According to Wikipedia, neoliberalism in economics was originally coined in 1938 by the German scholar Alexander Rüstow at a colloquium that defined the concept of neoliberalism as “the priority of the price mechanism, the free enterprise, the system of competition and a strong and impartial state.” To be "neoliberal" meant that – in the name of liberalism – a modern economic policy was required.
So far so good, especially if everything can be traded over infinitely long times (centuries for us) with a perfectly smooth substitution of one resource for another and one product for another. But this assumption does not hold for depletable resources, whose production does not adjust easily and instantaneously to demand.
I am always amused to see a plot like the one below, whether it refers to neoliberalism or some other simplistic, unrealistic concoction by economists.
|A nice plot of linear demand and linear supply, with no delay and no saturation. While this simplistic, static approach makes economics courses easier, it does not reflect the long-term reality of depletable resources. Source: Wikipedia.|
So let's look at Margaret Thatcher's United Kingdom (1979-1990) that pursued the neoliberal economic policy with gusto. Here is the U.K.'s oil production, consumption and oil imports/exports until 2005:
|Margaret Thatcher became the Conservative Party Prime Minister when the red and yellow curves crossed and was ousted by her party when they touched again. By the time U.K.'s North Sea production is over, U.K. will have produced at least 25 billion barrels of oil and exported roughly 6 billion barrels, or 25%. The production and consumption curves crossed again in 2005. You must be dying to learn what happened later. Image source: An OilDrum post by Euan Mearns, Oct 3, 2006.|
|U.K's exports/imports through the year 2012. Since 2005, U.K. has had to import ever more crude oil. Here two populations of reservoirs could be resolved with two Hubbert peaks. Source: EIA, accessed May 18, 2013.|
Now imagine this: What would happen, if U.K. slowed down its production and did not export oil between 1990 and 2005? I understand that this type of thinking is absolutely foreign to most everyone in the U.S. and would be dismissed as "socialistic talk." Why think about future, when one can make a quick buck today?
Which brings me to Mr. Nocera's hot appeal to export each year one or two months worth of U.S. gas production. Is this a wise idea? Is it perhaps more profitable to use this gas to power a thriving steel and petrochemical industry? Couldn't we export instead the high value added digital tool machines and complex industrial products, such as planes and cars? Shouldn't we be using the extra power from natural gas to mass produce solar photovoltaic panels and solar water heaters on most roofs in the U.S.? Introduce U.S. to an early twentieth century in mass transit? In short, shouldn't the U.S. have an industrial and social development policy, like Germany, Norway, or even China?
And as a sobriety check, here is what really happened with U.K.'s natural gas production and exports:
|Natural gas production in U.K The rapid production increase lasted for 12 years, followed by an equally steep decline. What you see here is a yet another classical Hubbert peak of production. Source: EIA, accessed May 18, 2013.|
|Natural gas exports/imports in U.K Since 2004, U.K. has become dependent on gas imports at an accelerating pace. Source: EIA, accessed May 18, 2013.|
Now, do you want to compare the outcomes of the British neoliberal policies with the Norwegian brand of socialism? Perhaps not, because this comparison is not kind to Margaret Thatcher and Company Limited. Very limited it turned out, despite a jolly good little war in the Falklands.
P.S. Financial Times, UK gas supply six hours from running out in March, by Gill Plimmer and Guy Chazan, May 23, 2013:
Britain came within six hours of running out of natural gas in March, according to a senior energy official, highlighting the risk of supply shortages amid declining domestic production and a growing reliance on imports. “We really only had six hours’ worth of gas left in storage as a buffer,” said Rob Hastings, director of energy and infrastructure at the Crown Estate, the property portfolio managed on behalf of the Queen. “If it had run any lower it would have meant . . . interruptions to supply.”P.S.P.S. 06/19/2013, from Rune Likvern, based upon BP SR 2013:
The growing gap between consumption and production, UK imported fossil energy for an estimated US $ 35 - 40 Billion in 2012. I do not know of any other country that has experienced such a steep decline in energy production. From being a net energy exporter in 2003 to basing around 43% of its energy consumption on imports in 2012. UK’s energy production is now back to levels of late 60’s early 70’s.Therefore, in nine years, UK has transitioned from a free market poster child that exports here and now whatever it has to offer, to a heavily indebted importer of crude oil, natural gas, and coal. Let this be a yet another warning for our darling manipulators of the media and public, and the incoherent, uneducated, and rushed reporters.