Resource security and energy abundance

John Mathews  - Former Visiting Fellow at SPERI & Professor of Strategic Management, Macquarie University, Sydney

Generalising this argument so that it applies to the West as well as to industrialising giants like China, we might say that greening strategies can be founded on manufacturing activities devoted to producing energy conversion devices and that policy should preferably be directed towards promoting such activities, as well as resource recirculation.  It is then a highly convenient truth that, as energy security is enhanced through building renewables, so carbon emissions are reduced.

Such a strategy can be pursued in the name of energy abundance and resource security – very different goals from the usual appeals to restrictions on energy and resource consumption. There is in fact no need for the West to reduce energy consumption – provided the energy is generated from renewable sources.  And there is no need for the West to seek to reduce resource consumption – again, provided the resources are recirculated.

These are both simple yet profound goals and imply simple yet profound changes to capitalism.  They are simple in that they can be expressed in a formula: ‘resource security and energy abundance’.  But following through on the policies needed to effect such an approach would imply a commitment to industrial strategy that is decidedly unfashionable in the twilight of the neoclassical era.

It is for this reason that I argued in Greening of Capitalism that Asia (and in particular China) is taking the lead in driving this next ‘great transformation’.  In the terms of a detective novel, China has both motive and means to build a new green growth system.  It has abundant motives in the appalling pollution problems it has created through its three and more decades of unbridled growth. (These problems are reviewed in telling detail in the YouTube sensation ‘Under the Dome’ by Chinese journalist Chai Jing).  And China has the means in the form of a strong state which is prepared to intervene in the economy to drive the promotion of the manufacturing industries that are producing green energy and resource devices.

Unless Western countries are prepared to intervene in their own economies to build green energy and resource systems with the same determination as shown by China, they will continue to go down to defeat in international competition over the emergence of the clean-tech economy.  In solar photovoltaic cells, for example, China now dominates global production of first-generation crystalline silicon solar cells – as is a common experience for an industrial latecomer utilising smart catch-up strategies.  But second-generation thin film solar cells should be a different matter entirely, because there is as yet no dominant technology.  In these circumstances smart industrial strategies in the West could set off a new technological trajectory where advanced companies could maintain a lead for years until China’s firms catch up through pursuing another round of industrial strategies.

Capitalism is the vibrant technoeconomic system that enables such industrial dynamics to be pursued.  There really is no secret as to why China is pursuing energy abundance and resource security through its highly targeted industrial strategies.  The only mystery is why the West allows it to win in the competition unleashed in the international political economy. Changing the emphasis of policy so that it engages direct with the economy through industrial strategy, and changing the rationale for renewables to building energy security through their manufacture, would go a long way to restoring some balance.