Streetwise Professor

August 11, 2022

“Inflation Reduction Act”? More Like The Resource Curse on Meth Act.

Filed under: China,Climate Change,Commodities,Economics,Politics — cpirrong @ 11:35 am

The “Inflation Reduction Act” became Joe Biden’s climate and health care bill.

The narrative pivots are truly amazing to watch.

The deeper you dig into the details, the worse it looks. The supersizing of the IRS is one example. And if you believe that the massive expansion in “enforcement” (representing fully half of the $87 billion in increased expenditure) won’t be directed at schlubs like you, well, you’re a schlub and a sucker. The IRS, like federal law enforcement generally, goes after the easy targets. The people without the resources to defend themselves. And given the rampant politicization of all federal bureaucracies with any enforcement powers, if you are an easy and leveraged target. Get some money, damage the deplorables.

As to the climate aspect, it is a massive boondoggle of subsidies of inefficient technologies. We are constantly told (just read Bloomberg, if you can stomach it) that renewables are becoming so so so efficient. OK. Then why do they need massive subsidies to displace putatively inefficient fossil fuels?

And is there any evidence that our Solons have contemplated the systemic impacts of their intervention? In particular, how encouraging electrification generally, and the supply of electricity with renewables, will affect the reliability and indeed the stability of the grid? Of energy supply generally?

Or as another example, have they thought a nanosecond about the environmental and geopolitical consequences of this intervention into the extremely complex energy supply system? I’ve gone on at length before about the environmentally destructive effects of allegedly “green” policies. In a nutshell: mining ain’t green.

I’ve also discussed the geopolitical aspects, specifically the inevitable conflict over mineral resources vital for batteries and electrification generally. This conflict will be with China in particular, and will occur primarily in Africa and South America.

When I originally raised this issue, I received a lot of pushback. Whatever. Just watch. The Scramble for Africa Part Deux is already underway (with Russia as well as China contending with the US).

This benign summary of US policy towards Sub-Saharan Africa conceals more than it reveals. It acknowledges that Africa has 30 percent of the “critical minerals that power our modern world.” It says “[t]he United States will assist African countries to more transparently [sic] leverage their natural resources, including energy resources and critical minerals, for sustainable development while helping to strengthen supply chains that are diverse, open, and predictable.”

Just how is that supposed to work, exactly, in competition with the Chinese (and Russians) who are all about “assisting” rather non-transparently (through bribery and force) African nations exploit their natural resources in ways that are anything but “sustainable,” “diverse,” or “open”? (They are altogether predictable though.)

The logic is inexorable. Western nations hell-bent on the “energy transition” will increase dramatically the demand for resources in poorly governed or ungoverned regions of the world. Given that property rights in these regions are weak (and often non-existent) the competition will not be mediated through markets, but through force and fraud.

Meaning that the unintended–but inevitable–consequence of the compelled transformation of energy supply will be conflict in wretchedly poor areas that will make 19th century British and French struggles in Africa look like child’s play.

Put differently, virtue signaling policies in the West will create massive rents in countries with weak institutions that are especially prone to the most vicious forms of rent seeking. That will work out swell!

Case in point: the looming battle in the Lithium Triangle:

Similar setbacks are occurring around the so-called Lithium Triangle, which overlaps parts of Chile, Bolivia and Argentina. Production has suffered at the hands of leftist governments angling for greater control over the mineral and a bigger share of profits, as well as from environmental concerns and greater activism by local Andean communities who fear being left out while outsiders get rich.

And it’s not just lithium. It’s copper too. And rare earths, and nickel, and on and on.

In other words, we are about to witness the “resource curse” on meth. Massive rent seeking struggles in weak polities, all due to the whims of western elites in the thrall of a theory–and divorced from reality.

And for what? Even if the theory is correct, the impact of things like the “Inflation Reduction Act” on global climate will be virtually immeasurable, in the 100ths of a degree F at most, and perhaps in the 10000s of a degree.

In other words, the intended consequences of this act, and others like it, will be virtually nonexistent, while the unintended consequences will be dire. “Died of a theory” will be literally true–especially for those unfortunate enough to be living atop the resources the demand for which will be stimulated greatly by western elites mesmerized by that theory.

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  1. I haunt another American blog where my standing joke is that the West’s problems admit of a simple solution – more machine-gunners.

    Many a true word is spoken in jest.

    Comment by dearieme — August 11, 2022 @ 12:17 pm

  2. The climate-change theory is baseless:

    The climate-change argument is pseudoscience:

    The road to hell is paved with good intentions is about to be demonstrated in real time.

    VDH has pointed out that when actions are morally justified, no action is too extreme. Entering now from stage left.

    Comment by Pat Frank — August 11, 2022 @ 2:56 pm

  3. As opposed to us buying fossil fuels from Russia, the Gulf states, Venezuela, Nigeria etc? All lovely places I’m sure. Almost every country with such reserves has become a basket case of sorts – kinda comes with the territory. Someone coined the phrase ‘geopolitical externalities’, a nice counter to that other class of externality which you all get so vexed about.

    BTW I would discount Russia from being a serious player in this new Great Game. No-one’s going to take them seriously from now on.

    @2: Are you actually going to get off your ass and do something this time, or is this yet more big talk? I see some dude actually took on the FBI yesterday – turned out well.

    Comment by David Mercer — August 12, 2022 @ 3:46 am

  4. @3 I’ve published six peer-reviewed papers showing that so-called climate change is based in pseudoscience.

    I have officially notified the US EPA and the IPCC of their error. I have promoted the papers to very many climate-change alarmists — who generally respond with silence.

    Is it my fault that the powers who benefit politically and financially from the criminal – not to say murderous – abuse do not change their ways?

    Those papers have taken considerable work on personal time and expense. One does what one can do. What have you done, David?

    Good luck this Winter.

    Comment by Pat Frank — August 12, 2022 @ 4:17 pm

  5. 4 So that’s it, the sum of your actions??“No action is too extreme” – well most are to you. ”What does what one can do” – how pathetic. What an absolute minnow of a man you are.

    I don’t need to do anything. The argument has already been won.

    Comment by David Mercer — August 12, 2022 @ 5:18 pm

  6. @5 — You misrepresented the comment of Victor Davis Hanson, you misquoted my plainly written word, and finally you attempted insult.

    So very typical of your style.

    No matter your perfervid belief otherwise, David, your insistence alone is not conclusional.

    Perhaps this Winter you might do something to take in a chilled pensioner or two who cannot pay their heating bill upon the vile work of the progs of your allegiance. The excess Winter fuel poverty deaths in the UK be on your head, too.

    Comment by Pat Frank — August 12, 2022 @ 9:32 pm

  7. Urrghh that White House document is horrible – stream-of-consciousness babble. It reads like it was written by someone who’s never travelled to Africa, let alone be aware of the challenges it faces. And what’s with the Conclusion starting at the bottom of the page? A formatting crime of the worst order.

    Incidentally it doesn’t state that these 30% of critical minerals are exclusively required for our ongoing energy transition. I’d wager some are needed by your defence & tech sectors (I vaguely recollect copper has a few other uses…).

    Also I wouldn’t sweat too much regarding the availability of Lithium. The good news is that there are a gazillion different battery chemistries being investigated across the globe, many based on widely available materials (e.g. salt – “OMG our oceans!!” you all shout).

    Comment by David Mercer — August 13, 2022 @ 5:27 am

  8. “a chilled pensioner or two”: UK pensioners get decent protection against inflation – their annual state pension goes up with CPI. Unfortunately this annual “pay rise” doesn’t reach them until April.

    They also get a tax-free handout for fuel bills – that arrives before Xmas, usually. I find this on the website:

    “If you were born on or before 25 September 1956 you could get between £250 and £600 to help you pay your heating bills. This is known as a ‘Winter Fuel Payment’.

    The amount you’ll get includes your ‘pensioner cost of living payment’. This is between £150 and £300. You’ll only get this extra amount in winter 2022 to 2023.”

    Political experience is that “temporary” tends not to be. No doubt there will be more largesse promised before the first frosts. Perhaps rightly so, depending on how it’s going to be paid for.

    Prediction – it’ll never be paid for. The whole of The West will collapse economically. There is one obvious alternative. The West should, just for once, fight a rational war: invade Saudi Arabia and steal its oil fields.

    Comment by dearieme — August 13, 2022 @ 5:30 am

  9. Narrative pivots? ? Narrative pivots? ? When do we call them what they are? Outright lies. They stand there and lie directly in your face, no attempt at “dissembling”, “hedging the truth” or “misstating the facts”, just outright lies. “Build back Better”, “Make America Great Again”, “Change You Can Believe”, one fucking direct, contradictory lie after another.
    And here’s another. 87,000 new IRS agents over 10 years. I doubt that there are that many accounting graduates in that time frame and they all surely don’t want to work for the IRS. So what or who are they going to hire? Art history majors or possibly gender studies graduates? There are plenty of those turds floating in the punchbowl.

    Comment by Donald Wolfe — August 13, 2022 @ 5:56 am

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