn Posted 1:19 am
29 Dec 2008
I saw Biden being interviewed by Larry King, and the one infrastructure project Biden chose to talk about was a smart national electric grid, which I think is a good sign. Somehow the U.S. managed to construct an Interstate Highway System, in addition to the hydroelectric projects (and rural electrification -- although the TVA looks pretty embarrassing at the moment).
So how about an Interstate Grid System, an Interstate Wind System, and an Interstate High-Speed Rail System?
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hapa Posted 4:45 am
29 Dec 2008
i don't think anybody is talking about government-only. it's too big a change.
the hoover dam is a sad story. a beautiful engineering project that could fail because, with every opportunity in the world, we didn't tend the underlying natural processes. a dry reservoir is a planning debacle and an insult to the sacrifices involved in building.
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Pompey Road Posted 9:20 am
29 Dec 2008
From even the closest scrutiny from that time or now for that matter this style of letting contracts for infrastructure projects will get you the most bang for your tax dollar. The cost plus and unlimited cost overruns of most military projects now are the epitome of waste and an example of how government waste and inefficiency can be taken advantage of. It would be assumed the new alternative energy projects, power grid, mass transit and new energy technology projects would be environmentally friendly as energy savings is just one of the intended objectives of green technology.
I was pointing to the conservative business model that we applied at one time even to the Industrial Military Complex before we lost complete control of the corporate lobbying process. I feel most that read the Hoover Dam reference knew I was talking about the business and engineering model specifically the right way to award contracts for infrastructure projects. From the engineering, material acquisition and the actual construction. I was hoping the business model only would be adopted for the current proposed green economy not the lack of environmental study that was lacking when the Hoover Dam was being considered. It is assumed in this present environment and since we are talking green and alternative energy projects the environmental study would preexist or be part of the engineering process.
Unless we have an earthquake that hits over an 8 right under the dam it will be providing electricity 1000 years from now. The power efficiency was upgraded several years ago with the overhaul of the generators. 80 years of swiss watch like operation with a thousand year shelf life brought in under budget and before the deadline. Apply the same principles to your green infrastructure projects and bid them out like Scrooge before his conversion.
The eons of time and nature was good to us down here. It was not until we become civilized that destroying our habitat become fathomable or fashionable.
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Jon Rynn Posted 11:20 am
29 Dec 2008
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Pompey Road Posted 12:56 am
30 Dec 2008
It is not within the scope of a blog piece to list the mass transit, especially rail and trolley systems the Automotive and big oil lobby had disassembled. Early in the last century they were seen as competition and to sell more cars and increase oil demand many mass transit rail systems were torn out. I am hoping as you are that Obama will make this part of his infrastructure rebuilding program. If you look at Europe they are far ahead of us in this regard because they had the good sense to keep their mass transit and develop more of it over the last several decades.
Even in my rural area we had passenger train service and two bus lines up until the mid fifties. We lost passenger rail first and then by the 80's interstate and local bus service was gone. This is one reason I don't have much sympathy for the Big 3 Auto Corporations. They shot themselves in the foot when they gave up the rail and bus portion of their manufacturing as well as their unwillingness to build a fuel efficient car.
Even the legacy cost they cry about now is an example of their own short sightedness. Where were they when Hillary Clinton was trying to get a National Health Care program. They would have been one of the major beneficiaries of the program.
I don't feel we will ever have any common sense environmental or transportation remedies until we get lobby reform done first.
The eons of time and nature was good to us down here. It was not until we become civilized that destroying our habitat become fathomable or fashionable.
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