Good Company

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Saturday, March 19, 2005

Simon World fisks Thomas Friedman on China

Simon World is a blog based in Hong Kong and seems an appropriate place to start with a fisking of Thomas Friedman on China. Read it first.

I view China as a competitor for oil and other raw materials, and a great nation that is feeling its way along through nationalist zeal ("Let's claim every islet in the South China Sea as Chinese!"). Like all great nations, it is understandably developing ways to protect its supply lines and to be able to enforce its will on others (though I don't like the fact that they quite freely "borrow" advanced technology so as to skip generations of weapon development- such as reverse engineering the goodies found in the US Navy EP-3 they forced down, etc). They seem to have a good grasp of tying up necessary commodities via long-term contracts such as oil deals (though their choice of business partners is a little off-putting - Iran, Sudan, Venezuela - but, hey, the Europeans are there, too). Investing in US T-bills? Sure. Make it silly for them to destroy our economy in such a way that we'd never, ever pay off on those notes, wouldn't it?

So what is Freidman about? He's back to preaching about the environment again and using China as his strawman around which to build his arguments. He's worried North Slope or ANWR petroleum might go to China. Well, if the price is right (enough to allow us to replace the oil sold from other sources and make a little profit) who cares? Freidman's logic eludes me here when quotes a "noted" energy economist" who warns that ANWR oil "cannot easily or efficiently be shipped to our Gulf Coast refineries. The logical markets are on the West Coast of the United States and in Asia..." Last time I checked, we had both refineries and a lot of US consumers on the West Coast of the US. What's the problem - it doesn't flow to New York? Selling things to Asians is bad? What about our balance of trade- wouldn't selling oil to Asia help?

And raising the taxes on gasoline will help how? Oh, let's see - people will drive less and prices of goods will rise and people will buy less and the economy will suffer and people will lose their jobs and more business will go offshore... In any event,according to Friedman, tax driven increases in the price of gasoline will encourage many good things, from closing "the U.S. budget gap" and forcing "the U.S. auto industry to convert more of its fleet to hybrid and ethanol technology, thereby reducing the amount of money going to Sudan, Saudi Arabia and Iran for oil. It would also reduce U.S. dependence on China to finance its debt and the chances that America will end up in a global struggle with China for energy."

However, demand driven price increases will do none of these things? Despite the fact that the price consumers now pay at the pump is over 50% tax anyway (as crude prices rise, so do government tax revenues)? Why does Mr. Friedman lack faith in the market to solve this problem? Where will the greater incentive to manufacture energy efficient vehicles come from? The government or the marketplace? Friedman just makes no sense.

Good job Simon!

Update: What exactly does Friedman mean by the "US auto industry...fleet"? Last time I checked, the cars in my driveway belonged to me, not to the auto industry. When I bought each of them for my "fleet" I had a choice- high cost hybrid (gas savings would never recoup additional cost of purchase), good mileage small car (safety concerns) or a multitude of other choices. My purchases reflected a compromise of budget, safety, mileage and my assumptions of frequency of repair. The cars were not bought because of some government program or artificial limitation on my choice. I resent Mr. Friedman trying to restrict my freedom. Even to buy some huge SUV, if I wanted it, which I didn't.

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