Full Title: The China Model and U.S. Energy Policy
Author(s): Lee Lane
Publisher(s): The Hudson Institute
Publication Date: January 1, 2012
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Description (excerpt):
Americans are right to be dismayed with U.S. energy policy. For forty years, presidents of both parties have backed a series of fanciful “breakthrough technologies.” From synfuels to Solyndra, these schemes have turned out to be costly disappointments and the source of a recurring political drama. After failures become clear, Congress sometimes conducts oversight hearings. But it welcomes each new scheme as a pretext for pork barrel politics. Neither the executive nor the legislature ever learns from past failures.
President Obama has added a new element to the story line. He often worries aloud that the People’s Republic of China (PRC) might be outpacing the United States in what he portrays as a race to deploy “green energy.” The public, by a large margin, 68 to 26 percent, supports subsidies to alternative energy.1 Even 53 percent of Republicans back subsidies, although this number has fallen during the Obama administration.2 Much of the public also seems to share a fear of China’s state-led economy. Today, 43 percent of Americans name China as the world’s leading economic power, versus 38 percent who name the United States.
The president, in linking green energy to fears about China, is making green energy a test case for a broader “industrial policy” agenda. In the United States, much of the left has long embraced this kind of state-led economic development.4 But the allure, and dread, of China’s industrial policy also exists on the right. Recall that Senator Santorum wanted to use tax breaks to all manufacturers, not just to green energy suppliers, as one means of waging a “trade war” on China.
This paper will contend that, with a stress on green energy or without one, China presents, not a better economic model, but a cautionary tale. My argument covers five points. First, for the PRC the task of maintaining high GDP growth rates will become increasingly difficult. Second, China’s institutions display deep flaws that, if not corrected, will make sustaining high growth harder still. Third, far from being a world leader in energy policy, the PRC has a very mixed record in the field, and its successes have come in spite of its institutions, rather than because of them. Fourth, while the PRC needs economic reform, the Party-state is likely to resist it. Fifth, for the United States, imitating Beijing’s dirigiste energy policies produces the same kind of wasteful patronage politics that plagues the PRC.