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Date: Friday, May 20, 2011

When Free Enterprise Fails

What do you do when your economy is built on the mineral and natural assets of
your country? In the case of an unregulated free enterprise system, the answer is
watch them dissipate, be exported for quick profit, slowly dwindle ‘til there are
none. That’s the capitalist way, that’s the unchained entrepreneurial way. Countries
such as ours were built on exploiting the land and our mineral assets for gain. And
there is nothing wrong with, say, a copper mine extracting copper to build our
country’s telephone network. Nor is it wrong for trees to be cut for lumber to build
homes, or for oil in Pennsylvania to first replace whale oil for lamps and later
heating homes.

The problem comes in two ways later on. Firstly there is the question of non-
renewable resources, assets that belong or should be to the national benefit
because once they are mined out, we’re done. And secondly there is demand from
other countries that provokes a wholesale exploitation of our nation’s assets for
export, for quick profit. I say quick profit because no refining or processing jobs are
created in this country when raw natural assets, like freshly cut Redwood trees or
raw copper or aluminum ore are exported. And therein lies another problem: the
greater the export demand for raw assets, the larger that workforce becomes. And
the larger that workforce is, the more similar jobs are created to keep them
employed. In California the whole issue of the Spotted Owl campaign – pitting
environmentalists against the lumberjacks over the issue of whether industrial
logging or protection of a species was more important – could have been resolved
by everyone fighting for real jobs for the lumberjacks. Instead of exporting 1,500
year old trees to Japan with the bark still on, two thirds of the lumberjack workforce
could have been put to work in mills, in transport and into wood product
manufacturing. Oh no, instead they clashed over an owl and allowed those same
jobs to be created in Japan. And the profit on those trees? About 20% of the profit
compared to the finished wood products. As a capitalist enterprise that was a
failure. As an unregulated free enterprise system it was a resounding success – for
someone else, overseas.

In Switzerland there have been simple laws for many years protecting what few
natural assets they have. Products can be imported in their raw state, but nothing
can be exported unless it has been handled, re-processed, three times. Cut down
the tree, mill it, then make something out of it (cuckoo clocks will do, so will axe
handles). Iron or aluminum ore can be mined, then smelted, then you make
something out of it – watches and Swiss army knives. Anyone think those items are
cheap? And the unemployment in Switzerland? Zero. Actually it is a negative
percentage – they import skilled workers.

China seems to be catching on. As a country they have already begun raping
most of the world’s minerals and natural resources. Africa, especially West Africa
has more than 300 Chinese companies extracting ore, gems and minerals. Siberian
timber is being cut down wholesale for shipment to China, ending up at a Wal-Mart
near you as tables, chairs and broom handles. Millions of barrels of crude oil is being
imported and turned into plastics and then exported to the tune of multi-billions of
dollars. But there is one thing China controls 90% of the world’s supply of, all mined
within China’s borders: Rare Earth Metals. Crack open your periodic table, these are
Scandium; Yttrium; Lanthanum; Cerium; Praseodymium; Neodymium; Promethium;
Samarium; Europium; Gadolinium; Terbium; Dysprosium; Holmium; Erbium;
Thulium; Ytterbium; Lutetium. Okay, you ask, what are they used for? These
minerals are the backbone of huge, new, growth industries and that most people
think are American (in origin anyway): safe lithium batteries for computers and cars,
the glow of flat screen TVs and computer monitors, lasers for fiber optic
transmissions, medical equipment (MRI and CAT scanners), solar cells, and, never
least, the manufacture of computer chips, especially the high-tech ones.

China has realized that exporting these rare earth metals means that high-tech
jobs are growing somewhere else, not in China, so they have begun to reduce their
exports. They have put on a non-free-enterprise cap as part of national policy. In
short, these valuable natural assets should be producing Chinese employment in
the near future and reducing corresponding employment here and in S. Korea,
Japan, Taiwan and India.

Yes, that is national protectionism to a certain degree but it is also sensible


husbandry of a nation’s assets and employment. Traditionally, nations have used
customs and tariff charges to regulate the fairness of import/export. But tariffs and
customs charges are restrictive of the capitalist system in ways that restricting the
export of raw minerals and natural products are not. Capitalism, the ability of
industry and employment to grow and respond to meet demand is not hampered if
there is a cap on export of a nation’s unprocessed natural resources. But if you
impose tariffs and customs duty, then you artificially set pricing and reduce desire
for products, thereby hampering trade.

Given all the wonderful and still abundant natural resources America has,
perhaps it is time we started to preserve these for the employment of Americans
and American industry first. Let’s make products here, the American way, a better
way, and build for our future instead of shipping it overseas.