Some Chicago Boyz know each other from student days at the University of Chicago. Others are Chicago boys in spirit. The blog name is also intended as a good-humored gesture of admiration for distinguished Chicago School economists and fellow travelers.
NB: some of the following is from a recent videoconference that included our own Trent Telenko, who is very much the man of the hour, but some of it is more publicly available, not to mention common sense. First, though, as is my wont, a quadrant diagram to organize my presentation …
Here’s the great French scientist Sadi Carnot, writing in 1824:
To take away England’s steam engines to-day would amount to robbing her of her iron and coal, to drying up her sources of wealth, to ruining her means of prosperity and destroying her great power. The destruction of her shipping, commonly regarded as her source of strength, would perhaps be less disastrous for her.
The wealth and power of a country are strongly related to its energy resources, whether those resources take the form of human slaves, steam engines, hydroelectric dams, oil and gas wells, or nuclear reactors. The fact that Russia possesses energy resources on which many other countries depend has been an enormous factor in that country’s ability to invade Ukraine and in Putin’s belief that the world will let him get away with it.
Wealth and power are sought, in one form or another, by most people. Showing James Boswell around the Boulton & Watt steam engine factory in 1776, Matthew Boulton summed up his business one simple phrase:
I sell here, sir, what all the world desires to havePOWER.
Yet the leaders of the West have, with few exceptions, chosen to reduce the relative power of their countries through their opposition to fossil fuel production and use combined with hostility toward further development of nuclear energy—or even the continued operation of existing nuclear plants. There has been little evidence of serious thinking about realistic limitations of intermittent power sources, even as countries have rushed to make themselves dependent on such sources…nor is there much evidence of serious thinking about the critical-mineral dependencies created by a large-scale switch to wind, solar, and batteries.
So what explains the choice of this path? Has mechanical power ceased to be an important factor in political power, in the destinies of nations? Hardly, as the Russia/Ukraine example makes clear. Or do we somehow have a generation of leaders who don’t care about political power? That, clearly, is also not the case…at least as far as the personal political power of those leaders goes.
I think there are several factors at work:
First, there is the widespread scientific and technical ignorance among political leaders and influential media people. I’ve noticed, for example, that American media coverage of energy storage projects almost always refers to kilowatts, megawatts, and gigawatts as if these terms indicate the storage capacity of a battery or other storage system. They do not. (A 100 megawatt storage system may provide 1 hour, 4 hours, or 20 hours worth of 100-megawatt electricity depending on its megawatt-hour rating. Measuring electrical storage capacity in megawatts is like measuring the capacity of your car’s gas tank in horsepower.) More generally, there is a widespread failure to comprehend just how difficult and expensive it is to store large quantities of electricity and an assumption that if we invest enough in wind and solar, the power will be available on winter nights and in the middle of prolonged snowstorms, ‘somehow’.
Second, there has been a general de-emphasis on the physical attributes of the economy under the belief that we are now in a ‘digital’ or ‘virtual’, or ‘post-industrial’ age. Enterprises and people dealing with physical things have lost political power relative to those that deal in words, images, and code. The Western leaders of 1950, or even 1970, would have been a lot more cautious about deliberately creating energy dependency on a likely-hostile power.
Third, many politiciansand many of the academics and other “experts” advising themsimply do not identify closely with their own nations and with the people and culture of those nations. This is also true of a high proportion of influential media figures. There is a strong thread of belief in the U.S. Democratic Party that America is too wealthy, too powerful, too dangerousthat it is country that is “just downright mean,” in the words of a former First Lady. The same is true of much of the Left in other Western countries. And if you think these things about a country and its people, you’re not likely to want to increaseor even sustainits power.
That’s true especially if you decouple the power of your country from your own personal power and well-being. And I think “progressive” politicians, and many members of academic and even business elites, often do see themselves as inhabiting a transnational space in which their personal well-being is not strongly coupled to that of their countries.
Fourth, in a world in which organized religion has become increasingly marginal, there are a lot of people looking for causes in which to believe. ‘Green energy’ is such a cause, and the specter of Climate Change gives it apocalyptic power. And when people believe they are facing the apocalypse—that the planet is soon going to burn—they’re not likely to look too carefully at those things advertised to avoid the burning.
Fifth, societies across the western world have become much more risk-averse. The question of why this shift has occurred, and of its positive and negative attributes, merits a separate article—but it’s pretty obvious that it has happened. And the consequences for energy development have been very significant, particularly in the case of nuclear energy.
Here’s a proposal from the International Energy Agency, which asserts that a 30% reduction can be obtained this year, with reductions over 50% in the longer term.
I’ve only scanned the summary so far, but plan to read the whole thing over the weekend.
America is hanging by a thread. A great liquidation is underway, with many of the structures that support American society..or, in some cases, any viable society…being kicked away, sold off piecemeal, or just wantonly destroyed. I’m talking about physical structures, legal structures, and social structures.
I do not think it is too late to turn this trend around, but the situation is very serious, and I’m going to ask you to gaze into the abyss with me before I discuss some reasons for hope.
Consider:
–Significant parts of America’s energy infrastructure are being destroyed or targeted for destruction. For example, the Indian Point nuclear plant, serving NYC, was closed in April, despite the fact that this closure will likely create grid instability–and will certainly result in the zero-emissions power it had previously produced being generated instead by sources which do generate emissions. (Yet at the same time, NYC is banning the use of natural gas in new buildings–which will further increase the demand for electricity!) The Diablo Canyon nuclear plant, the largest source of electricity in California, is also scheduled for closure in 2025. The cost of Diablo Canyon was $14.5B in present-day dollars, and I estimate that this represents at least 50,000 person-years of labor. Something like 1200 working lifetimes, being wantonly trashed. Only a society which is very rich (for now)–disrespectful of its past accomplishments–and uncaring about the future would act in this way.
And these examples represent only a small portion of the assaults being conducted on America’s energy infrastructure. Peaker plants which ensure continued output under tough conditions, are being closed, with much hand-waving about how ‘demand management’ will solve any problems. Oil and gas production are being squeezed. Pipeline construction is being suppressed, at the same time Putin is given the US green light for a Russia-Germany pipeline. Energy is being transformed from an American asset into an American vulnerability.
–Billions of dollars of America military equipment were abandoned in Afghanistan and are now in the hands of the Taliban. If we use a conservative estimate of $40 billion, that represents at least 400,000 person-years of human labor, thrown away. But that’s not the worst of it, of course: much of that equipment will now be used against us or our allies. There are already reports of formerly-American weapons on their way to Iran.
The effect of the horribly-executed Afghanistan withdrawal on our credibility as an alliance partner will be devastating. While many foreign policy types expressed worry about what expecting Germany to pay a larger % of the NATO bill would do to our alliances, any imagined impact of that was trivial compared with the impact of the current debacle. The negative effect on American military recruiting, also, will be considerable, as discussed by several commenters at this blog. Overall, America’s actual and perceived power position in the world has been greatly reduced over the past few months.
–American manufacturing has been negatively impacted by numerous policy choices and social factors, and America is no longer the world’s facto ry: that role now falls to China. We have become extremely dependent on China and other countries for many products and components of products–as we found out during last year’s Covid crisis when we were subject to threats that we would ‘burn in the fire of Covid’ if China should choose to deny us critical pharmaceuticals and ingredients thereof. We have become highly dependent on other countries for electronics manufacturing, especially microchips: a single Taiwanese company, TSMC, acts as the ‘foundry’ for a whole range of chips produced to the designs of many different American companies. A Chinese takeover of Taiwan could be devastating to our industry, and such takeover appears considerably more likely than it did a couple of months ago.
Manufacturing was, for a couple of decades, considered by the approved-expert classes to be an increasingly-unimportant industry, populated only by those with inferior and uncreative minds. There is some recognition growing lately that this field may actually matter. But American politicians generally have so little comprehension of how the economy actually works that it is hard to believe that any remedies that they propose will be efficacious ones. As example #1, I give you Joseph Biden: a man who asserted that anyone who can mine coal can ‘learn to code’, and who apparently believes that manually shoveling coal into furnaces is an actual substantial occupation in America today. Biden also said, referring to China: “They’re not competition for us.” This was in mid-2019!
America has given up much of its potential in manufacturing. and the consequences are severe for national security and for millions of people.
–And, speaking of China: the United States has increasingly adopted a submissive position regarding to that country. Major corporations are bending over backwards to avoid offending the leadership of that country…see my post here for some examples. Universities, too, have become increasingly dependent on Chinese students and money. At MIT, a board member of the McGovern Institute for Brain Research raised concerns about whether a certain research collaboration with China was appropriate on national security grounds…other board members took offense, and even said that any serious inquiry into the ambitions of the Chinese Communist Party would be “racist.” She was told to ‘stick to science’ and not to mention China again.
The situation is unpleasantly like what Churchill observed in the Britain of the late 1930s, where he wrote of “the unendurable..sense of our country falling into the power, into the orbit and influence of Nazi Germany, and of our existence becoming dependent upon their good will or pleasure”…A “policy of submission” would entail “restrictions” upon freedom of speech and the press. “Indeed, I hear it said sometimes now that we cannot allow the Nazi system of dictatorship to be criticized by ordinary, common English politicians.” (quote from William Manchester, The Last Lion)
At the same time that the Biden administration is pushing for total electrification of transportation, they seem to have little concern about the fact that the US is far from self-sufficient in the minerals required for electrification technologies–and Biden’s son Hunter has been involved in a deal to give China a strengthened position in the supply of cobalt, a key material needed for battery production. We are being positioned for a return to the kind of extreme energy dependence on other nations that for years gave the OPEC nations so much power and hence contributed to Middle East instability.
America’s relative strength vis-a-vis China is under threat not only as measured by traditional military, economic, and geopolitical factors, but in terms of the influence of the CCP on American internal politics and affairs.
–Media, academia, and increasingly business, indeed the majority of institutions in our society…are being taken over by an obsession with race and ethnicities. People are not seen as individuals, but rather as members of ‘communities’, which term now refers to demographic categories. Those who dare deviate from the political and social views assigned to members of their groups are denounced; see for example the attacks on the new Virginia Lt Governor Winsome Sears.
According to this 2018 survey, favorable race relations in the US peaked in 2009, with 66% of people rating them ‘good’…falling to only 26% assigning a ‘good’ evaluation in 2018. A more recent Gallup poll shows that favorable views of race relations have fallen sharply over the past several years.
America’s colleges have been particularly race-obsessed: see for example some college reading lists, with their assumption that ““diversity is defined by race or gender.” The link in the last sentence is from 2017…the obsession has clearly gotten much worse since then.
And it has gone way beyond colleges. “I’m so exhausted with being reduced to my race,” a girl at Grace Church School, an upscale private school in Manhattan said. “The first step of antiracism is to racialize every single dimension of my identity.” Kindergarten students at Riverdale Country School in the Bronx are taught to identify their skin color by mixing paint colors. The lower school chief in an email last year instructed parents to avoid talk of colorblindness and “acknowledge racial differences.” These cases are only one example of a much wider phenomenon.
If this sort of thing continues, then at best…at best…America becomes something like the Austro-Hungarian Empire, about which historian AJP Taylor wrote:
The appointment of every school teacher, of every railway porter, of every hospital doctor, of every tax-collector, was a signal for national struggle. Besides, private industry looked to the state for aid from tariffs and subsidies; these, in every country, produce ‘log-rolling,’ and nationalism offered an added lever with which to shift the logs. German industries demanded state aid to preserve their privileged position; Czech industries demanded state aid to redress the inequalities of the past. The first generation of national rivals had been the products of universities and fought for appointment at the highest professional level: their disputes concerned only a few hundred state jobs. The generation which followed them was the result of universal elementary education and fought for the trivial state employment which existed in every village; hence the more popular national conflicts at the turn of the century.
A creaky and dysfunctional society like Austria-Hungary is the best outcome for America if the race obsession continues on its current path…it is possible, even likely, that the actual outcome will be something much darker. Categorizing people by groups and defining them by the single dimension of membership in such groups is very, very dangerous. I’m reminded of something Ralph Peters wrote:
“Man loves, men hate. While individual men and women can sustain feelings of love over a lifetime toward a parent or through decades toward a spouse, no significant group in human history has sustained an emotion that could honestly be characterized as love. Groups hate. And they hate well…Love is an introspective emotion, while hate is easily extroverted…We refuse to believe that the “civilized peoples of the Balkans could slaughter each other over an event that occurred over six hundred years ago. But they do. Hatred does not need a reason, only an excuse.”
Excuses for inter-group resentment are now being manufactured at high speed, even mass produced. Really want to go there?
California regulators are considering changes to the ‘net metering’ rules, which allow owners of home solar panels to sell excess electricity back to the grid. These changes may include a connection fee of several hundred dollars per year.
People who have rooftop solar–and who also have grid connections–usually expect the grid to be there for them, with whatever power they need, when night, clouds, etc cut their solar output to a low level. This certainly implies capital costs for the utility power generators and transmission/distribution companies. The concern is that those who get solar when it’s available, but rely on grid power at other times, are not paying their fare share of the infrastructure’s capital costs.
As an indicator of these costs, a modern combined-cycle gas turbine plant costs about $970 per peak kilowatt.. So a simplistic analysis would suggest that if a homeowner has a peak demand of 10 kw, he is driving $9700 in capital costs for the grid. This is probably somewhat excessive, since everyone’s peaks won’t occur at exactly the same moment…but the number is not trivial. A lot of assumptions would need to go into estimating a ‘correct’ cost, and those assumptions will surely be argued about fervently in California in the near future.
Key question: Could this be a turning point leading to a more realistic understanding of wind/solar costs in situations where reliable electricity is important, as opposed to the simplistic narratives about wind/solar’s ‘cheapness’? I mean, if even California is seeing a need to do something that would surely slow the uptake of ‘renewable’ energy…
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