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Thursday, April 2, 2009

Capital Letters — Is Energy Independence Desirable?

Is Energy Independence Desirable?

I thought that the title of the article by David R. Henderson, “Let’s Not Be Energy Independent,” in the October 2008 issue was shocking, and the content of the article did nothing to allay my concerns.

The author seems to think that one achieves independence by tariffs and import controls. He also seems to think it wonderful that hostile foreign governments are willing to trade something valuable to us for our fiat money. I think that it is morally reprehensible to be smug about defrauding people. Moreover, the Arabs and the Chinese may soon stop accepting these fiat dollars and are already using the ones they have to buy up prime United States assets. We learn nothing from the examples of the Indians who sold Manhattan Island for some beads. What will posterity think of us for selling our real estate and industry for Chinese trinkets and for oil that we desperately need but could have perfectly well produced for ourselves?

We do not need import controls to achieve energy independence. We simply need to repeal laws and regulations that make the United States a very hostile place for industry in general and energy production in particular. We need abundant affordable energy to produce any tangible products that people throughout the world could value. We told ourselves that they were buying our financial and business expertise, but we are rapidly finding out just how much that was worth.

Europe is waking up to the hazards of being dependent on Russian gas to keep from freezing to death in the winter. Being weak and dependent invites exploitation, not robust free trade. Restoring America’s economy and freedom requires the best use of all of our own resources, including oil, coal, and nuclear, with the specific allocation determined in a free market. Perhaps other technologies will develop, but they will not arise through wishful thinking or government subsidies of economically infeasible “alternatives.” The United States once again needs to be a magnet for foreign capital because of the rule of law and a favorable tax and regulatory climate. That was one of our biggest comparative advantages, one that we have progressively squandered.

–Jane M. Orient, M.D.

Tuscon, Arizona


David Henderson replies:

Dr. Orient has three main arguments, but only one of them deals with my case against energy independence.  I shall consider that one first.

Dr.Orient argues that we could achieve energy independence  simply by repealing laws and regulations that  make the United States a hostile place for energy production.  She and I would probably agree on repealing 90  to 100 percent of those laws and regulations. The most  important ones that affect oil are the restrictions on offshore  drilling and on drilling in Alaska. Even doing that,  though, would probably increase our domestic production  by at most three million barrels per day. Given that  we import about 12 million barrels per day, we would  still need to import a substantial fraction of our oil and  would not, therefore, be energy independent.

She also argues that our economic well-being and  economic freedom would be enhanced by making “the  best use of all our own resources, including oil, coal,  and nuclear, with the specific allocation determined in  a free market.” But this certainly is not an argument  against anything I wrote.

Finally, Dr. Orient gives an argument about foreign investment, but here she is arguing not with me but with herself. She clearly is upset about “selling our real  estate and industry for Chinese trinkets and for oil.”  She seems to be getting at the fact that Chinese and other sellers who provide our imports use some of the  proceeds to buy real estate, shares in companies, and companies themselves. In others words, they invest in  the United States. Her tone suggests that she objects to this. But two paragraphs later, she claims that “United  States once again needs to be a magnet for foreign capital.”  In other words, she wants foreign investment in  the United States. So do I.