As summer turns to autumn, let’s talk, however briefly, about the economic prospects for the next couple of months. We’ve already mentioned about the impending E.U. energy crunch (here, here, and here), so let us today focus on its quite likely consequences.
A couple of days ago, Andrej Martyanov highlighted the current trajectories of major industrial economies, holding that
‘It seems that the issue with understanding the economy persists…economy IS energy. No energy—bid your dreams of becoming a global power goodbye.’
I have no arguments here. In other words, we may even adapt Clausewitz’ (in-) famous dictum as follows: energy security is the continuation of politics by other means.
Now, Martyanov emphasised that a fair number of nations—most notably China and India, but also Germany, Italy, Japan, the UK, and South Korea—are energy-starved, i.e., highly dependent on energy imports to keep their economies going.
Speaking out production and manufacturing output, let’s briefly mention a few key facts highlighted by Martyanov:
China’s steel production dwarfs the U.S.’ by a factor of 14-15, Germany’s by a factor of 29-30, and the UK’s by a factor of 152.
China’s aluminium output dwarfs the U.S.’ by a factor of 32-33, Germany’s by 65-66, and the UK’s by a factor of 1,384-1,385.
Chinese universities are ‘producing’ 6-7 times the number of STEM graduates compared to the U.S., and 46-47 compared to Germany.
These numbers aren’t even close. The ‘advanced’ economies are enjoying the last manifestations of the legacy of the 20th century, but this is quite certainly not going last (much longer). In combination with the still-ongoing Coronavirus Crisis—esp. its strong economic aspects and their long-term consequences—let us think about the most likely near-term future trends.
German politicians and pundits alike appear in denial about all of this. Take, say, the example of Norbert Röttgen, a former government minister and currently serving as on the Bundestag’s foreign affairs committee (bio via Wikipedia), who recently commented on German TV (for the following quote go to 49:10):
‘This winter, we will be witnessing Vladimir Putin using gas to conduct gas policy, thereby trying to influence our politics, Germany's foreign policy [sic], by using gas to conduct power politics.’
Leaving aside the truistic nature of Röttgen’s circular ‘reasoning’ (doh), let it be known that Forbes ran an article on energy security—in Russian. Note that there is no English version of this article by V. Kurilov.
‘Even’ Yahoo!Finance has caught on, as this recent example shows:
‘Energy is so hard to come by right now that some provinces in China are rationing electricity, Europeans are paying sky-high prices for liquefied natural gas, power plants in India are on the verge of running out of coal, and the average price of a gallon of regular gasoline in the United States stood at $3.25 on Friday—up from $1.72 in April.
As the global economy recovers and global leaders prepare to gather for a landmark conference on climate change, the sudden energy crunch hitting the world is threatening already stressed supply chains, stirring geopolitical tensions and raising questions about whether the world is ready for the green energy revolution when it’s having trouble powering itself right now.’
Funny that this is mentioned: ‘green’ energy has (kinda) failed, it would appear. Europe is in a tight spot already: falling energy production, little ‘help’ to be expected as the U.S. sells its LNG to Asian customers.
What, then, is to be done?
If you’re in Europe and in a gas-powered country, wait for V. Putin’s statement, scheduled for tomorrow, 13 October, and hope for the best outcome in the upcoming E.U. and climate change meetings.
Don’t bet the farm on it, though, as indicated by a recent comment by German Green Party co-chair A. Baerbock. During a campaign event on 8 September, she stated:
‘If we continue as the SPD and CDU have done in recent years, we will endanger Germany as a manufacturing location and jobs in Germany. And that’s exactly what I don’t want, but the opposite. In the future, climate-neutral steel should be produced in Eisenhüttenstadt, in Duisburg, and not in China.’
Asked by someone in the audience where the climate-neutral energy should come from, Baerbock retorted:
‘Good question, and where should the electricity come from? Of course, it will continue to come from the power outlets [Steckdose] and, of course, it will continue to be used in the factories through the power lines that we have. But this electricity must be climate neutral in the future.’
And while you’re at it, why not wish for the moon?
Be afraid, be very afraid if these politicians actually get to run the government.