Paul Krugman bends minds with today's column. We learn that Stupid Bush and Evil Cheney were opposed to corporate welfare for the mining industry, weak on national security, unreasonably Green, and too cozy with China. Who knew?
The topic is rare earths and China's virtual monopoly on mining and refining:
Some background: The rare earths are elements whose unique properties play a crucial role in applications ranging from hybrid motors to fiber optics. Until the mid-1980s the United States dominated production, but then China moved in.
“There is oil in the Middle East; there is rare earth in China,” declared Deng Xiaoping, the architect of China’s economic transformation, in 1992. Indeed, China has about a third of the world’s rare earth deposits. This relative abundance, combined with low extraction and processing costs — reflecting both low wages and weak environmental standards — allowed China’s producers to undercut the U.S. industry.
You really have to wonder why nobody raised an alarm while this was happening, if only on national security grounds. But policy makers simply stood by as the U.S. rare earth industry shut down. In at least one case, in 2003 — a time when, if you believed the Bush administration, considerations of national security governed every aspect of U.S. policy — the Chinese literally packed up all the equipment in a U.S. production facility and shipped it to China.
The result was a monopoly position exceeding the wildest dreams of Middle Eastern oil-fueled tyrants.
Hmm - with oil at $80 per barrel the Saudi's daily production is worth about $800 million, or roughly $280 billion per year. The Times tells us that annual sales of rare earths are about $1.4 billion. Still important, but maybe not quite the monopoly about which oil-fueled tyrants dream.
And a bit more on that 2003 closing here; Magnequench took on Chinese investors under Clinton and exited the business in question under Bush, so two Presidents had a chance to intervene. Nostalgia buffs will enjoy this 2008 Clinton-basher at DKos. Newsbusters, too.
But let's press on. Surely Krugman calls for an enraged public to demand government action, right? Not exactly:
So what are the lessons of the rare earth fracas?
First, and most obviously, the world needs to develop non-Chinese sources of these materials. There are extensive rare earth deposits in the United States and elsewhere. However, developing these deposits and the facilities to process the raw materials will take both time and financial support. So will a prominent alternative: “urban mining,” a k a recycling of rare earths and other materials from used electronic devices.
What's this - Krugman is willing to let market forces sort this out? OK, that might work - Australia and Canada have projects in development and I think we can be sure of Japanese support. But Krugman is a progressive and progressives demand government action.
So let's have a Congressional study - hey, Krugman gets results!
And let's have a law exhorting the Department of Defense to rethink this - hey, Krugman has already moved a bill through the House and Senate action is considered likely.
That is a great job by a powerful NY Times columnist. So why so coy? Possibly he does not want to flaunt his vast power. Or maybe the fact that the House and Senate bills were sponsored by Republicans bothers him a bit.
Or maybe the idea of providing corporate welfare to high-polluting mining companies strikes him as something other than the fulfillment of the progressive vision. Can we have a picture of the mine slated to be reopened in California? Yes we can:
Hard to believe Cheney opposed that. Stiil, it's great seeing Krugman on the national security beat. Over at Heritage folks are worrying but not panicking.