Energy

The Myth of Green Australia

John Muscat — Sat, 04 May 2013 01:38:37 -0400

Having collected the Nobel peace prize in 2007, Al Gore’s fortunes as a climate crusader slid into the doldrums. But 8th November 2011 arrived as a ray of sunshine. On that day Australia’s parliament passed into law the world’s first economy-wide carbon tax. Rushing to his blog, Gore posted a short but rapturous statement, cross-posted in The Huffington Post. His fervent language echoed in progressive circles across the globe. Australians have been held-up as pioneering environmentalists ever since, putting Americans to shame.

“This is a historic moment”, thundered Gore. “With this vote”, he blogged, “the world … turned a pivotal corner in the collective effort to solve the climate crisis”. He proclaimed it “the result of tireless work of an unprecedented coalition that came together to support the legislation”; he praised the “leadership of Prime Minister [Julia] Gillard and the courage of legislators”; and he declared “the voice of the people of Australia has rung loud and clear”.

But maybe Gore’s enthusiasm was a bit misplaced. In September, less than two years later, Australians seem likely, according to the polls, to hand the Gillard Labor government a stinging landslide defeat.

“A pivotal corner in the collective effort”

As it turns out, and not for the first time, Gore’s analysis was wrong. For one thing, calling the carbon tax “pivotal” is pure hyperbole. Although a relatively large land mass, Australia is populated by just 23 million people who collectively emit a minuscule 1.5 per cent of the world’s greenhouse gases. Nor is the country influential in a broader political union or association beyond its borders. Since climate change alarmists suggest that global emissions must fall by 25 to 40 per cent in 2020 compared to 1990 levels, Australia’s efforts must be seen as more symbolic than effective. Currently, the tax and its post-2015 form as an emissions trading scheme (ETS) are adjusted for a trivial 5 per cent cut from 2000 levels in 2020; 5 percent of 1.5 percent of the world’s emissions barely registers against a few days increase in countries like China.

Environmentalists maintain that the important thing is not results, but setting a moral example of climate action. They argue Australia’s emissions may be tiny in absolute terms, but amongst the highest in per capita terms. Major emitters like the US, China, India and the EU, they argue, can be shamed into action by Australia’s noble sacrifice. Unfortunately for them, this argument, not very strong to being with, deflated like a punctured balloon since the shambles at Copenhagen.

We’ve been here before. In December 2009 Australia’s newly minted Labor Prime Minister, Kevin Rudd, with a bulging entourage of 114 officials, descended on the Copenhagen conference to negotiate a successor to the Kyoto Protocol. He was awarded the task of preparing a draft negotiating text. Rudd played an active role in the lead up, having signed Kyoto and undertaken to legislate for an ETS in his first term, a serious step given Australia’s status as the world’s leading coal exporter. Before flying out to Denmark, he introduced the necessary bills into parliament for a second time.

Copenhagen was a test of the ‘noble sacrifice’ argument driving Rudd’s activism but resulted in an epic fail. Rudd’s draft text was tossed aside and the conference collapsed into bickering between delegations from the developed and developing worlds. There was no successor to Kyoto, just a flimsy, non-binding accord the delegates “took note of” but didn’t adopt. Greenpeace called Copenhagen “a crime scene”.

The UN’s Framework Convention on Climate Change has stayed off the rails ever since. Later Conferences of the Parties (COPs) at Cancun and Durban did little more than kick the can down the road. Durban opened twenty days after the “historic moment” of Australia’s carbon tax, but delegates deferred all talk of a binding agreement to 2015, anticipating a possible start in 2020. Canada pulled the plug on Kyoto altogether, later followed by Japan and Russia. “This empty shell of a plan leaves the planet hurtling towards catastrophic climate change”, huffed Friends of the Earth.

Under the non-binding Copenhagen Accord, parties were invited to submit emission reduction “pledges”, and most have done so. Even if achieved, though, they get the world nowhere near 25 to 40 per cent reductions on 1990 levels in 2020. Writing in Nature, analysts from the Potsdam Institute of Climate Impacts dismiss them as “paltry”. Amid rising emissions, Australia’s “pivotal” carbon tax is but a straw in the wind.

“An unprecedented coalition that came together”

At the end of 2009, Rudd’s ETS was rejected by parliament a second time, due in part from rising doubts about the climate agenda. As 2010 progressed, his popularity waned, battered by his inept handling of the contentious mining tax. Labor colleagues bristled at his secretive and high-handed manner, while powerful union bosses resented his indifference to their concerns. Taking advantage of drooping opinion polls, Rudd was sacked and replaced with Deputy Prime Minister Julia Gillard.

This sent shockwaves through the country, which had never seen a sitting prime minister dumped in his first term. Fearing a backlash, Gillard hastily called an election for 21st August, hoping to exploit positive feelings around serving as Australia’s first female leader. She proved a poor campaigner, however, and a series of damaging leaks scuttled her efforts. Labor’s support faded and on election night Gillard was left with 72 seats, four short of a majority in the 150 seat House of Representatives. The Liberal-National opposition ended up with 73 seats, also short of a majority. The balance of power was in the hands of one Greens Party member and four independents.

After weeks of negotiations, the Greens and three of the independents pledged support for a Labor Government under Gillard, the first minority government since the 1940s. But it became increasingly clear that a fresh election would produce a solid Liberal-National Party majority. Returning to the people for a new mandate was never in Gillard’s interests. As for the Greens and independents, fortune delivered them more power than they ever had or would ever have again. Making the most of their time in the sun, they opted for Gillard, who wasn’t about to call another election. Gillard’s coalition may be “unprecedented”, in Al Gore’s words, but it’s untrue that they “came together to support” high principle. They were thrown together by electoral chance and stuck together out of grim self-interest.

“Leadership of Prime Minister Gillard and the courage of legislators”

After the second rejection of his ETS, Rudd shelved the policy indefinitely, to the dismay of the world’s environmentalists. The inner circle which advised him to take this course, according to later revelations, included Julia Gillard. On becoming prime minister she showed little enthusiasm for the climate cause, ruling out a price on carbon unless there was “a deep and abiding community consensus”. Her tokenistic policy at the 2010 election was “citizen’s assembly” to canvass options. The opposition also ruled out a price on carbon. Twice in the lead up to polling day, Gillard explicitly denied rumours of a hidden agenda, uttering the now infamous words “there will be no carbon tax under the government I lead”.

Gillard entered the post-election negotiations desperately hoping to save her prime ministership. The radical Greens would never have backed the conservative opposition. But when they demanded a carbon tax as the price of their support, she caved in a fit of panic, displaying little of the courage praised by Gore. The independents signed on to keep the minority government in business.

Labor’s Clean Energy Future package includes a carbon tax, but also billions of dollars of compensation and credits to cushion the blow. In a massive money churn, around $5 billion of the revenue is disbursed to households in higher benefits and tax breaks, and $9.2 billion goes to industry assistance, including free permits for high emitting industries, $300 million to the steel industry, $1.26 billion to the coal sector, and $1.2 billion to manufacturing. Unhappy about these handouts, the Greens were bought off with a $10 billion Clean Energy Finance Corporation. Australians are left wondering how all of this encourages shifts to “cleaner” energy sources. The handouts muffle some damaging impacts of the tax, but they are hardly “courageous” from the perspective of Al Gore.

“The voice of the people of Australia has rung loud and clear”

Gillard made her plans for a carbon tax public on 25th February 2011. Her residual popularity sank like a stone. The Newspoll of 18-20 February 2011 recorded 50 per cent satisfied and 39 per cent dissatisfied with her performance. In the next survey of 4-6 March 2011, those figures were reversed: 39 per cent satisfied, 51 per cent dissatisfied. Labor’s support (first preference) plunged to 30 per cent in the March survey, from 38 per cent at the election. These results were consistent with a general fall in support for climate action. From a high of 68 per cent in 2006, reported the Lowy Institute Poll, it dropped to 41 per cent in 2011. Only 32 per cent of Australians supported the carbon tax when Gore wrote his rapturous blog post.

Gillard’s frantic attempts to recover have come to nothing, and calling an election for 14th September hasn’t helped. The latest Newspoll of 5-7 April 2013 had her satisfaction rating at a dismal 28 per cent, with 62 per cent dissatisfied. Labor’s support is still in the basement at 32 per cent, with the Liberal-Nationals at 48 per cent. Likely, the government faces a devastating loss of around 20 seats.

The opposition’s implacable campaign against the carbon tax has rocked Gillard’s time in office. They promise to repeal it, dismantle much of the Clean Energy Future package and even abolish the Department of Climate Change. Since the 2010 election Labor has suffered a succession of defeats at the state level, losing power in New South Wales, Victoria, Queensland and the Northern Territory, while the Liberal-National Coalition improved their majority in Western Australia. These elections were fought on state issues, but in every case the conservatives echoed Opposition Leader Tony Abbott’s anti-carbon tax message. Closer to home, Gillard was forced to stare down moves against her by colleagues to restore Kevin Rudd, once in February 2012 and again in March this year. Four senior cabinet ministers were sacked or resigned after the second episode. Labor limps forward in the worst possible shape.

A Liberal-National victory would probably mean the end of climate change as a major political priority in Australian politics. Al Gore was mistaken. He didn’t hear “the voice of the people of Australia” on 8th November 2011; but if he’s listening he’ll hear it “loud and clear” on 14th September 2013.

John Muscat is a co-editor of The New City Journal.

Fracking Offers Jerry Brown a Watershed Moment

Joel Kotkin — Mon, 22 Apr 2013 01:38:25 -0400

The recent announcement that Jerry Brown is studying "fracking" in California, suggests that our governor may be waking up to the long-term reality facing our state. It demonstrates that, despite the almost embarrassing praise from East Coast media about his energy and green policies, Brown likely knows full well that the state's current course, to use the most overused term, is simply not politically and economically sustainable.

Although largely a prisoner of basic green dogma, Brown also is a former Jesuit, with that order's sense of rationality, order and, well, philosophical flexibility. Unlike many of his progressive idolaters and legislative allies, Brown may well be intelligent enough to look past the rhetoric of the environmental movement and consider its often unexpected ill-effects.

Brown needs to balance "California comeback" stories – including one that gushingly describes "California beaming" – with the actual realities. Good times, and the current technology bubble, may be blessing Silicon Valley, but as Walter Russell Mead points out, this comeback is being pushed "over the heads of the poor and the jobless." This, he adds, "is not how progressives used to think."

The chasm between the effects of "noble" green politics and the interests of most Californians is becoming evident, if not widely recognized in the mainstream media. Editorial writers at the New York Times may believe we are losing our need for oil and gas, but this transition should be more difficult than they suggest and, if achieved through often-thoughtless Draconian measures, could have profound impacts on the overall economy.

Let's start with the supposed "up" side of the purist renewable policies hitherto embraced by Brown. The governor's 2010 election promise about creating 500,000 "green jobs" – his economic rationale for his energy and other environmental policies – increasingly looks far-fetched. With electric car maker Fisker, backed by well-connected Democratic venture capitalists and Al Gore, now perhaps ready to follow solar-panel maker Solyndra into bankruptcy, the pitch about a green economy seems unlikely, even bizarre.

The state-driven "green" policies have also created huge losses for the giant state-employee retirement fund CalPERS, one of whose managers at a recent conference confided that renewable–energy investments have negative returns approaching 10 percent.

Certainly, neither green energy nor even the current Silicon Valley bubble are creating enough jobs to make up for the enormous shortfall in employment since the recession. This is particularly evident in urban areas like Los Angeles and Oakland – where Brown was mayor from 1999-2006 – as well as most of the state's interior. Overall, the state vies for last-place honors with the likes of Rhode Island, Nevada and Mississippi for the nation's highest unemployment rate. The damage is greatest in the state's more blue-collar interior. Working-class Stockton just was allowed to enter bankruptcy and other municipalities seem likely to join the queue.

Progressive journalists, eager to pronounce the state's comeback to justify their ideology, seem utterly unaware of the seriousness of the overall situation in the state. One wonders what they would say if Pete Wilson or Meg Whitman were governor. Compare Texas, which is 550,000 jobs ahead of its 2007 number, to California, which, despite recent gains, remains down 560,000 jobs from its peak. Perhaps unemployment is not a big issue in the progressive reserve of Palo Alto, where the jobless rate is about the same as in North Dakota, but it is a constant in much of Los Angeles, San Jose and Santa Ana, as well as the Central Valley. If this suggests a "comeback" to New York Times columnist Paul Krugman, perhaps we need a new definition for that word.

These comparisons seem particularly relevant to the discussion of fracking – oil and gas extraction using a technique called hydraulic fracturing. In the environmental scheme of things, oil and even natural gas, once widely favored by progressives, now constitute an utter evil. This is true even though gas has been the primary reason for the country's reduced carbon emissions by replacing coal as a source for generating electricity. Some of the state's well-heeled greens would like to ban the process entirely.

Brown must be aware he is not just governor of the public sector or of his admirers among the coastal rich. He has to consider the unimaginable: removing mandates that force the state to rely on expensive, often-unreliable renewables, notably, solar. These have helped push California electricity prices well above the national average, and much higher than in prime economic competitors such as Washington state, Utah, Texas, Arizona and Nevada. Economist John Husing suggests this is one reason why California not only completely missed the recent national revival in manufacturing jobs – 500,000 the past two years – but actually lost 10,000 more such jobs.

We are clearly missing the party here. California's energy policies reflect what is already happening in Europe, where anti-fracking ideology, sometimes supported by the no-doubt-disinterested Russians, have largely won the day. But the costs of green policies have already convinced hard-pressed Spain to abandon its widely praised renewable program.

Far more economically healthy Germany also is rethinking its renewables mandates. One reason: German companies like Bayer and BASF consider moving to cheaper locales, such as along the U.S. Gulf Coast, where electricity is one-third the price. Texas, Utah and Arizona are to California's hard-pressed manufacturers what the Gulf Coast is to Germany's.

And, then, there are the effects of the budget. Unlike his East Coast admirers, Brown must know that the budget situation is hardly rosy over the longer term. The state auditor recently released a report showing the state's net worth to be negative by some $127 billion, in large part due to often out-of-control pension costs. There are already indications that the return from last year's hike in income taxes may not be as large as expected and that what was, during the election, promised to schools will likely end up, as widely predicted, covering rising pension obligations.

Companies and individuals may not leave California in droves, as some have suggested, but investors certainly can put their money someplace more fiscally responsible. A longer-term problem may be that the higher-income earners, who generate the vast majority of income-tax revenue, are also those most likely to change behavior or find effective income-hiding strategies; remember, Facebook paid no income taxes last year.

Given these prospects, reviving California's fossil-fuel industry could prove a critical boost to the budget. A deal to raise some energy taxes while allowing more exploration and development would go a long way to filling the state's coffers.

Energy taxes play a big role in financing higher education in many states, including North Dakota, Louisiana and Texas. Oil money, ironically, has allowed Texas to fund universities, particularly the main University of Texas campus in Austin, as a competitor to the perennially hard-pressed University of California system. An energy boom in California, whose energy resources may exceed those of all these states, might offend most academics, but, my hunch is, they might take the money.

Perhaps more important, a pragmatic shift on energy would also help, as columnist Tim Rutten puts it, "jump start" the state's economy, particularly in central California. In the past decade, Texas has created almost 200,000 energy-related jobs, while California has generated barely 20,000. These jobs provide good wages to many blue-collar workers, the very people losing out the most in our progressive-minded state.

There are other signs of pragmatism from the governor. Brown has announced support for a peripheral canal that would provide more-reliable water supplies to the state's huge agribusiness industry. Although some state regulators threaten farmers with ever-tougher regulations, some observers, such as three-term Salinas Mayor Dennis Donahue, now a full-time farmer, say the governor is trying to "walk the line between labor, greens and agriculture."

Many Republicans and conservatives find the notion of Brown getting on the road to reality itself fundamentally unrealistic. But the past could be prologue. Brown also started off his first term, in 1975, as something of a dreamer, proclaiming a "small is beautiful" agenda. This was, in many ways, ahead of its time, and skeptical of government spending, but Brown's environmental views, particularly, also offended some business interests. Far worse, he signed off on legislation freeing up public-sector unions, which has turned into something of a disaster.

But by the time he started running for a second term, Brown readjusted to a new reality. He could claim that, as someone opposed to the growth of institutionalized government, he could live with Proposition 13. Brown had opposed the measure, but, once it passed, in 1978, he chose, unlike many progressives, to embrace it.

Brown then ran as a centrist, pro-growth governor. He particularly embraced the then-ascendant technology industry, gaining new donors and allies, although the shift toward realpolitick horrified some of his green backers. But the politics worked brilliantly.

Today's circumstances, of course, are different. For one thing, Brown faces little pressure from the right, as the Republican Party, at least for now, has deteriorated into near irrelevancy. The once-potent California business community also has lost much influence, with every lobby, basically, trying to make its own deal with the overweening state apparat.

So, if Brown is to move to the center, he will have to do it largely on his own, and put up with the incessant hectoring of his allies. Yet, Brown's occasional genius has demonstrated a Machiavellian quality, knowing when to embrace opponents in order to divide or weaken them, or to allow allies to stew. He also, at this stage of life – today, April 7, is his 75th birthday – must wonder if he wants to leave a legacy of fiscal weakness, a fading competitive edge and an ever-expanding class chasm. In the long run, whether on fracking or a host of other issues, Brown's success will not derive from pleasing progressive writers, but by promoting a better future for the vast majority who live in, and love, this state.

Joel Kotkin is executive editor of NewGeography.com and a distinguished presidential fellow in urban futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

This piece originally appeared in the Orange County Register.

Photo: Troy Holden

U.S. Could be Courting Trouble in Europe

Joel Kotkin — Mon, 25 Mar 2013 01:38:18 -0400

One of the most fascinating aspects of Barack Obama's presidency stems not so much from his racial background, but his status as America's first clearly post-European, anti-colonialist leader. Yet, after announcing his historic "pivot" to vibrant Asia, the president, the son of an anti-British Kenyan activist, recently announced as his latest foreign policy initiative an economic alliance with, of all places, a declining, and increasingly decadent, Europe.

Some analysts, such as Walter Russell Mead, suggest the possible "ratting out" of the new Asia focus could constitute "a mistake of historic proportions." In East Asia, leaders, from Vietnam and Singapore to Japan, have been counting on a strong U.S. presence to ward off Chinese hegemony in the region. The idea of a reduced naval presence and a weakening commitment to allies would undermine our influence in this increasingly critical economic region.

At the same time, the president's desire to integrate our economies more closely to that of Europe reflects a longtime prejudice within the Democratic Party favorable to the old Continent. The notion of a new trade tie to the European Union set longtime Eastern policy types, such as former Bill Clinton aide and onetime Woodrow Wilson School head Anne-Marie Slaughter into rhapsodies about an emerging new "Atlantic Century." Vice President Joe Biden, for his part, told a recent Munich security conference that Europe represents "the cornerstone of our engagement with the rest of the world."

This is delusional, to say the least. Republicans have their faults, but at least they know how to tell historic time. In contrast, largely Democratic Europhiles simply want to relive the glorious past, and consume a legacy of affluence. And to be sure, generally it's more pleasant to attend – as long as someone is paying the bill – a conference in London, Paris or Zurich than Beijing, Mumbai or Mexico City. Europe, as we know from the debates over compensation of EU bureaucrats, knows how to treat functionaries with the comfort to which they easily can become accustomed.

Pumping for greater Euro-ties seems almost insane under current conditions. The Continent's unemployment rate, nearly 12 percent among the 17 EU member countries, is already at record levels, and its younger generation suffers unemployment approaching 30 percent or higher in at least five EU countries, including Greece, Spain and France. In Portugal, 2 percent of the population has migrated just in the past two years, not only to Northern Europe but, amazingly, also to Portugal's booming former African colonies.

This does not seem to be setting up the prime conditions for Ms. Slaughter's imagined new "Atlantic Century." Although North America retains the resources, demographics and innovative culture to compete with Asia and other rising powers, Europe is in a notably downward trajectory. Its share of the world economy has plummeted from nearly 40 percent in 1900 to 27 percent today and continues to shrink rapidly. By 2050, not only the United States, but China and the rest of the developing world, according to the European Commission, will have surpassed the total of the 27 countries in the EU.

One has to be a cockeyed optimist not to see that the long-term prognosis, even without the current euro crisis, is not good. Manufacturing, long a Continental bastion, is weak and falling behind that of the U.S. as well as Asia. German engineering may still be first-class, but much of the production and design will be moving to Mexico, the U.S., Latin America and Asia.

Energy may prove a particular vulnerability. Although the region has shale and other energy resources, greens are far more powerful in Europe than in America and hostile to the hydraulic fracking that has created the current U.S. boom in oil and gas. The combination of radical green policies favoring expensive, often unreliable renewables, as well the shuttering of the Continent's once-strong nuclear industries, are creating both high prices and wobbly reliability of electricity supplies. (Ironically, the reluctance to maintain nuclear power and oppose fracking for natural gas has led to a rise in greenhouse gas emissions and even some increased use of coal.) Tulane's Eric Smith suggests many of Germany's manufacturing powers are intensifying efforts to shift operations, notably to the southern United States, for cheap electricity and lower overall costs.

Demographics, however, may be Europe's weakest suit. Although East Asia is now experiencing low fertility, Europe has been demographically stagnant for at least a generation longer. By 2050, Europe's workforce is expected to decline by 25 percent from 2000 levels; the U.S. is expected to see expansion of upward of 40 percent.

This phenomenon threatens Europe's lone serious economic power, Germany. The country now produces fewer children than in 1900. Given the expansive welfare state, the fiscal burdens being faced in Germany and other EU countries will dwarf those of the United States; by 2050 Germany will have nearly twice as many retirees per active worker as America.

Yet remarkably, for all its manifest failings, Europe remains a Mecca and role model for many American progressives, like Ms. Slaughter. The past decade has seen the publication of a spate of books, such as Jeremy Rifkin's "The European Dream" and Steven Hill's "Europe's Promise," that see Europe's regulation state and "soft power" an alluring alternative to America. Some hail the EU as the prototype of a benign "new kind of empire" based on culture and pacifism.

If so, it's an empire rapidly hurtling into its dotage. The great European historian Walter Lacquer has pointed out that such optimism about the Continent becoming "united and prosperous" is likely "misplaced." In policy terms, for the U.S. to follow Europe's model is an almost sure recipe for our own decline. Even the usually pro-free-trade Wall Street Journal is concerned that any attempt to "harmonize" American policies with those of the "European model" will simply expand government power and bureaucratic hegemony.

To be sure, there remain parts of Europe, particularly in the Northern rim, that are doing better. These countries – the Netherlands, Scandinavia and Germany – have enacted significant labor market reforms, retain some strong industries and have tried to be responsible fiscally. If they broke off from the EU and set up a modern-day Hanseatic League, it may make sense for us to embrace stronger ties with them. But that can't be said of an alliance with the weak sisters of the EU's southern and eastern fringes, or even dirigiste state-dominated France.

In reality, the EU will never become a giant Sweden. Scandinavia possesses a unique history, shaped by massive outmigration in the past century and a largely homogeneous population; many of these countries possess great natural resources, such as oil, iron ore or hydroelectricity. In contrast, the eastern edge of the zone contains some of the most depopulating parts of the planet, as people seek opportunities in the more economically viable North. The comic political economy of Italy, the political violence of Greece and the mass disenchantment of Spain presage a European future that contrasts greatly with the relative prosperity and order of the North.

None of this suggests that, if the political strings are not wound too tight, that a free-trading arrangement with Europe may prove useful. But if an agreement becomes a wedge for accelerating the adoption of Euro-style policies, it could allow us to squander an opportunity to maintain our pre-eminence in the post-colonial, and post-European-centered, world.

This piece originally appeared in the Orange County Register.

The Real Winners Of The Global Economy: The Material Boys

Joel Kotkin — Wed, 06 Mar 2013 11:10:23 -0500

Something strange happened on the road to our much-celebrated post-industrial utopia. The real winners of the global economy have turned out to be not the creative types or the data junkies, but the material boys: countries, states and companies that have perfected the art of physical production in agriculture, energy and, remarkably, manufacturing.

The strongest economies of the high-income world (Norway, Canada, Australia, some Persian Gulf countries) produce oil and gas, coal, industrial minerals or food for the expanding global marketplace. The greatest success story, China, has based its rise largely on manufacturing. Brazil has been powered by a trifecta of higher energy production, a strong industrial sector and the highest volume of agricultural exports after the United States.

Things are really looking up for the material boys here in North America. Over the past decade, the strongest regional economies (as measured by GDP, job and wage growth) have overwhelmingly been those that produces material goods. This includes large swaths of the Great Plains, the Gulf Coast and the Intermountain West, three regions that, as I point out in a recent Manhattan Institute study, have withstood the great recession far better than the rest of the country.

Today virtually all the “material boy” states now boast unemployment well below the national average; the lowest are the Dakotas, Wyoming and Nebraska. Texas, the biggest of the U.S. material boys, boasts an unemployment rate around 6%, well below California (nearly 10%) and New York (8%). One key reason: While Texas has created over 180,000 generally well-paid energy jobs over the past decade, California, with abundant energy reserves, has generated barely one-tenth as many. New York, despite ample potential in impoverished upstate areas, largely has disdained developing its energy sector.

These realities contrast greatly with the conventional wisdom that with the rise of the information age, the application of “brains” to abstract concepts, images and media would come to trump the “brawn” of producers, a thesis advanced influentially in 1973 by Daniel Bell in The Coming of Post Industrial Society. More recently Thomas Friedman has cited the East Asian countries such as Taiwan and Japan as suggesting that a lack of natural resources actually sparks innovation and economic health, while too great a concentration generally hinders progress.

So how is it that the rubes, with their grease-stained hands, reeking of the smell of manure or chemical fertilizers, have outperformed the darlings of the information age? The answer lies largely in the forces that are reshaping the world. This includes, most portentously, rising demand for fuel, food and fiber in developing countries, notably in East Asia and Latin America.

In the past commodity-based economies suffered frequent cyclical recessions whenever a handful of wealthy consuming countries — the EU, Japan and North America — experienced a recession or slow growth. Now a set of new consumers are fuelling strong demand even when high-income countries tank; this is keeping prices up far more reliably than in the past. Of course, a major global economic catastrophe, or some new breakthrough in energy or agricultural technology, could bring prices down precipitously, but for the most part demographic trends seem likely to favor commodity producers over the coming decade or two.

Arguably the biggest surprise has been the United States’ strong advantages in the resource race. America has a far richer endowment of raw materials than its primary competitors, including the European Union, India, China and Japan. Only the Russian Federation is equally well-endowed: The Siberian periphery that was first conquered in the great period of Russian expansion between the 16th and mid-19th centuries remains one of the greatest resource regions on the planet and the base of that country’s economy.

Agriculture is perhaps the least appreciated of the new drivers of the U.S. economy. Farm exports have been surging; in 2011 the U.S. exported a record $135 billion worth of agricultural goods, with a net favorable balance of $47 billion, the highest in nominal dollars since the 1980s.What accounts for this boom? One key driver is China, which consumes almost 60% of the world’s soybean exports and 40% of its cotton.

Perhaps even more transformative has been the energy boom, largely sparked by new technologies such as fracking and deepwater drilling. This has transformed the Great Plains alone into the world’s 14th largest oil producer, roughly on a par with Nigeria and Norway. Unless stopped by regulatory constraints, this expansion may only be in its infancy. We can expect large increases in production not only in North Dakota; Texas’ Eagle Ford shale oil is expected to quintuple its daily production by 2014 . New finds in the Wattenberg Field north of Denver alone could contain more than a billion barrels of recoverable oil and natural gas, essentially matching the huge Eagle Ford or the Bakken Field in western North Dakota. Another find, the Green River formation in Wyoming, could contain an astounding 1.4 trillion barrels of oil shale.

The energy revolution already has been transformative in the material states. Between 2010 and 2011, according to an analysis by EMSI, all six of the fastest-growing job classifications were related to energy development. Since 2009 the industry, according to EMSI, has added some 430,000 jobs, with the largest share going to Texas, Oklahoma, and Pennsylvania.

Perhaps even more important, the expansion of the energy sector is galvanizing manufacturing, hitherto the weakest link in the material boy economy. The energy boom could create more than a million industrial jobs nationwide over the decade both to supply the industry and as a result of lower energy costs, according to a recent PricewaterhouseCoopers study.This new industrial economy is already evident in those parts of the country embracing the energy revolution, notably Texas, Oklahoma, Louisiana, Pennsylvania, and Ohio.

Some see the rise of the material boys as just another “bubble” soon to collapse. Derek Thompson at the Atlantic suggests that the North Dakota boom may have already crested. And to be sure, labor and infrastructure limits may slow the rate of growth compared to past years, but projections by JPMorgan Chase suggest that North Dakota will continue to enjoy GDP growth two to three times the national average for the next few years. And as for the labor shortages, help is also on the way; North Dakota now boasts the highest rate of domestic in-migration in the country.

To be sure, the material boys will face real challenges in the years ahead. The need to train skilled blue-collar workers — something the country has neglected for generations — presents a major challenge in places like Louisiana and Texas, where education levels remain below the national average, as well as the more literate but less populous Dakotas. Infrastructure needs like pipelines and electrical transmission lines will become more evident as production increases.

But even the most effete coastal denizens should appreciate what the rise of the “material boys” means for America’s future. The growth of basic industries also creates demand for high-end business services — everything from architects and investment bankers to data-miners, advertising, and public relations firms — concentrated in such places as San Francisco, Seattle, New York, and Boston.

But clearly the biggest beneficiaries will be the cities of the commodity belt, starting with Houston, the epicenter of the energy industry, as well as Oklahoma City, Dallas-Ft. Worth, Omaha, Salt Lake City and Denver. Rapid growth is even evident in smaller places in the Dakotas such as Sioux Falls, Bismarck, and Fargo.

Most importantly, the rise of the material boys expands the nation’s geography of opportunity in ways rarely imagined just a decade ago. It is a process that all Americans should appreciate and encourage.

This piece originally appeared in Forbes.

Welder photo by Bigstock.

Natural Gas Boom: The “Janus” Effect

Eric Smith — Sat, 16 Feb 2013 00:33:30 -0500

The last five years have seen a revolution in terms of the amount of inexpensive U.S. natural gas made available for consumption in power plants, road fuels, and as a feedstock for new and expanded petrochemical plants. We are now even debating the advisability of large volume natural gas exports in the form of liquid natural gas (LNG).

This bonanza has created euphoria in the fossil energy and industrial communities, but has also created something of a “Janus effect” within the Environmental community. To the Romans, Janus (the two faced god) provided a cohesive view of the present as well as an uncertain view of the future. In Rome, the temple to Janus was opened only when Rome was at war. During peace time, presumably because the future was more certain, the doors of the temple remained closed. They were last opened in AD 531 immediately prior to an invasion by the Goths. We all know how well that turned out.

Environmentalists are reacting to the natural gas bonanza in three ways. The first group, which we may define as “pragmatists”, see a hopeful face based on solid evidence that natural gas helps with achieving multiple environmental goals by reducing particulate emissions, sulfur emissions, NOX levels and CO2 emissions. They acknowledge natural gas fueled generators emit approximately 40% less CO2 per kilowatt hour than the older coal-fired units they are largely replacing. Although the aftermath of the recession has reduced the use of most other fuels, natural gas now rivals coal as the major fuel source for power generation in the US.

A second group, the “environmental fatalists” are less impressed with the displacement effects on coal but appreciate that natural gas plants provide crucial support when mandated, for intermittent renewable power options, such as solar and wind. Once renewables represent approximately 10% of aggregate capacity, negative side effects of these “intermittent” sources become problematic; too much dependence on them can cause grid “instability” or, in a worse case, cascading power failures and massive blackouts.

Then there’s the third group, we’ll call the “ideologues.” Often the loudest, this group views natural gas as an implacable enemy for undermining the economic viability of renewable energy projects. They oppose the use of natural gas on principle and call for ever more restrictive regulations and production constraints on natural gas fueled power production. In their view, increasing the costs of generating electric power from natural gas will allow renewable generation finally to achieve cost parity. This “logic” explains at least some of the objections to fracking, an essential requirement for shale gas production, which, if restricted, would seriously undermine production and consumption of additional natural gas in the U.S.

The ideologues believe in “leveling the playing field” so that renewables such as solar and wind can be made economically viable. They see themselves fostering a new economy based on renewable energy. The rest of society’s role is to “shut up” and allow them unimpeded access to scarce and valuable assets (e.g. subsidized prices and preferential access to the grid) in order to wipe fossil fuels off the grid.

Natural gas based power generation represents the ideologue’s worst nightmare. They know that increasing the use of natural gas for a generation undermines the economic value of renewable-based generating companies. It’s not hard to imagine that for those individuals and businesses profiting from renewable subsidies and mandates, natural gas represents a great threat. The argument therefore does make a certain amount of sense if you accept the initial premise.

Renewable mandates generally represent a commandment that “Thou shalt generate e.g. 10% of a given utility’s power output using approved renewable resources”, regardless of the costs to ultimate consumers. Requiring utilities to purchase high priced renewable power under so called feed in tariffs results in those higher prices simply being “rolled in” to the aggregate cost of power delivered to all consumers and duly covered by an aggregate rate requirement.

Such initiatives to support an artificial market for renewable power generation are politically vulnerable, since the public tends to reject mandates forcing investors in renewable energy projects to face bankruptcy as a distinctly possible outcome. Government-guaranteed loans supporting construction of the plants manufacturing new PV solar cells or wind turbines have already outraged a public forced to pay for their bankruptcies.

What is the future of America if the renewable mandate regime expands under state or federal programs? That future is now on display in Germany, a trailblazer in applying subsidies and preferential access to the grid to support the adoption of solar and wind power. The country has not only restricted the construction of new coal and nuclear power units, but also limited the operations of natural gas fueled generation by providing preferential prices and access to the grid for renewables. To be fair, the Germans are also groaning under the cost of imported natural gas supplies, primarily from Russia.

Unfortunately, as a result Germany does not have adequate load following capacity to absorb the ups and downs of renewable power generation. The result is grid instability. These policies are creating potential dangers for an economy heavily dependent on power intensive manufactured exports. Already German petrochemical manufacturers, such as BASF and Bayer, have warned that the country faces grave threats to its manufacturing base due to lower cost competition in the natural gas-rich US. Volkswagen has been equally blunt about their need to manufacture car parts outside of Germany. Remember that Germany’s job pool has roughly 24% of the work force engaged in export focused activity.

The Germans avoid discussing their lack of enthusiasm for searching out low cost coal gas and shale gas deposits in the fatherland. The country now endures an aggregate price of 32 cents/kilowatt hour vs. a US price of about 10 cents/kwh. The bad news is that this already elevated German rate is slated to increase further in the next year, by another 50%, to a level of 48 cents/kwh.

To make it through Germany presumes the good will of neighboring countries which face their own energy challenges. Germany’s current power generation profile has approximately 20% of its power being provided by renewable sources, primarily wind and solar. Germany’s neighbors complain that the country is exporting the grid instability associated with its “green” policies. It’s gotten so bad that the country, which loathes nuclear power, is actually expanding the use of coal fired generation. In essence, coal fired generation is growing in Germany at the expense of higher cost natural gas generation. (The silver lining is that the U.S. is supplying the extra low cost coal required). Naturally, Germany’s CO2 and particulate targets are not being met, while the equivalent US targets are being met ahead of schedule.

Not surprisingly, the German government is now back tracking because their economy cannot support, from a technical or economic perspective, the current level of installed renewables. Angela Merkel has recently called for a more balanced approach to power generation. That will probably mean a policy of diverting subsidies and preferential treatment from solar and wind to natural gas and hydro.

The Current Status in the US

Back here in the US, we’ve managed to spend $97 billion or so on government funded wind and solar projects that certainly will not survive without operating subsidies, feed in tariffs, preferential access to the grid and production mandates.

Fortunately, the US is upgrading our power generation fleet by building new, unsubsidized, gas-fired generation plants throughout the country. We are also seeing new pipeline and grid infrastructure coming to market along with significant expansions of our refining and petrochemical manufacturing facilities, exploiting nonconventional hydrocarbon resources. The bulk of this expenditure is being managed with minimal federal financial support.

However, adverse government regulation of fracking could bring the shale gas band wagon to a sudden halt. (Beyond that, a measurable, multi-year slowdown in permits for new gas pipelines is also having a deleterious effect.)

Recognizing the risks, shale gas proponents are taking another approach. Having apparently convinced the pragmatists and the fatalists of the benefits of natural gas, they are now beginning to spend significant sums in an effort to educate the general electorate and thereby isolate the diehard ideologues.

Fortunately, the majority of the environmental community is not made up of latter day luddites bent on destroying western civilization, just as the majority of the oil and gas industry is not made up of barbarians seeking to plunder the environment. The majority of the population consistently supports measured progress on both the environmental and economic fronts.

The challenge now is to grow support for environmental compromises that produce favorable results for everyone. We still live in a democracy where everyone gets to vote and to have his or her say. However, we do not live in an “Alice and Wonderland” world where everyone can create his own reality. Germany is already facing the downside of listening to their ideological enthusiasts. Let’s take the German lesson to heart, and embrace a more pragmatic approach. It is after all, the American way.

Eric Smith is a Professor of Practice at the A.B. Freeman School of Business at Tulane University. He serves as the Associate Director of the Tulane Energy Institute. He is a Chemical Engineer and has an MBA from the A. B. Freeman School at Tulane University.

Why it's All About Ohio: The Five Nations of American Politics

Joel Kotkin — Thu, 08 Nov 2012 19:34:48 -0500

Looking at Tuesday’s election results, it’s clear the United States has morphed into five distinct political nations. This marks a sharp consolidation of the nine cultural and economic regions that sociologist Joel Garreau laid out 30 years ago in his landmark book “The Nine Nations of North America.”

In political terms there are two solid blue nations, perched on opposite coasts, that have formed a large and powerful bloc. Opposing them are two almost equally red countries, which include the historic Confederacy as well as the vast open reaches between the Texas panhandle and the Canadian border.

Between these two largely immovable blocs stands the fifth nation – essentially the Great Lakes industrial heartland. By winning this territory – which could be called “Bailout Nation” – President Barack Obama built a winning coalition. Though this part of the country has suffered economic decline and demographic stagnation for decades, it is now emerging, as former President George W. Bush would put it, as “the decider” of America’s political fate.

It’s no surprise that the coastal nations voted totally blue, reelecting the president, usually by margins of 10 points or more. The first of these nations can be dubbed “the Old Country,” the most European part of America.

It stretches along the coast, from Maine to Maryland, and is essentially the Democratic Party’s base. It’s where the intellectual heirs to the traditions of Progressivism, the New Deal and New Frontier are most entrenched.

Republican presidential nominee Mitt Romney lost by five percentage points or more in every state from this nation. In New York and Massachusetts, Obama won with 60 percent; in Washington, D.C., he received an astronomical 91 percent. Talk about home court advantage.

This area is heavily urbanized and its economy - except for parts of western Pennsylvania – has become largely de-industrialized. Good jobs here are in the professions and financial services. Unemployment is high in some states, particularly New York and Rhode Island, but low – below 7 percent – in Maryland and Massachusetts.

In the Old Country, natural resource extraction industries represent a small part of the economy and populations are concentrated in large metropolitan areas, with strong minority communities. It’s ideal territory for today’s Democratic Party, which is devotedly multicultural, strongly supportive of green energy and hostile to fossil fuels, large-scale agriculture and suburban sprawl.

The region is essentially solid blue – as even the appealing Senator Scott Brown (R-Mass.) found out Tuesday. In the Old Country, things remain more of the same. The election numbers were nearly identical to 2008. States like Rhode Island, for example, didn’t even shift a point, despite lower national polling for Obama and the Dems.

The Old Country’s coalition partner is Ecotopia, named after the science-fiction best-seller by Ernest Callenbach. “Ecotopia” tells the story of a successful breakaway “green” republic, which embraced most of the totems of West Coast progressivism, everything from renewable energy to militant feminism. This nation includes the states of California, Washington and Oregon. To these you can add Obama’s green-oriented, multicultural home state of Hawaii.

In political terms, coastal Ecotopians share their states with less progressive regions on the other side of the mountains. Eastern Washington, Oregon and California all tend to be conservative – but are usually outnumbered, as they were this year, by the more densely populated coastal areas.

Together, these two nations represent 186 electoral votes, almost equal to Romney’s total. They overwhelmingly send Democrats to Congress. And they have outsized influence. Ecotopia is home to Silicon Valley, while the Old Country, along with Hollywood, has turned the culture industry into an adjunct of the Democratic Party.

For their part, the Republicans increasingly control two nations. One is the former Confederacy, which supported the former Massachusetts governor – only Virginia and possibly Florida slipped over to the Obama. This region has some of the nation’s strongest population growth and a strong allegiance to the military, one key GOP voting bloc.

Energy defines much of the southern rim of the Confederacy. Texas and Louisiana have seen strong growth from oil and gas. Even the remaining Democrats in this region fear federal energy regulation under Obama will slow their economic growth. President Bill Clinton won Louisiana in 1996; this year the state went for Romney by an astounding 20 points.

The other nation in the GOP camp is the Empty Quarter, the vast region stretching from the Great Plains and the Inter-mountain West to Alaska. This is where much of America’s food is grown and minerals extracted. Like the Gulf Coast, many in these states feel they have much to lose from a Democratic victory.

Despite losing Nevada and Colorado and possibly Florida to Obama on Tuesday, these regions have seen expanding shares of Republican vote. Across these two nations, Romney’s margin was considerably better than Senator John McCain’s in 2008. In some states, his margins expanded by 10 points or more. From 2008 to 2012, Obama lost by 10 percentage points in Utah; 7 points in North Dakota and 5 points in Montana, South Dakota, Wyoming and Idaho.

Yet these Republican nations may not be as stable as their Democratic counterparts. Conservative politics is almost extinct in places like California and New York. But Great Plains voters, however unhappy with Obama, still send some Democrats to the Senate, particularly when the GOP nominates extreme-right candidates.

Ultimately, the decision comes down to the Great Lakes industrial region – which we can call the Bailout Belt. For these areas, which have high concentrations of manufacturing, the auto bailout was a godsend. And the region is now even more prosperous by the discovery of vast amounts of oil and gas.

The benefits of the bailouts in this election – communities revived, families uplifted – outweighed those from fossil fuel producers, which now operate under threat of a possible Environmental Protection Agency-ordered shutdown. These states, outside of Indiana, stayed with Obama – by a handsome seven-point margin in Michigan. In virtually all these states, however, Romney did better than McCain.

The president was quiet about fracking during the election. Now eyes turn to the EPA, since the House of Representatives would likely oppose a ban of any kind. The Bailout Belt may have to decide its energy future before it sides with either party.

And where this region decides to go, so goes the nation – the entire nation.

Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and contributing editor to the City Journal in New York. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.

This piece originally appeared at Reuters.

Barack Obama photo by Bigstock.

Prairie Populism Goes Bust As Obama’s Democrats Lose The Empty Quarter

Joel Kotkin — Sun, 04 Nov 2012 01:34:04 -0400

Along Phillips Avenue, the main street of Sioux Falls, South Dakota, the local theater’s marquee is a tribute to the late Senator and 1972 presidential candidate George McGovern, who was buried last month, and is still regarded as a hero by many here. But with McGovern gone, it seems that the Democratic tradition of decent populism he epitomized was being interred along with him.

In his landmark 1981 book, The Nine Nations of North America, Joel Garreau deemed the vast region stretching from the southern Plains well past the Canadian border The Empty Quarter. Along with the western strip of the neighboring Bread Basket that stretches up from central Texas through the Dakotas, the Quarter—covering much of the nation’s land and home to many of its vital natural resources—is in open revolt against the Democratic Party, threatening the last remnants of prairie populism.

Although long conservative and GOP leaning, the Empty Quarter—containing Nevada, Utah, Wyoming, Idaho, Montana, and most of Alaska, along with inland California and Washington and parts of Colorado, New Mexico, and Oregon—has a proud progressive tradition as well. Over the past half-century, many of the Democratic Party’s most respected leaders —McGovern, Senator Majority Leaders Mike Mansfield of Montana and Tom Daschle of South Dakota, and powerful figures like North Dakota’s Byron Dorgan and Kent Conrad—have represented the Plains.

The tradition is still revered there, but today’s Democrats are becoming an endangered species as the party has become ever more distinctly urban, culturally secular and minority dominated.

While Obama lost most of the Quarter in 2008, this year polls show that he’s likely to be crushed there, despite the booming economy in many of the states. Obama’s popularity has dropped more in North Dakota, which has the nation’s lowest unemployment rate, than any other state.

Amidst the growing anti-Obama tide, progressive Democrats in most of the Quarter have been increasingly marginalized, both by their own party and by voters. In the past two years, Republicans picked up a Senate and House seat in North Dakota, and look likely to pick up another this year, along with a Senate seat in Nebraska, and quite possibly another in Montana. They are also poised to claim the only remaining Democratic House seat in Utah, if Mia Love’s lead over Rep. Jim Matheson holds up.

By the end of this election, it's possible that only two classic Prairie Democrats—South Dakota’s Tim Johnson and Montana’s Max Baucus—will remain in the Senate, where they once formed a powerful caucus. The Plains states, plus Alaska, account for 50 Congressional seats and an equal number of electoral votes—more than Florida, North Carolina and New Hampshire combined.

Why has this occurred? One problem, notes former Daschle top economic aide Paul Batcheller, lies with the “nationalization” of the Democratic Party—and its transformation from an alliance of geographic diverse regions to a compendium of narrow special-interest groups, so that under Obama, the Democratic Party has essentially become the expression of urban-dwellers, greens and minorities, along with public employees.

This, says Batcheller, has “made it easier for Republicans to paint Democrats as in cahoots with the likes of Ted Kennedy, Nancy Pelosi, etcetera. And because politics has always been fairly civil here, having those coastal boogeymen to use has made it easier to paint Prairie Dems as having gotten Potomac Fever.”

He also points to “changes in the media”—especially cable TV—that have made it more difficult for grassroots Democrats to make their case for their own interests, outside of the increasingly polarized national debate. At the same time, Obama’s policies—focused largely on constituents in dense coastal cities—have widened the gap between the Plains and the Democrats. It is increasingly difficult to be a successful Prairie progressive when that means striking out consistently against the very industries, from large-scale agriculture to fossil fuels, at the center of these economies.

At the same time, the failings of Democratic big states, most notably California and Illinois, are not exactly advertisements for the virtues of modern progressivism. Particularly galling, notes Mike Huether, the mayor of Sioux Falls, have been the huge deficits and expanded welfare spending associated with the Obama Administration.

“This is a fiscally conservative place, we don’t like deficits,” notes Huether, a lifelong Democrat whose city of 156,000 operates with a fiscal surplus. “People here want self-sufficiency. They are happy to give a hand up but they see that as short term and that’s it.”

And the region’s self-sufficiency is an increasingly important part of our national debate, especially about energy independence. Although often dismissed as a land of rubes and low-end jobs, a study of the Plains I conducted with the Praxis Strategy Group and Texas Tech University found that, overall, it has outperformed the rest of the country in virtually every critical economic measurement from job creation and wage growth to expansion of GDP.

The area has also thrived demographically, with population growth well above the national average. Most of this has taken place in the region’s flourishing urban centers, from Ft. Worth and Midland, Texas to Sioux Falls, Bismarck, Fargo, Oklahoma City and Omaha. This growth includes migration from still de-populating smaller towns in the region, but increasingly includes migrants from the coastal areas as well as immigrants.

More people now arrive in Oklahoma City from Los Angeles than the other way around. And these arrivals are hardly poor Okies pushed back unwillingly; the Plains cities have become magnets for educated people. Over the past decade, the number of people with BAs in Sioux Falls has grown by almost 60 percent; Bismarck and Fargo saw growth of over 50 percent, while Oklahoma City, Omaha and Lubbock enjoyed forty percent increases. In contrast, the educated population of San Francisco grew at 20 percent and that of New York by 24 percent.

Any coastal denizen who spends time in these cities may be surprised by the tolerance and lack of bible-thumping one encounters there. Social issues, notes Mayor Huether, have never been drivers in the Plains as they have been in parts of the Deep South. A quiet Nordic spirituality prevails here, rather than evangelical enthusiasm; people and politicians generally do not wear their faith on their sleeves. The real issue in the Plains centers around the future of the economy, and how best to bolster family and community; the Obama program, with its interest-group agendas, simply does not translate well in this environment.

Ultimately, the red tide sweeping over the Plains is bad news, not simply for Democrats but for the country, part of the trend noted by Batcheller in which moderating regional forces within both parties—New England Republicans and Blue Dog Democrats—are losing ground.

Prairie Democrats are crucial for ensuring that producers tangible staples—food, fiber and energy—have a space within their party’s tent, along with the big-city coastal consumers of those resources. Never mind the conservative cliché: If Democrats lose their remaining hold on the Plains, the nation’s parties will truly be split between makers and takers.

This region is likely to become more important over the coming decades, providing much of the food needed for world markets as well as significant share of our new domestic energy. Its manufacturing, technology and service industries are also growing rapidly, integrating the area more into the national and global economies.

Batcheller, among others, believe that the Plains Democrats may not become extinct, but their future will be limited in the increasingly polarized, and nationalized, political order. On the local level, particularly on key infrastructure projects like Lewis and Clark water project that is being built to meet the needs of Sioux Falls and its environs, Republicans and Democrats are largely in agreement. Neither tea-party extremists nor greens can block progress towards widely accepted local infrastructure goals.

One can only hope that the Prairie Democrats manage to survive. They have contributed a unique brand of civically minded, decent social democracy that added much to the national debate. Egalitarian in intent, their brand of aspirational liberalism, fully content and compatible with notions of individual achievement and hard work, offers an alternative to the “know nothing” extremism increasingly dominant in both parties. This tradition of progressive decency could be sorely missed in the years ahead.

This piece originally appeared at The Daily Beast.

Sioux Falls photo by Jon Platek..

The Rise of the Great Plains: Regional Opportunity in the 21st Century

Praxis Strategy Group — Wed, 24 Oct 2012 08:12:34 -0400

This is the introduction to a new report on the future of the American Great Plains released today by Texas Tech University (TTU). The report was authored by Joel Kotkin; Delore Zimmerman, Mark Schill, and Matthew Leiphon of Praxis Strategy Group; and Kevin Mulligan of TTU. Visit TTU's page to download the full report, read the online version, or to check out the interactive online atlas of the region containing economic, demographic, and geographic data.

For much of the past century, the vast expanse known as the Great Plains has been largely written off as a bit player on the American stage. As the nation has urbanized, and turned increasingly into a service and technology-based economy, the semi-arid area between the Mississippi Valley and the Rockies has been described as little more than a mistaken misadventure best left undone.

Much of the media portray the Great Plains as a desiccated, lost world of emptying towns, meth labs, and Native Americans about to reclaim a place best left to the forces of nature. “Much of North Dakota has a ghostly feel to it," wrote Tim Egan in the New York Times in 2006. This picture of the region has been a consistent theme in media coverage for much of the past few decades.

In a call for a reversal of national policy that had for two centuries promoted growth, two New Jersey academics, Frank J. Popper and Deborah Popper, proposed that Washington accelerate the depopulation of the Plains and create “the ultimate national park.” They suggested the government return the land and communities to a “buffalo commons,” claiming that development of The Plains constitutes, “the largest, longest-running agricultural and environmental miscalculation in American history.” They predicted the region will “become almost totally depopulated.”

Our research shows that the Great Plains, far from dying, is in the midst of a historic recovery. While the area we have studied encompasses portions of thirteen states, our focus here is on ten core locations: North Dakota, South Dakota, Nebraska, Kansas, Oklahoma, Texas, New Mexico, Colorado, Wyoming, and Montana.

Rather than decline, over the past decade the area has surpassed the national norms in everything from population increase to income and job growth. After generations of net out-migration, the entire region now enjoys a net in-migration from other states, as well as increased immigration from around the world. Remarkably, for an area long suffering from aging, the bulk of this new migration consists largely of younger families and their offspring.

No less striking has been a rapid improvement in the region’s economy. Paced by strong growth in agriculture, manufacturing and energy — as well as a growing tech sector — the Great Plains now boasts the lowest unemployment rate of any region. North Dakota, South Dakota and Nebraska are the only states with a jobless rate of around 4 percent; Kansas, Montana, Oklahoma and Texas all have unemployment rates below the national average.

A map of areas with the most rapid job growth over the past decade and through the Great Recession would show a swath of prosperity extending across the high plains of Texas to the Canada/North Dakota border. Rises in wage income during the past ten years follow a similar pattern. The Plains now boasts some of the healthiest economies in terms of job growth and unemployment on the North American continent.

Of course, this tide of prosperity has not lifted all boats. Large areas have been left behind — rural small towns, deserted mining settlements, Native American reservations — and continue to suffer widespread poverty, low wages and, in many cases, demographic decline.

In addition, the region faces formidable environmental and infrastructural challenges. Most prominent is the continuing issue of adequate water supplies, particularly in the southern plains. The large-scale increase in both farming and fossil fuel production, particularly the use of hydraulic fracking, could, if not approached carefully, exacerbate this situation in the not so distant future.

Inadequate infrastructure, particularly air connections, still leaves much of the area distressingly cut off from the larger urban economy. The area’s industrial economy and rich resources are subject to a lack of sufficient road, rail and port connections to markets around the world. Yet despite these challenges, we believe that three critical factors will propel the region’s future.

First, with its vast resources, the Great Plains is in an excellent position to take advantage of worldwide increases in demand for food, fiber and fuel. This growth is driven primarily by markets overseas, particularly in the developing countries of east and south Asia, and Latin America.

As these countries have added hundreds of millions of middle class consumers, the price and value of commodities has continued to rise and seem likely to remain strong, with some short-term market corrections, over time.

Second, the rapid evolution and adoption of new technologies has enhanced the development of resources, notably oil and gas previously considered impractical to tap. At the same time, the internet and advanced communications have reduced many of the traditional barriers — economic, cultural and social — that have cut off rural regions from the rest of country and the world.

Third, and perhaps most important, are demographic changes. The late Soichiro Honda once noted that “more important than gold or diamonds are people.” The reversal of outmigration in the region suggests that it is once again becoming attractive to people with ambition and talent. This is particularly true of the region’s leading cities — Omaha, Oklahoma City, Tulsa, Kansas City, Sioux Falls, Greeley, Wichita, Lubbock, and Dallas-Fort Worth — many of which now enjoy positive net migration not only from their own hinterlands, but from leading metropolitan areas such as Los Angeles, the San Francisco Bay Area, New York and Chicago. Of the 40 metropolitan areas in the region, 32 show positive average net domestic migration since 2008.

Together these factors — resources, information technology and changing demographics — augur well for the future of the Great Plains. Once forlorn and seemingly soon-to-be abandoned, the Great Plains enters the 21st century with a prairie wind at its back.

Visit TTU's page to download the full report, read the online version, or to check out the interactive online atlas of the region containing economic, demographic, and geographic data.

Praxis Strategy Group is an economic research, analysis, and strategic planning firm. Joel Kotkin is executive editor of NewGeography.com and author of The Next Hundred Million: America in 2050. Kevin Mulligan is Associate Professor of Geography at Texas Tech University and Director of TTU’s Center for Geospatial Technology.

As Partisan Rancor Rises, States That Back a Loser Will Be Punished

Joel Kotkin — Fri, 05 Oct 2012 09:40:09 -0400

Never mind the big-tent debate talk from both Barack Obama and Mitt Romney about how their respective politics will benefit all Americans. There’s a broader, ugly truth that as the last traces of purple fade from the electoral map, whoever wins will have little reason to take care of much of the country that rejected them.

At least since the dissolving of the “solid South” in the late ’50s and early ’60s, both parties have competed to extend their reach to virtually every region. As recently as 1996, Democrat Bill Clinton could compete in the South, winning several states in the mid-South and even in the heart of Dixie, including Louisiana, Arkansas, Kentucky, and Tennessee. President Obama has about as much chance of winning these states this year as Abraham Lincoln did in 1860—giving him little reason to consider them in a second term.

In the Clinton years, powerful Democrats hailed from what we now call red states not only in the South but also in the Great Plains. South Dakota’s Tom Daschle served as both Senate majority and minority leader, and Louisiana’s John Breaux and North Dakota’s Kent Conrad and Byron Dorgan were also players.

After his 2008 win, Obama dismissed Republican objections to his stimulus with a two-word rejoinder: “I won.” But it’s become clear since that neither party is willing to accept the other’s claim of a popular mandate for its agenda. And the log jam probably won’t be broken in November—especially if, as seems like the most likely outcome, Obama wins a second term while Republicans hold the House and edge closer to retaking the Senate.

The 2010 Republican landslide was the rare election that radicalized both parties. The new GOP House majority was attained by adding Tea Partiers who have pushed the House—and to a lesser extent the Senate—rightward. At the same time, Democrats lost many of their remaining members who’d held on in Republican-leaning districts, leaving the party with a smaller but more ideologically pure cast of true believers in office.

The right-leaning Blue Dog Democrats who once dominated the party’s ranks in the Plains and the Southeast are virtually extinct (as are Northeastern Republicans). In 2008 there were more than 50 Blue Dogs; the 2010 election sliced their ranks by half. After November there could be fewer than a dozen remaining. More and more Democrats, as Michael Barone has noted, come from overwhelmingly Democratic districts.

A reelected President Obama may well find himself with almost no Plains or Southern Democrats in Congress outside of a few House members in Dixie’s handful of overwhelmingly African-American districts. With little reason to make compromise or common cause with solid red-state Republicans, the administration could leave the denizens of these states to bitterly cling to their guns and religion, while the president expands on his first-term practice of bypassing Congress to legislate by decree on everything from environmental policy to immigration and the implementation of health-care reform.

Already, notes National Journal’s Ron Brownstein, Democrats hold congressional majorities in only three noncoastal states—Iowa, New Mexico, and Vermont. Much of the country inside the coasts may find themselves with little sympathy from or access to a president whose reelection they will have rejected, often by lopsided double-digit margins.

This could impact, in particular, energy policy since American fossil-fuel production is increasingly concentrated on the Plains, the rural Intermountain west and the Texas-Louisiana coast. Virtually all the mineral-rich economies excepting green-dominated California now lies well outside the electoral base of the president and his party. In a second Obama term, these states could well propel the national economy but could have little say on energy policies. Farming and ranching concerns will also have little political leverage with the White House. And traditional social concerns, most deeply felt in the Southern and more rural states, would lose all currency in a second-term administration whose worldview stems from that in big-city-dominated, deep-blue coastal states.

The dissenting states with large fossil-fuel-driven economies—West Virginia, Texas, Oklahoma and North Dakota—would likely go to court to battle regulatory steps that they see as threatening large parts of their economies. In the Great Plains, expect a reprise of the 1970s Sagebrush Rebellion that bedeviled Jimmy Carter, as states fight back against green-oriented Washington regulators cracking down on users of federal land and water.

Of course, if Romney finds a way to win, the coastal states would likely come in for some similarly rough treatment. The former Massachusetts governor has saved his harshest remarks for closed-door private events with big backers, dismissing 47 percent of the electorate as spongers at one such event, and telling backers at another that the Department of Education would become a “heck of a lot smaller” under his presidency and that the Department of Housing and Urban Development, which his father led during Richard Nixon’s first term in office, would face substantial cuts and “might not be around later.” The most devastating policy move he shared behind closed doors, though, was telling donors that he might eliminate the deductibility of state and local income and property taxes on federal returns—a move that would amount to a significant tax hike to many people living in high-tax and high-cost-of-living deep-blue states like New York and California.

But since those states are solidly Democratic, Romney has little to lose politically by punishing or alienating their citizens.

Deep-blue business interests could also lose their influence in a Romney administration, particularly if Republicans hold on to their strong majority in the House. The green-energy tax and subsidy farmers that have staked their future on the continued favor of the Democratic Party could find themselves cut off, and transit developers would also take a hit as the vast majority of train and bus riders come from a handful of dense and Democratic states (almost 40 percent of all national riders are in the New York area alone).

But with Romney, the blue states would at least have a kind of patrician insurance, much as Clinton brought Southern sensibilities to the Democrats. The former Massachusetts governor is tied by a cultural and financial umbilical cord to his old comrades in the financial world of New York and Boston, making him less of a threat to the coastal ruling structures than Obama is to those of the interior states or the South.

Whoever takes the White House, the nation’s best hope may be the regional mavericks who defy the trend toward geographical polarization. Democrats such as Sen. Jon Tester in Montana and Senate candidate Heidi Heitkamp in North Dakota are running hard against the anti-Obama tide in their states. Should they win, the party’s need to protect their seats would help press the White House to modify the party’s drift to an increasingly leftish social and environmental agenda.

On the Republican side, the need to protect a middle-of-the-road politician like Massachusetts Sen. Scott Brown would push other party members into moderating their more extreme positions on social issues and regulation. Republican victories by Tommy Thompson in Wisconsin and Linda McMahon in Connecticut might also help moderate the party by adding to the numbers of “blue states” in the GOP caucus.

For the federal union to work effectively, there has to be a sense that we are all, in different ways, linked to each other and share common interests that mean we’re willing to make compromises to live together. It’s time to bridge our partisan regional divides and avoid an ever more nasty, and divisive war between the states.

This piece originally appeared in The Daily Beast.

State text map by Bigstock.

Obama Fuel Economy Rules Trump Smart Growth

Wendell Cox — Tue, 04 Sep 2012 01:38:09 -0400

The Environmental Protection Agency (EPA) has just finalized its regulation requiring that new cars and light trucks (light vehicles) achieve average fuel efficiency of 54.5 miles per gallon (MPG) by 2025 (4.3 liters per 100 kilometers). This increase in the "CAFE" standard (Corporate Average Fuel Efficiency) is the second major step in the Obama Administration's program to improve light vehicle fuel efficiency. In 2010, EPA adopted regulations requiring 35.5 MPG average by 2016 (6.6 liters per 100 kilometers).

The EPA standard is based upon carbon dioxide (CO2) grams emitted per mile of light vehicle travel, with an average of 163 grams per mile (101 per kilometer) to be achieved in 2025. This is slightly above the 2020 European Union standard of 152 grams per mile (95 grams per kilometer). Of course, the regulations have both supporters and detractors, with the automobile manufacturers being among the supporters.

Assuming the objectives are met, the reductions in CO2 emissions will dwarf the modest gains forecast from anti-suburban smart growth policies. For decades, this powerful movement has sought to limit or prohibit suburban expansion and even outlaw the detached housing that most people prefer. This includes railing against automobile use and seeking to coerce people out of their cars (as expressed by Secretary of Transportation Ray LaHood).

The anti-suburban movement has many labels in addition to "smart growth," such as “densification policy," "compact cities," "growth management," "urban consolidation," etc. The origins can be traced back to just after World War II, with the enactment of the British Town and Country Planning Act. The policy origins of smart growth in the United States date from the 1960s (the state of Hawaii) and 1970s (the state of Oregon and California local jurisdictions).

Forecast CO2 Emission Reductions from Smart Growth

With concerns about greenhouse gas (GHG) emissions (principally carbon dioxide, or CO2), proponents saw the opportunity to force people back into the cities (from which most did not come) and turn smart growth into an imperative for "saving the planet." This is no exaggeration. As late as last month, this was claimed by fellow panelists at a Maryland Association of Counties conference. As is indicated below, the data shows no such association.

Even forecasts by proponents fall short of demonstrating an apocalyptic necessity for smart growth. The Cambridge Systematics and Urban Land Institute Moving Cooler report attributed only modest reductions in CO2 emissions to smart growth's land use and mass transit policies (Moving Cooler was criticized on this site by Alan Pisarski. See ULI Moving Cooler Report: Greenhouse Gases, Exaggerations and Misdirections). The data in Moving Cooler suggests an approximately 50 million ton reduction in CO2 emissions from these smart growth strategies by 2035 (interpolating between 2030 and 2050 figures).

The more balanced Transportation Research Board Driving and the Built Environment: The Effects of Compact Development on Motorized Travel, Energy Use, and CO2 Emissions produced similar figures, however it indicated skepticism about whether their higher range projections were "plausible."

Comparing Smart Growth to the Previous Fuel Economy Standard

At the 2005 fuel economy rate and the projected driving increase rate in the US Department of Energy Annual Energy Outlook:2008 (AEO), CO2 emissions from light vehicles would have increased 64 percent from 2005 to 2035 (Note 1). This could be called the "baseline" case or the "business as usual" case. This would have resulted in a CO2 emissions increase from light vehicles of approximately 0.75 billion tons.

Using the more aggressive Moving Cooler forecast, the smart growth transport and land use strategies would only minimally reduce CO2 emissions from the baseline case (64 percent above 2005 levels) to 60 percent. This is "chicken feed" (Figure 1).

Forecast CO2 Emission Reductions from the 54.5 MPG Standard

Under the previous 35.5 MPG standard, AEO:2008 and AEO:2012, a 19 percent reduction in CO2 emissions from cars and light trucks would occur from 2005 to 2035. We modeled the new regulations based upon AEO:2012 forecasts for the earlier regulation. This yielded a 2035 CO2 emission reduction of 35 percent from 2005 (Figure 2), despite a healthy one-third increase in driving volumes over the period. The calculation also includes an upward adjustment for the rebound effect, as lower costs of driving encourage people to drive more, which EPA estimates at 10 percent ("induced traffic"), which is indicated in Figure 3.

Achievement of the 54.5 MPG standard would reduce CO2 emissions from light vehicles from 1.9 billion annual tons in 2035 under the 2005 baseline to approximately 0.750 billion metric tons in 2035. Approximately 70 percent of the decline in CO2 emissions would be from improved fuel economy, while 30 percent would be from slower annual increase in vehicle travel that has been adopted in AEO:2012 (Figure 4). The increase in driving is now forecast at 33 percent from 2005.

The contrast between the potential CO2 emissions from smart growth and fuel economy is stark. By comparison, the annual overall reduction in CO2 emissions (from the 2005 baseline) would be virtually equal to the 30 year impact of smart growth (Figure 5).

Comparison with Transit

The 35.5 MPG standard would make cars and light trucks less CO2 intensive than transit. At work trip vehicle occupancy rates, the average new light vehicle would emit less in CO2 per passenger mile in 2016 than transit in all but eight of the nation's 51 metropolitan areas over 1,000,000 population. The 2025 54.5 MPG standard would drop that number to two (Note 2). Even before these developments, there was only scant potential for replacing automobile use with transit (much less walking or cycling) because of its long travel times. According to data in a Brookings Institution report, less than 10 percent of jobs in the largest metropolitan areas can be reached by the average resident in 45 minutes on transit (Note 3).

Smart Growth: Not Needed to "Save the Planet"

Smart growth is an exceedingly intrusive policy that would attempt to enforce personal behaviors, counter to people's preferences, by attempting to dictate where people live and how they travel. This is expensive as well as intrusive. It is also detrimental to the economy, which is already taking a toll in lower household discretionary income (especially from higher house prices) and stunted economic growth.

A report by The McKinsey Corporation and The Conference Board indicated that sufficient CO2 emissions could be achieved with "…no downsizing of vehicles, home or commercial space and traveling the same mileage" and "…no shift to denser housing." Or, more directly, smart growth is unnecessary, in addition to producing little "gain" for the "pain."

Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.”

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Note 1: The 2030 to 2035 driving volume is estimated using the annual percentage increase from 2025 to 2030 in AEO: 2008, which has data through 2030.

Note 2: Calculated from 2010 National Transit Database summary by Randal O'Toole of the Cato Institute. These calculations assume the 250 gram per mile standard for new light vehicles in 2016 and the vehicle occupancy ratio of 1.13 for work trips from the 2009 National Household Travel Survey.

Note 3: Limited transit access is not just an American problem. In Paris, with arguably the best transit system in the western world, the average resident of a suburban new town on the regional metro (RER) can reach twice as many jobs by car as by transit in an hour, according to Fouchier and Michelon.

Prius photo by Bigstock.