FARMINGTON HILLS, MICH. (
ResourceInvestor.com) -- Larry Kudlow, U.S. television’s popular economic pundit, opens his nightly show with the chant “Drill! Drill! Drill!” to emphasize his commitment to the cause of American self sufficiency in oil, but the issue is much, much, bigger than simply our dependence on foreign oil.
The reliance of the American economy on imported commodities in general, and metals in particular, is a cancer slowly, but surely, eating away our standard of living and quality of life. The short sighted ‘haves’ of America’s industrial, financial, and political classes simply do not understand this fact. They insist to a person, that we, not them of course, are only experiencing the inevitable temporary growing pains of the ‘new’ global economy. They are short sighted, fixated only on their immediate profit or access to political power. They are economically ignorant of the powerful influence on America’s future quality of life and cost of living of such movements as resource nationalism in the BRIC countries [Brazil, Russia, India and China, the countries the domestic economies of which are exploding with demand]. The BRIC economies' vibrant growth is driving the development of natural resources in the BRAC countries [Brazil, Russia, Australia and Canada. The latter have enormous quantities of critical metals and minerals for the benefit—more and more—of only the BRIC and BRAC economies!
As the 2008 political season nears its quadrennial crescendo and rock stars and war heroes are vying to be selected for the most militarily powerful job in the world it would seem that no one, certainly no politician, is willing to admit that America’s world economic-leadership is eroding at an almost perceptible daily rate. Candidates, and office holders, remind us that each of the U.S. Navy’s 12 carrier battle-groups is, by itself, more powerful than any other single nation’s entire navy! Yet they fail to mention that we cannot build armoured ships or vehicles, small arms, artillery, armour piercing ammunition, missile guidance, night vision equipment, computers, displays, or, believe it or not, nuclear propulsion systems, or aircraft of any kind, civilian or military, without minor metals, such as the rare earths. Most of which we are now, 100%, dependent on nations unfriendly to America, which, notwithstanding their being unfriendly, already practice resource nationalism. Some of them, such as China, have already openly begun to restrict the export — or utilization for items for export—of key industrial minor metals, so as to reinforce their own self sufficiency in these materials.
Whether or not the U.S. is able to produce enough domestic oil to be independent of foreign sources means that we must first be able to build tungsten-carbide-tipped drills, produce nickel, molybdenum, manganese, and chromium based oil field tubular steels, and produce rare earth-based catalysts for refining “heavy crudes.” For solar energy conversion we will need indium and germanium if thin film PV cells are to be mass produced. For wind power generators we will need rare earths, nickel, and cobalt to build the generators, the battery storage systems, and the DC to AC inverters to make wind generated electricity practical. For nuclear reactors we will need nickel, molybdenum, zirconium, hafnium, uranium, and, hopefully, the non-proliferative fuel, thorium.
China’s global quest for natural resources is funded ironically largely with profits earned by outsourced manufacturing from America. It is daily reducing the amount of natural resources available to the U.S. from the global market, not expanding it. Yet American capitalists blithely and blindly state that their aim is to expand the amount of material in the global market to drive down the price; they are apparently unaware of or uninterested in the fact that availability has now mostly replaced price as the driver for supply. China, for example, can increase its domestic supply of rare earths simply by, as it is now doing, restricting exports. Profits lost by Chinese exporters are of no consequence whatsoever to Beijing’s command economists. Yet Wall Street’s followers of Thomas Friedman’s ‘level playing field, global-marketplace’ fantasy think that free market economics reign in Asia.
America’s domestic demand doesn’t increase American supply when either foreign resource nationalism or domestic environmental anti-mining activism or both are factored in. Wall Street’s answer is to ‘outsource’ production to the ‘global economy.’ The aim is to maximize short-term profits; the direct result is the relegation of America—in the global economy—to the role of only a buyer. It’s pathetic.
The U.K.’s Daily Telegraph reported just a few days ago that China is actually on its way to not only self-sufficiency in minerals but also, after that has been achieved and maintained, to being a “major exporter of commodities as vast new mineral deposits are discovered.” China’s command economists seem to think, and publish their plans every five years for all the world to see, that:
Don’t you think the communists are onto something here?
Before summarizing, I want you to read two paragraphs of a survey on the “Competitiveness of the U.S. Minerals and Metals Industry” published in 1980. So it would have been written during the administration of President Jimmy Carter, our second engineer-President—the first was Herbert Hoover. Note please how the 20th century progressed: Hoover was a mining engineer and Carter was a Navy-trained nuclear propulsion engineer-officer.
In any event, in 1980 the National Academy of Sciences began its executive summary of the above linked report as follows:
“The United States has consistently maintained that a strong domestic minerals and metals industry is an essential contributor to the nation's economic and security interests. Despite competition from foreign firms, the domestic industry has the potential to remain strong, but this potential cannot be realized without active support for the technological base of the industry. This base is threatened by the failure of industry, academe, and government to maintain the partnership that has contributed to a U.S. comparative advantage in technology for much of this century. A strategy of applying a technology-based comparative advantage can contribute to the competitiveness of the domestic industry, but its success requires rebuilding of the industry-academe-government partnership. All three groups must support the partnership, and the Bureau of Mines, as the responsible federal agency, must take an active role in maintaining it. The United States has a fundamental interest in maintaining a competitive minerals and metals sector that will continue to contribute significantly to the nation's economic strength and military security.[Emphasis mine] The industry represents an $87 billion enterprise that employs over 500,000 U.S. workers and provides the material foundation for U.S. manufacturing. Although the intensity of use of metals (i.e., per unit of gross national product) is expected to decline gradually, over time, the long-term outlook is that continued growth of the economy will ensure increasing markets for metals. Metals in general continue to be very competitive with respect to alternative materials….”
Further along in the executive summary the following pregnant passage occurs:
“Unless a strategy building on areas of U.S. comparative advantage is pursued, the current competitiveness of the domestic industry versus foreign competitors is likely to be transitory. Nontechnological measures (such as plant closings, reduction of the labor force, and wage concessions) have already yielded most of their possible benefits. The potential for future gains in profitability from such adjustments is now much lower. As a result, the competitiveness of the domestic industry must in the future depend increasingly on other measures, most notably technology. The pervading message of this report is the need to improve the technology base of the U.S. minerals and metals industry by increasing the amount and quality of research and development, as well as the speed with which the results are transferred to industrial applications.”
If the National Academy of Sciences’ conclusions had been addressed by administrations following Carter, would have left an incomparably stronger American economy. You can read the entire report on-line (free, your taxes paid for it) and either weep or get a sense of frustration. It should leave you with a desire to do something about the toxic residue of economic ignorance left by activist environmentalism upon our body politic.
Most of the great mining schools that were open in 1980, when the above report was drafted, are now gone or closing. Nonetheless, most new, North American mining-technology developments are going to increase the value of non-North American mining operations. America’s mineral resources have actually increased since 1980 due the improvement of technologies for economically extracting valuable minerals from lower grade ores. Yet America’s mines lie fallow in an age of triumphant, economically ignorant and short sighted, ‘activism’ to ‘save the environment.’ Foreign mines, uncontrolled and unregulated, daily poison the air and water of nations growing by leaps and bounds economically. Ironically, American mining companies equipped with environmental technology better than anyone else's in the world are unable to extract a gram of metal due to barrages of injunctions from so-called environmentalists and conservationists.
The Nazi Wehrmacht’s quartermaster corps reported accurately and diligently on dwindling supplies of strategic materials for the deteriorating German war machine as the war was being lost after D-Day. So, annually, the USGS dispassionately reports the growing reliance of the U.S. on imported commodities to a deaf-and-dumb U.S. Congress, industrial base, and financial-wizard class.
Note again, dear readers, the following USGS chart, which I frequently refer to:
Below is the U.S. Geological Survey's import-reliance chart for the latest year for which data are available:
As you review the foregoing table remember that today our defense industry alone is critically dependent on metals for which we are now 100% dependent (‘reliant’ is a euphemism) on foreign sources. Of particular note is the number of those metals’ major sources are China, Russia, or an unstable ‘developing’ country in Africa. Does our political class really think that China and Russia will simply supply us with strategic and critical military materials? No one can be that stupid.
If you compare the table with those from years before you would see the proverbial, ‘death (of an economy-ours) by a thousand tiny, yearly, cuts.’
Senators Obama and McCain, I ask you what will either of you do to reverse the dependence of the U.S. on all imported commodities--not just oil—and which come from unfriendly or unstable nations? You need to answer this question because if it is not addressed very soon it will be too late for the U.S. to overcome this reliance. Then your leadership qualities will be remembered only as those that brought us further down. I, for one, cannot vote for anyone who does not have the right answer to the questions of import reliance and deterioration of our:
Mine! Mine! Mine!
