The United States has not increased its total energy consumption in nearly 25 years. Of course, energy consumption per capita has fallen during this time, as the nation’s population grew by 21%, from 280 to 340 million. But total energy consumption, measured in quadrillion btu (quads), has averaged around 95 per year with most years coming within a percentage point or two of that figure. Last year for example? 94.2 quads. How about 10 years ago, in 2014? 95.4 quads. So, the US is a very good energy saver, applying efficiency gains across sectors over time, and reaping the rewards: growing GDP without growing energy inputs.
One observation worth making here is that much of this progress occurs through the normal course of technological advancement, and the regulatory state that pushes industry to embed efficiency gains into products. Computers, toasters, lights, cars, power tools, buildings, transportation. Policy and technology working together, to bring down the overall volume of energy required to produce GDP? Shocking! And here we thought the regulatory state was in the way of profits! Question: If over the course of 25 years your population increases 21%, and your GDP nearly triples, while your energy inputs stay flat, would you not agree your return on energy invested is stellar?
The US trade position is excellent and requires no fixing. In the current discourse, China is cast as a predatory nation that overproduces and exists only to dump goods on the rest of the world, and the US is the poor and unlucky buyer of last resort, forced to hoover up everyone else’s goods. What a bunch of nonsense. The US is not only the world’s second largest manufacturer (second to China), but exports goods and services that are valued at a very robust 12% of its GDP. If China is a toxic state-supported overproducer that exports goods valued at 20% of its own GDP, how is that radically different from the US position? Why isn’t the US accused of dumping cheap oil and gas, for example, on the rest of the world?
The bulk of misunderstanding around the US trade position is little more than nostalgia, and the very wrong view that the jobs we shipped overseas the past half century can somehow “come back.” Well, one of the reasons those jobs can’t come back is that they no longer exist! The jobs that exited the US and other western nations have been transformed in foreign countries by robotics, automation, software, and other efficiency gains. The US no longer makes shoes or clothing at scale but guess what—making shoes and clothing are also challenging to make in low labor cost domains too. These are not high value, high margin goods which is why those countries that produce them have also invested in more efficient, modern manufacturing methods. When China makes heat pumps, solar panels, mobile phones, wind turbines, and cars—do people imagine these are all being produced in 1930’s style sweatshops? These are all being manufactured with the latest production technology.
The US can no more return to being a manufacturing-forward economy, than it can return to being an agrarian-forward economy. Economic development has an arc. It goes in one direction. The US and the West are traveling through this same arc, having gone through agrarian, and then industrial revolutions. Today, while the West still retains agriculture and manufacturing, the primary jobs are found in design, engineering and technology innovation, software, and services—and a great deal of those services are defined by intelligence, knowledge, and analysis. Just what you’d expect from wealthy populations that have made higher education the norm.
Newsflash: China is fated to travel the same arc, so we don’t need Treasury Secretary Bessent to give a speech exhorting China to achieve better balance in its economy. China is already on track to do just that. China passed the Lewis Turning Point in 2010—the moment when all available surplus labor working in agriculture moves out of rural areas and goes to work in manufacturing in the cities. You can find a related theme in the Kuznets Curve, another way to think about economic development. Nations become wealthy during the industrial phase, which leads them to turn to education, skill upgrading, further modernization, and better attention to preserving the environment. China can no more prevent itself from going forward in this regard, than the US can induce itself to go backward.
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