Ezra Klein, Elites, and Industrial Policy

Liberalism and building paired are already in the oxymoron territory, but I am intrigued. The New York Times’ town crier to its highly educated elite audience, Ezra Klein, recently wrote an article headlined, “America needs a Liberalism that Builds.” Klein would have us believe government industrial policies would be superior to markets, say, achieving the lofty goal of overcoming global warming. Adam Smith and all the human progress since “The Wealth of Nations,” be damned, mercantilism, now renamed “Industrial Strategy,” is the way to go. 

Even though markets accompanied by compatible regulation have produced rising living standards wherever tried, Klein is unimpressed. Building things in the U.S. may be difficult due to regulatory and legal roadblocks, but other nations build things such as kilometers of rail much cheaper. The implication is all we need to do is follow how the governments of Germany, Japan, and Spain build railroads. Adapt the methods of their bureaucracies of handling projects to our problems, costs tumble, and we achieve our ends.

I’ll never know why Klein chose railroads to illustrate his theme, but let’s look at it closely if that’s his argument. The grandest government-sponsored h rail project in the U.S. is the California High-Speed Rail (CHSR). Approved in 2008 to connect the important population centers of Los Angeles and San Francisco with a high-speed 520-mile line, the cost has already ballooned from $33 billion to $80 billion. CHSR now says it will complete the 171-mile single-track section between Madera and Bakersfield by 2030. 

The Florida East Coast Railway, a private freight line, started the Brightline high-speed passenger service in 2012 and, by 2018, completed the 70-mile service between Miami and Palm beach. The 170-mile link to Orlando will be in service next year. The entire project will cost about $1.75 billion, raised through private financing. Isn’t the contrast between CHSR and Brightline the better comparison? The private company is outdoing Klein’s government entities.

I’m still trying to fathom Klein’s point of view. If there is a market for a high-speed rail link, private industry will fill the need if the government doesn’t get in the way. Of course, Florida East Coast already owned the right of way and knew how to run a profitable railroad. These advantages enabled Brightline to avoid government interference and operate economically.

While CHSR has discussed linking L.A. with Las Vegas, Brightline is now planning a railway to span the 270 miles. Who would you bet on to get the job done? 

In any case, Klein’s claim that industrial policy in other countries can build economic railways, so using it to tackle energy policy to curb climate change must appeal to the educated elites. Overlook much of Japan’s rail and stations more closely resemble the Brightline model; government can lead us to a cooler world.

Klein forgets the fact the Biden administration already has an industrial energy policy. Solar and wind with a dash of corn will power our nation. Raise the price of fossil fuels so high that solar, wind and electric vehicles won’t seem so bad. Let our nuclear plants close without replacement. No one seriously thinks you can have a significant new dam or geothermal project approved. Wind and solar are the plan.

Like its railroads, Klein advocates we emulate the better organized Europeans led by Germany to build our energy future. Not surprisingly, our energy policy mirrors Germany’s industrial policy. Wind and solar are heavily supported while closing all its carbon-free nuclear plants. 

As I’ve pointed out, Germany’s energy policy is a disaster. The wind didn’t blow, and the sun didn’t shine enough to fill the nation’s needs. Now energy prices have exploded. Discouraging any other domestic energy, Germany is dependent on Russian natural gas for backup. It’s either that or Coal, which they also now use in large amounts. Germany is in the ludicrous position of sending arms to help Ukraine while making energy payments to help fund Russia’s aggression. Do Klein and the elites think this is the policy we should mimic? Yet, we are well on the way down that road.

Historically humanity has thrived on relatively cheaper and more reliable power. Worldwide 1.3 billion people live without any electricity. Of those lucky enough to have electricity, Coal generates nearly 40%. Until we find a way to provide cheap cleaner energy for these people, nothing we do in the U.S. at any price will make any climate change difference.  

The Biden policy is to discourage any investments in fossil fuels. We’ve shown replacing Coal with natural gas can cut carbon emissions in half. The largest federal utility has chosen natural gas to meet future needs over wind and solar. Liquifying the excess production means it can be shipped reasonably. With modern extraction methods such as fracking, we can develop this resource economically in many countries to increase the world’s supply. Of course, this will mean large-scale investment, which the Biden administration discourages.

There are other promising energy developments. I’ve noted Nuclear, if reasonably regulated, is increasingly competitive. Recently, Fusion has had some good newsCarbon and methane capture shows signs of adding to our arsenal. Geothermal is attractive where it’s available.

The world knows our power problems and the rewards of coming up with economical solutions. Do I know which of these will come to the fore? I have no idea, but the market will sort it out if we let it.

What is unlikely is wind and solar will provide the majority of world power in the future. People are finding wind and solar have environmental drawbacks and are undesirable neighbors. Large footprints and unfavorable locations are beginning to limit places to build. These problems will raise their already high price or restrict them entirely. Germany is the poster child for the wrong-headed energy policy and is now suffering from NIMBY backlash.

Why we as a nation would opt for solar and wind over other options is a mystery. We produce virtually no solar panels or wind turbines. The batteries and hookups that might make these unreliable energy sources somewhat workable need massive amounts of copper, lithium, and rare earth minerals that we can’t mine here. A major copper mine in Arizona has been in the works for 26 years with little progress. Two lithium mines in Nevada probably will never be approved. China dominates rare earth minerals as it does solar panels. You couldn’t find a better way to make us dependent on others, some unfriendly, than Biden’s energy policy. 

Klein, however, knows government can do the job if all the liberals give a little. He knows all this because”‘ I’ve spent most of my adult life trawling think tank reports to better understand how to solve problems.” Germany has already gone down this road, and the results aren’t pretty. 

In our current baby formula crisis, people early on raised concerns but were ignored. Similarly, we see warnings the Biden Industrial Policy relating to energy could result in power grid problems resulting in power outages and rolling blackouts. We may suffer from these as early as this summer. 

Increased reliance on intermittent power sources combined with declining base sources such as natural gas or nuclear has put the nation at risk. Have any of those think tank reports written by Klein’s fellow elites sounded the alarm?

A popular argument for government industrial policy is it can lead to quicker solutions than private industry. In truth, you only go faster down the wrong road.

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