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Wednesday, September 3, 2008

US Oil Dependence and Its Dangers: The Chinese Case (3rd in a Series)

Today's Buggy Topic 

Earlier today, September 3rd, 2008, prof bug left a fairly extensive commentary in a thread at EconBrowser . . . a well-visited economic blog run by Prof. James Hamilton of UC San Diego and Prof. Menzie Chin of the University of Wisconsin.  It's a good site, with middle-of-the-road economic analysis, and generally speaking, it requires a decent grounding in, say, intermediate level undergrad economics.

The topic left by prof Hamilton referred to the new oil contract that the Chinese government has signed with the Iraqi government --- a favorable sign according to Hamilton.  Prof bug didn't disagree, but he noted --- as he has when he has posted on the international oil market and US (and EU) dependence on it --- how even the best of economists aren't trained to deal with the foreign policy and security spill-overs of our dependence.  Click here for the Hamilton post and the buggy riposte.

The Dangers of Such Dependence

Prof bug has spelled them out before: click here and, a day earlier (August 15, 2008) here.  No need to say any more.  If you're interested, go to the Hamilton post and the buggy reply today, and --- if you want to pursue your knowledge --- click on the two earlier buggy links.

Keep in mind that when talking about energy independence and how costly it will be --- for your standard-model economist it's pie-in-the-sky talk --- the trillions of dollars the US has spent in military use alone in the Middle East, not to mention our entanglement in the affairs of corrupt gangster-regimes and how the huge price of oil has emboldened the menacing behavior of authoritarian Russia and Iran --- both otherwise basket-case economies --- is never taken into account.  It's as though growing trade and investment interdependence is always for the good, an extension of market-logic across state-boundaries, with no wider consequences for global or regional stability or the growth of real or potential threats to basic American interests and values around the world. 

And the notion that growing interdependence between, say, the Chinese economy and the American economy will invariably promote not just mutual cooperation but growing democratic trends rests essentially on flimsy premises, with no clear evidence for the assumptions.  When, for instance, a rapidly growing if still half-backward China is devoting only 40% of GDP to its people's consumption --- the equivalent in Japan and the EU as well as the US is well above 60% --- then you know that there are motives driving Chinese development in the minds of its dominant Communist Party elites that don't mesh with standard economic assumptions about economic growth.

None of This Means, Please Note, Growing Globalization Is Bad Per Se

It has its clear desirable side --- not least in adding to the competitive pressures that have enabled the US to be in the vanguard of pioneering a shift from an industrial to a post-industrial knowledge-based economy . . . the major driving force technological change, manifested in the enormous mushrooming of communications and information technologies that didn't exist two decades ago.  But that said, the blithe, almost blasé assumptions in the minds of most economists when analyzing growing economic interdependence --- with a narrow focus on limited economic gains and costs --- have to be continually questioned, a form of conventional wisdom that has already created the menaces of an aggressive Russia in its former imperial colonies, a defiant Iran bent on developing nuclear weapons and missile delivery systems, and a zealous Wahhabi Islamist government in Saudi Arabia that spreads hateful anti-Christian, anti-Jewish, misogynist propaganda world-wide in competition with the Shi-ite oil-rich zealots in Iran.