James Hamilton parts company with some prominent economists on what we need to do to start our economy growing again:
I recommend that, rather than wring our hands in despair, America should respond to our long-term challenges by making note of the natural advantages we already enjoy and figuring out how to make the best use of them.
Clearly, since the examples he gives are oil and natural gas production and rare earth production, he means the mineral assets, the natural resource assets.
I have some sympathy with his proposal having recommended some of the same things myself but I think a distinction is necessary. I’m all in favor of the things he advocates but I also think that the key to a robust economy in the future will be enhancing our standing as a producer and exporter of processed materials. Exporting unprocessed raw materials won’t be any more help today than shipping unprocessed timber to Japan was 30 years ago. I can think of dozens of things that we’re producing and just shipping without processing from minerals to mohair.
Also, I can’t help but wonder if he’s not fighting the last war. That the raw materials producing and exporting countries (like Canada and Austrialia) have done well over the last several years is no indication that it will last forever. A crash in demand from China, which seems likely in the event of a collapse in the China’s construction boom, could change that picture dramatically.
Opening ourselves up to greatly increased materials production and processing without sacrificing environmental considerations will require a substantial change not just in policies but in viewpoints. The reason we’re no longer exporting rare earths isn’t the price. It’s environmental concerns.
It seems rather dubious to base economic prosperity on draining finite domestic resources. I’d rather have a manufacturing based economy which drains OTHER countries of their natural capital.