Why China Cannot Blackmail Us Like the Middle East Does

Many pundits have noted that China seems to be taking over more and more of the world's share of manufacturing as measured either by the value of the output or by the number of factory jobs.  We see periodic calls for the government to Do Something to "Revive Manufacturing" to create the traditional "good-paying jobs" which were lost as manufacturers fled overseas.

It's quite true that manufacturing employment benefits the economy greatly.  Manufacturing & Technology News offers headlines such as "A GM Factory With 2,100 Workers Closes, And 33,000 Other People Lose Their Jobs -- Impacting 120,000" to illustrate that manufacturing jobs generate significant follow-on employment, unlike government jobs which saddle us with do-nothing bureaucrats who destroy value while accruing pension liabilities for future generations.  A major part of the hand-wringing about the loss of manufacturing jobs is quite justified because of the economic impact of those jobs.

Once in a while, however, the "loss of manufacturing jobs" story is presented from a ridiculous point of view.  For example, in urging people to click the link to "China Leading Global Race to Make Clean Energy," the New York Times wrote:

A shift to sustainable energy could leave the West reliant on China, much as the world now depends on Mideast oil.  [emphasis added]

The article explained that the Chinese economy is growing far more rapidly than the American economy and that the Chinese are going to need more and more energy.  It's a simple fact of physics that the Chinese are going to install far more new electricity generating capacity than Americans are - at 15% per year, their demand for energy is growing far faster than ours.

China vaulted past competitors in Denmark, Germany, Spain and the United States last year to become the world's largest maker of wind turbines, and is poised to expand even further this year.

China has also leapfrogged the West in the last two years to emerge as the world's largest manufacturer of solar panels. And the country is pushing equally hard to build nuclear reactors and the most efficient types of coal power plants.  [emphasis added]

There are three major reasons why the Chinese are becoming leaders in developing, manufacturing, and installing renewable energy systems:

1. They might as well take advantage of any energy source that seems workable.

2. There may be a significant export market for wind turbines and solar cells if other countries pass laws to make fossil fuels more expensive.

3. Making wind turbines requires a great deal of semi-skilled labor which is cheaper in China than anywhere else.

On the other hand, as the Times notes, they're still going to use huge amounts of coal-fired electricity simply because it's the cheapest electricity available anywhere.

The Chinese Opportunity from the Global Warming Scam

At the recent Copenhagen conference on global warming, the Chinese made it plain that they planned to work hard to become more efficient users of energy - that is, they plan to squeeze more GNP out of each unit of energy - but that's sound economics and they'd do that regardless of the weather.

They have no intention of burdening their manufacturers by making energy more expensive than it has to be.  They'll sell us all the solar systems and wind turbines we want to buy, of course, but they plan to use their own coal themselves as much as required to meet their energy needs as cheaply as possible.

Up to that point, the Times simply reported straight facts.  Then they fell off the sled:

These efforts to dominate renewable energy technologies raise the prospect that the West may someday trade its dependence on oil from the Mideast for a reliance on solar panels, wind turbines and other gear manufactured in China.  [emphasis added]

The Times seems to be suggesting that if we don't go along with Mr. Obama's plan to create huge numbers of "green jobs" by spending heaps of taxpayer money, we'll end up as dependent on Chinese energy sources as we now are on Middle East energy.

That's absurd.  Consider our current relationship with China.  If you purchase a child's meal at McDonalds or Burger King, it generally comes with the latest cheap plastic toy stamped "Made in China."  We at Scragged often wonder what the Chinese workers who make these toys think of them, if they think about them at all.

Anybody who's any brighter than a few fries short of a Happy Meal realizes that we're totally dependent on China for such toys.  Is that bad?  Could we make them if we had to?  Does this dependency on China put our national security at risk?

Seriously, folks: a sudden acute shortage of cheap colorful junk would not bring about the end of the Republic.  Worst case, after a few anxious months and some quick work south of the border, our brats would be choking on toys stamped "Made in Mexico."

In the case of energy, the situation is even less of an emergency than our dependence on foreign suppliers of kid's toys and other Wal-Mart staples.

Suppose we buy a wind turbine from China.  It may have been made in China but it makes energy here.  Once out of its container in Long Beach, the Chinese can set up whatever trade barriers they wish to no effect.

Threat, Yes, but Not of Blackmail

This is not at all like the oil situation where the Middle Eastern nations pump energy out of the ground there and ship it to us to be consumed here, and we are only as secure as our next tanker-full.  In contrast, there's no possible way for the Chinese to stop us from using a wind turbine once it's installed in the US.  They could stop selling us spare parts, but that's far less effective leverage than having the power to shut off all the pumps at one stroke.

As already noted, it doesn't take a doctorate to stamp out metal gizmos, and while China may be provided with vastly more illiterate hordes than the United States, we can surely find a few factories' worth should the need arise - if nothing else, we can look in the parking lot of the local Home Depot where the day laborers congregate.

While it's true that it would be good for our economy to keep some high-leverage manufacturing jobs in the US, our government, the EPA, our planning boards, and our unions have strewn many, many obstacles in the path of anyone who wants to open a factory here.  Anyone considering investing in a factory to make renewable energy equipment would go to China because it's a whole lot easier to get permission to put up a factory.

Oddly enough, another reason any investor would prefer China is because their political situation is far more settled than ours.  A US investor has no idea what capital gains taxes will be in 6 months, has no idea what health care will cost nor who will be expected to pay for it, has no idea what will happen to income tax rates, has no clue whether the factory will be permitted to emit the CO² the workers exhale, and is well aware that US labor law is totally up in the air as unions push for new laws in their favor.

Then there's our infamous jackpot-emanating legal system; the Europeans, for one, would rather subject themselves to the tender mercies of Chinese mandarins than the vagaries of Johnnie Cochran and John Edwards.  These are but a few of the uncertainties in making a US investment; only a liberal Democrat would be shocked to find investors sitting on their money or investing elsewhere.

Buying power-generating equipment from China won't make us dependent on them for energy.  The real problem is that manufacturing stuff in China has become a no-brainer.