by Damon de Laszlo, ERC Chairman
Another month and another stock market peak, largely driven by the euphoria around the so-called Magnificent Seven, riding the AI boom. Another month in which those living in Gaza have had their homes and infrastructure mercilessly pounded as well as being cut off from humanitarian aid and food by the Israeli military; during which time Ukraine also has been cut off from military support by the US politicians and only minimally supported by Europe, and continues to have its power supplies and water supplies targeted as the Russians pound its infrastructure. The rest of the world cannot be impressed by Western democratic institutions’ inability to support their friends and intervene effectively in these humanitarian disasters.
In Europe and the UK, economies trundle along in a sort of flat-line malaise again, that is unaddressed by governments’ inability to produce policies that encourage the private sector to produce the wealth that improves the well-being of the population. Green beliefs, rather than science, promulgate regulation that undermines economic growth, producing well-meaning regulations that make European manufacturers uncompetitive in world markets. Perhaps the most glaring example, among many, is the failure to produce a competitive electricity supply to industry while imposing green penalties for example, on steel manufacturing – capable and probably happy to move away from carbon-based fuels if they were able to buy electricity on a world competitive basis. As it is, the backbone of German industries, motor cars, are being strangled by high energy costs and, in particular, steel prices as well as raw material prices for EV development.
In Europe, countries bucking the trend seem to be Spain and some of Club Med. Businesses in this area are used to chaotic government, lightly enforced regulation, and are less dependent on energy than the rest. The only bright spark is the gradual dawning of the idea that you can’t have free green electricity from intermittent and inconsistent sources like tidal, wind and solar. The effort in this area should not be downgraded. Every contribution is useful, but the subsidised cost deliberately hidden in all three systems has subverted the general public understanding that they cannot address the needs of a modern country. The good news, however, is that this is beginning to dawn, and we are seeing serious conversations about nuclear power from smaller plants distributed across the grids. All technology that has been safely and effectively used in ships and submarines for many years.
The most recent country to come on board seems to be Belgium. A huge subject but a ray of rational and scientific light will genuinely contribute to greening the economy.
From the West’s point of view, perhaps the most interesting and important developments come from America. The country seems to be getting around the problem of a hopeless and dysfunctional government, but one at least that does less damage to its own economy than many others in the West. This is probably because, importantly, domestic power resides with the State governments where, unlike Europe, businesses can move without government impediment from one State to another if they don’t like the political or economic climate. We seem to be seeing in America an industrial revival “admittedly encouraged by Wahington” as businesses discover that the extended geographical supply chains have been overdone. The efficiency of globally extending supply chains, while economically profitable, greatly reduces the resilience of the business concerned. Minor disruptions within the chain cause massive problems which can easily defeat the benefits.
While the expansion of global trade with China joining the World Trade Organisation has brought huge benefits to people, particularly in Asia, it has had the effect of hollowing out American industry. This trend is now being reversed and we are seeing, as I said, with government encouragement, re-shoring as the new driving force for the US economy.
Good news for the West.
Damon de Laszlo
25th March 2024