Growth. It's what every economist and politician wants. If we get
'back to growth', servicing debts both private and sovereign become much
easier. And life will return to normal (for a few more years).
There is growing evidence that a major US policy shift is underway to
boost growth. Growth that will create millions of new jobs and raise
real GDP.
While that's welcome news to just about everyone, the story is much
less appealing when one understands the cost at which such growth comes.
Are we better off if a near-term recovery comes at the expense of our
future security? The prudent among us would disagree.
Resurrecting American Export Strength
It's easy to be skeptical that America could once again be a titan of global exports.
For a very long time, that role has mostly been relegated to
countries in the developing world. America as an export economy?
Somewhere along the 50-year transition from industrial manufacturer to
voracious consumer, Americans have lost touch with such a remote
possibility. Indeed, this phase of America's economic history is now
quite settled.
A multi-decade outsourcing wave has left US workers to concentrate in
the financial sector -- an over-weighting of talent we would come to
regret after the crisis year, 2008.
Since 2009, though not well advertised, Washington has been pursuing a
quiet policy to boost exports in nearly every sector, throwing
investment capital at port and rail infrastructure, and getting the
message out to regulators and state government. Now, after some very
notable gains in which exports have advanced to nearly 14% of GDP, the
President in his State of the Union Speech made it clear: The US would no longer cede a labor and manufacturing advantage to the rest of the world.
With that declaration, notice was served. It was perhaps not a
coincidence when, the following day, the Federal Reserve articulated a
zero-interest-rate policy that would be sustained for years. The US
dollar reacted immediately and promptly returned to its downtrend. Has a
new industrial policy now been unveiled?
(Painting: Alfred Bierstadt, 19th Century: Mt St Helens and Columbia River)
Rivers of Coal
The small city of St. Helens, Oregon sits astride the Columbia River,
25 miles closer to the Pacific Ocean than Portland. Over the past two
years, a consortium of coal shippers and coal producers has been
searching along the Pacific Northwest coast for a place to construct new
export terminals. Coal, which is mined in the Powder River Basin of
Wyoming and which often travels long distances to power stations in the
American South, would also find easy rail routes to Asian markets
through the ports of the West Coast. Rebuffed already by Bellingham, WA,
north of Seattle, and then rebuffed again by Longview, WA, north of
Portland, the industry is trying once more -- this time at St. Helens.
To understand this persistence, one has to appreciate the current
juncture in world coal markets. Global oil supply has been coming up
against a ceiling for seven years now, since 2005. As a result, much of
the world is trying to access increasingly more BTUs through natural gas
and coal. Asia, which has built tremendous coal capacity, is a
relentless user of coal. And US coal mines, older and with much higher
extraction costs, are able to take advantage of rising world coal
prices.
Moreover, as the US has been transitioning to natural gas for over 30
years to create electricity, that trend is only accelerating as its own
coal plants age and retire. (see Regulation and the Decline of Coal, Smart Planet,
January 2012, by Chris Nelder). The combined effect has caused a
reversal in the long decline of US coal exports, which began to turn
higher in 2002:
From a low of 40 million short tons at the start of the last decade, US
coal exports have recovered and doubled to 80 million short tons as of
2010.