Reading the papers these days you get an idea of what it must have been like to live during the Great Depression. We look back at the 1930s as an era of unremitted suffering, with people standing in endless bread lines and hobos asking handouts. But it was also the era of Busby Berkeley, Fred Astaire and Joe DiMaggio and a time when industries such as radio and commercial airline flight were in the process of being born.
The American economy is a vastly complex organism, far too sprawling and complex to be summarized in a few numbers such as unemployment rates and GNP. True we’re living in a time when 8 percent unemployment is starting to seem normal. And true, IPOs have dried up and Silicon Valley seems to have forgotten its core business and gone off chasing the will-o-the-wisp of alternative energy.
But it also an era in which vast progress is being made. The current fracking revolution has turned our energy equations upside down. The current issue of Foreign Policy carries an article, “Cursed With Plenty,” in which author David Rothkopf tells us about the “Resource Curse” and worries the U.S. may lapse into something called “Hugo Chavezitis,” which he defines as a condition that “tends to strike countries when they tap into large finds of oil, gas, or other valuable natural resources.
Although such bonanzas clearly have their advantages, the influx of new wealth often leads countries to neglect real underlying problems or the requirements of long-term growth simply because they can spend their newfound riches to paper over their troubles. Political leaders don’t have to do the hard work of building human capital and promoting sustainable economic growth—they can just coast along, riding the benefits of the resource boom.
Well, Hugo Chavezitis only strikes countries being run by demagogues such as Hugo Chavez. The U.S. economy is still dynamic enough so that instead of everybody looking for a free handout from natural resources, we are using those resources to rebuild broader prosperity.
Stanley Reed of The New York Times reported that Voestalpine, a maker of high-quality steel for the auto industry, has announced plans to build a new foundry reducing iron ore to raw iron in the United States or Canada to take advantage of cheap natural gas. It seems that the price differential between the two continents is now so great that it makes sense to ship the finished iron across the ocean in order to take advantage of North American energy. Chemical companies are setting up shop in Pennsylvania and Ohio to be near the Marcellus and BASF, the German chemical giant, just announced plans to build its newest plant in Louisiana. Rather than turning America into a banana republic, our fracking revolution is sparking an industrial renaissance.
All this tells you that nothing beats free enterprise and that in America the forces of business are still strong enough so that even the most misguided government policies cannot beat them down. According to officials in both the U.S. and Germany, we are in the midst of phasing our old 20th century energy sources such as fossil fuels and nuclear energy and marching forward toward a future powered by windmills and solar collectors. This future state is so inevitable that even the most massive overlay of government subsidies and mandates cannot get us there fast enough.
The German government has decided to abandon nuclear altogether. Here we’ve just put it in the hands of the slow-motion Nuclear Regulatory Commission while creating the double bind of outlawing reprocessing and then telling the industry it has nowhere to put the “waste.” As a result, there are already whole books written about how the future of energy is emerging in Germany. Yet German manufacturers know better. They are eyeing America for its cheap natural gas, even as one European nation after another decides to outlaw fracking. All this solar and wind power, of course, will require cheap coal to back it up and will prove enormously expensive anyway. But while ordinary German customers may be forced to swallow the bills, industries that must compete on an international level will move elsewhere. Hence the migration to America.
This is why nuclear will eventually find a rebirth, despite the present lull in the industrialized world. The economics will prove too powerful. You’re already seeing this in Japan, where the panic over Fukushima is subsiding and newly elected Prime Minister Shinzo Abe appears ready to restart Japan’s reactors. People have got tired of coping with Spartan levels of electricity and watching heavy industry move to Korea and the Philippines. In the end, Germany will have to follow suit.
But the most encouraging news comes from another New York Times story about the hard times being experienced by the 100-year-old Hitachi Corporation. The electronics giant is going through a painful restructuring in order to cope with the loss of comparative advantage on consumer products to other Asian countries.
Hitachi’s shift from consumer electronics has been the most striking, epitomized by its exit this year from a half-century of manufacturing TVs. Consumer electronics made up just 9 percent of its revenue for the year through March 2012, down by almost half from a decade ago, and it is expected to fall further this year.
Instead, Hitachi is focusing on infrastructure projects, including information technology services and networking systems, power generation, railways and industrial machinery—pushing for growth overseas. Last month, Hitachi bought the Horizon nuclear project in Britain for $1.1 billion, paving the way for the Japanese company to build its first nuclear reactors outside Japan. The company is also in talks with Lithuania over plans to build a nuclear plant there.
So in the bowels of one of the world’s great manufacturing corporations, nuclear is being perceived as the future. That’s the most exciting news you could hear in the present doldrums.
—William Tucker is a veteran journalist who has covered energy and the environment for 30 years. His work has appeared in Harper’s, The Atlantic, The American Spectator, National Review, The New Republic, The Weekly Standard, Reader’s Digest, Reason and many other publications. He is editor of www.realclearenergy.org. Terrestrial Energy, Tucker’s fourth book, available from his website and from Amazon.com. Reprinted by permission.