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this is all too heavy for a midweek subject...lighten up guys....

Another fine essay Paul thanks enjoyed the read. But I think there are problems with the battery route on powering cars - they have to be recharged and preferably fast - where will the power come from ? And they have problems of longevity if the battery cost is almost half the price of the car and could die (heat wave - unless it has constant cooling day and night) in 3 - 5 years who wants that ? You have to be very diligent to keep a battery alive and have good usable power for more than 4 years - I have a small solar set up and know the practical problems with deep cycle batteries. Its not going to work as things are. The fuel cell (less efficient at the moment) is a better future bet in my view.

Paul,

I certainly think you are on to something. But you seem misled in your reference to these rare metals as part of the green technology. There is nothing green about a load of very rare metals that require mountains to be excavated or lakes to be dredged, only to be bolted into non-essential highly energy intensive mass produced consumer items. Batteries only store electricity - they do not create it!

Yes indeed, China will be the economic victors of the 21st Century. Alas they will preside over the broken wreckage of international Industrialised collapse. Not so much "Rare Earth" but more "Scorched Earth"!

the moves in the commodity markets have been clear to anyone who watches them. its been no secret.

however democracy institutionalises incompetence so we get what we get. no one would think of voting for someone as an air traffic controller with no qualifications or experience but that is what we do when we vote in MPs.

so gordon or anyone else is not thinking about the model of good government [ i do not believe they even have a model or understand what one is]. they are thinking about how to make their opponents 'look bad' in the press. so they walk around each other flicking heels and try to trip each other up like kids in the playground.

why is someone educated called a geek. it'll be egghead next. or swot. what is with the fear of education? i suppose we should be thankful the its not in tellytubbyspeak.

as for rare metals tech there is usually a way around them.

i did like the hybrid economy line in yesterdays report. if china i a big player and its not playing market forces [or pretending to] then the global 'system' isn't going to be 'capitalist'.

This comment was removed because the moderators found it broke the house rules. Explain.

Probably just my imagination but I got the sense when Barack Obama was walking through the halls of power in China that the penny had dropped for him.

While they were chasing 20th century shadows in the middle east and puffing out their chests and extoling the virtues of human rights (HA!) China has quietly and modestly completely and utterly outflanked them in the geopolitical theatre.

Well done China!!

It is worth noting again (on a similar line to #4) that China is overwhelmingly ruuled by trained Engineers, methodically building up an architects dream and making it real from the ground up.

The west is largely ruled by professional politicians or ex lawyers, trained in ....well what exactly?

Good report Paul. More reports along these lines would be most welcome.

Looks like South Asia has pretty much won this game before the west, the USA in particular, had woken up to the fact that it had even started. Paul noted America in his TV report the many trade deals the Chinese have now cut in Africa and South America; raw materials (even the more common ones such a copper) will become scarcer because they're now flowing into China to fuel its manufacturing industry.

If China manages to sustain its economic growth and increase the prosperity of much of its growing population then its internal demand for consumer goods will grow.
The movement of western manufacturing to locations in China favours Chinese workers over western ones, to the detriment of western countries.

The west does need to worry what will happen when China's internal markets begin to consume much of what China produces (that may include products made by western companies too ~ after all they're mainly driven by short term pressure to satisfy stock-holders), so reducing the amount of raw materials to western countries.
Needless to say the economic clout it gives the Chinese in negotiations is enormous, easily as powerful as OPEC's control over oil quotas.

The only strategic way for the west to keep a toehold in rare-earth production would be through direct government investment and control of the mines, justified as an issue of national strategic importance.

Should anyone doubt that a new world order is emerging (one currently favouring South Asia as the west struggles to recover from the credit-crunch) then begin reading the growing number of books about China's recent economic miracle; China is changing, almost too fast to keep up with.
I think this is just the start for South Asia, it could be as significant as those conditions that favoured Europe from the 15th - 20th centuries.

PS. I agree with Jericoa (#6). I think the penny really has dropped in the USA.

The US economy is pretty much now bankrolled by the South Asia; foreign banks, mainly Chinese and Japanese, now control over 40% of the US national debt, mainly in the form of US Government bonds. (Moreover, long-term US interest rates are market-driven, based on the buying and selling of US government bonds. The US has gradually ceded control of its long-term interest rates to foreign Banks, namely China and Japan should they decide to sell or demand the cash value.)

If the Chinese called in all their loans, the US economy couldn't afford to pay them and would collapse. I imagine that thought will keep Obama, and the presidents that follow him, awake on quite a few nights.

'WHAT ARE LITTLE LAWYERS TRAINED IN?' (#6)

'Amoral manipulation of data - that's what little lawyers are trained in.' This is why we have so many in politics.

Obama fits the mould.

There's also an interesting take of the US's [and our] changing relationship with China [and how the west engages with China] by Timothy Garton Ash in the Guardian's comment section today.


In foreign affairs we seldom look further than the Middle East and the Indian sub-continent, inevitable given the events of the last two decades; we need now to move our attention further east.

If the subtext is that China has somehow cornered the world market in the successor to petroleum and the future of the automobile ?

1) "rare" earth presumeably because it's not common , and hence would be prohibitively expensive for mass market auto manufacturing.

2) Batteries are a store not a source of energy - mass production of electric cars requires mass building of power stations fuelled by what ?

3)Can you see this technology doing the heavy lifting of world trade - transcontinental freight movement and shipping ?

I would venture that whilst the "rare earth " technologies are increasingly important, and are a valuable component of "green" automobiles, they are not a realistic substitute to oil.

If the price warrants it, we will no doubt find alternative supplies of these minerals. In the meantime China will do what it's best at - cheap manufacturing.

I found this report very interesting and thanks. I also enjoyed the Paxman interviews on the night. Delving further I see that rare earth elements could be crucial in hydrogen storage technology. What this shows is that western capitalism is flawed. It is being out-witted by a control-economy acting on a strategic programme. Another weakness exposed in market-orientated so-called global economics.

#10

I think you would be right if 'rare earth metals' were the only thing on China's shopping list over the past 30 odd years.

It is only one manifestation of the guiding principle made into reality which China has been methodically pursuing with the same pragmatic and mindful approach an engineer (like me) would apply when given a vision of a final outcome for them to achieve by an architect.

It is no co-incidence that all the top leaders in China now are from an engineering background, hand picked to build the brilliant Deng Xiou Pings architectural plans. One of dengs quotes is ''capitalism should be treated like a caged bird'' Brilliant!!

In the west we let the bird fly (and crap) all over the place and we are now desperately trying to catch it and put it back in the cage....Deng knew this all along.....and designed accordingly.

A good example of the all encompasing chinese policy is Brazil, China is on better terms with the resource rich Brazil than the USA! When I lived in Hong Kong 10 years ago I knew people who were buying and shipping iron ore 1/2 way accross the world from Brazil to keep its manufacturing fed,it was more strategic than economic the key chinese personel even married Brazillians..........

As I have said many times before China took a look at 'The British Guide to building an empire'' circa 1750 to 1914 moderated it to fit the modern world and are now in the process of executing it brilliantly!!

# 11 summarises it very well I think.


''It is being out-witted by a control-economy acting on a strategic programme. Another weakness exposed in market-orientated so-called global economics.''

From his body language I think Barrack felt he was visiting the palace of a greater power. The power shift has already happened, most people just don't realise it yet.

''may you live in interesting times'' so goes the dual traditional Chinese blessing / curse.

The USA can not even claim the moral high ground, we say Tibet...they say the Iraq war and Guantanomo bay...

Totally outflanked.

All fascinating stuff.


Jericoa

In the 60's the Japanese became, as they remain today, major exporters by the application of technical brilliance, innovation and their products becoming a byword for reliability. They built huge global brands that have grown to become household names against a backdrop of considerable resistance because of their behaviour in WW2.
China by contrast have simply thrown open their doors to western business to make the lowest priced manufactured good on earth, nothng more and nothing less. Amongst the jam packed hoards of Chinese made goods try in this country try and find anything that has a Chinese global brand..where's the innovation? Where's the quality?
The Chinese know that the only thing they have in their favour is low cost and that makes them the worlds sub-contractors and for that reason they will try and keep a whiteknuckle grip on their undervalued currency....because without that what have they got!!

"President Barack Obama has now, reportedly, accepted there will be a global resource crunch within a decade, led by peak oil."

Who is reporting this? Is it on public record? The official position from government sources in the US and UK is still no oil peak before 2030 at the earliest. If Obama is declaring peak this is major news.

#various above: I just want to clear up one confusion - rare earth is not "rare" in a literal sense. Annual production is maybe 120,000 tonnes but there are about 40 million tonnes in the Bayan Obo mine. Eventually of course it will run out, or there will be unacceptable environmental impacts of mining the mineable deposits. However during this transition phase to renewable sources of electricity and to electric-powered cars, both NiMH batteries and NdFeB magnets seem pretty crucial. It will certainly up the cost of mass manufacturing a Prius-like hybrid, but it does not seem prohibitive. Fans of NiMH actually reckon Li-Ion is equally susceptible to resource constraints. Basically, sometime this century, we are gonna have to stop expanding the number of cars on earth, it looks to me anyway, at least at the rate it is expanding now.

Yet another excellent and thought provoking article not to be read by the faint-hearted.

We have to admire the way China has been able to manipulate the greed of the west without them even noticing.

While the west was trying to promote their brand of democracy across the Middle East to try to manipulate oil supplies China was way ahead of the curve and looking at ways of exploiting the west's incessant greed and involvement in two long wars. They were saving and lending their money instead of blowing it on armaments. They were buying up as much as they could of the earth's valuable and decreasing resources.

While the west was bringing in never ending laws on how to make it more difficult for businesses to trade and make profit by employing people China was welcoming them in with a never ending supply of cheap labour without any human rights or employment protection.

How could politicians in the west have been so shortsighted?

Frightening to think that it has only taken about ten years for the west to go bankrupt and China to hold all the ace cards.

Where do we go from here is the question everyone should be asking for can the west really be subservient to China whilst they hold a huge stockpile of nuclear weapons?

Perhaps it's something people are best not thinking about.

‘Amongst the jam packed hoards of Chinese made goods try in this country try and find anything that has a Chinese global brand. Where's the innovation? Where's the quality?’ #13

China is where Japan was in the 1960’s, when Japanese products were often described as ‘Japanese rubbish’; then - first with electronics and motorcycles – the Japanese began producing innovative products that became market dominant.

The next step forward for the Chinese will be to see if they can do more than just copy western technology and produce innovative products. Given the Japanese managed it (Honda, Sony, Toyota, Nintendo etc), that China has a large number of very bright graduates and an exceptionally long history of significant inventions I suspect it’s only a matter of time.

I take Mark’s point about ‘rare’ earth not being that rare; it’s an accident of history that they were considered rare when first discovered. The real point is that the Chinese appear to have gained a virtual monopoly. Imagine if one country controlled 90% of all oil production!

I also agree with Mark that I just can’t see how the world’s car ownership can continue to grow indefinitely this century.
If India and China follow our example, whereby many households have two cars that means: a) an unimaginable rise in the number of cars produced and b) unimaginable traffic congestion. Not to mention the vast amount of materials and oil/batteries required to produce them and keep them running.

I can see a ‘resource-crunch’ being a very real possibility this century.

#16

''How could politicians in the west have been so shortsighted?''

I think from the understanding shown in your post you already know the answer to your question.

The west stopped having any grander vision when communism (eastern bloc style) collapsed. Instead we turned to consumerism as a vision, which is actually a nightmare masquerading as a vision.

Politicians all became the same, ideological lines were swopped for simply '' who can make the economy grow faster...hence the birth of that child of mamon ...'Nu Labour' who jumped into bed with the city boys and the bankers faster than a street hooker from Brooklyn.

Human nature does not change, we are no wiser in terms of understanding what we are than we were thoudsands of years ago.

i like to quote the old testament from time to time,I am not religious but I recognise a lot of wisdom in their non the less

Simply

''where there is no vision the people perish''

#17
In the mid 60's Honda won motorcycle World Championships with 5 cylinder 125cc engines that could run to 21,500rpm's and 6 cylinder 250cc engines that went to 18,000rpm's.

There was plenty of innovation from Japan in the 60's. I just hope China comes up with something before they deliver us the 'resource crunch' you see coming!!

I work in an branch of industry that was targeted by China as crucial to its economic growth, as a result it has been virtually destroyed. It is common practice for industries that one day find they have to "compete" against China to suffer near or total collapse; which would most likely explains China's new found monopoly of supply in rare earths.

Just like the other monopolies China now enjoys, see if you can buy a children's toy or any computer accessory made anywhere other than China, just for example.

Exposes the shortcomings of leaving everything to private enterprise and how private enterprise is particularly poor at responding to strategic changes. If rare earth is massive leaver in the developing 'green' economy the state must play a role in local extraction. If China dumps rare metals to crash the price why not the state buy them and treat them as strategic material and financial reserves - green gold?

brit_toolmaker. 19.
Thank you for correcting me about Japanese bikes in the 60's. Bikes did spearhead the resurgence of Japan's trade and industry, but Japan had to shake off an earlier reputation for producing inferior products. (Perhaps I should have put 1950s?) But they produced an economic miracle, as did Germany.

My view on bikes was shaped by my teenage biking years in the 70's when there were very passionate discussions over the merits of British vs Japanese bikes. There was then still a British bike industry, the Japanese hadn't the dominance they now have.

The Chinese have cornered a vast share of manufacturing; most computer accessories (and much more) are assembled in China, but often for foreign companies.

Offhand, I can't yet think of a wholly Chinese owned company that is a well-known worldwide brand in the same way that, say, Sony or Honda is; though Lenovo, Haier and a number of banks and finance companies are amongst ones to watch.


With a huge pool of rural poor that think low paid factory work an improvement in their income level the Chinese have a considerable advantage over western economies and companies.

Perhaps we need much more discussion as to what this is going to mean for our economy over the next few decades?
If the centre of world finance shifts, as manufacturing has, from London, New York etc to South Asia what will we be left with, apart from tourism?

Over to you Paul.

The Chinese are busy going round the world spending their, soon to be worthless, dollars with corrupt governments in exchange for control of the world's resources. Once they control what they want they can dump the rest onto world currency markets and destroy the dollar and the US without firing a shot. The demise of the US will probably take out Europe as well.

Hi Paul,

Couple of comments.

Firstly, this is a brilliant brilliant article. Top class journalism that puts most British newspapers to shame.

Secondly, would be very interested to get your take on coltan in terms of the balance of powers and underlying interests in the trade.

Thirdly, pedantic point 1, "the wind farm and the hybrid car - the two key technologies in the transition to green energy use", I'm currently reading Lovelock who makes a convincing argument against wind and for nuclear power as the only realistic source for reducing carbon dependence.

Fourthly and finally, pedantic point two "Now to the response of the two big manufacturing powers outside China - the US and Japan" - I think it is fair to call Germany the biggest manufacturing power outside China, given that during 2008 it exported $1.2 trillion of manufactures according to UN COMTRADE, as opposed to $855 billion for the US and $693 million for Japan. [China exported $1.3 trillion, France in fifth exported $460bn - the UK in 8th exported $321 million] - I would therefore expect Germany to also have a role to play in this new Great Game.

Correction...
$693 billion for Japan and $321 billion for the UK [manufacture exports]

Big picture stuff re manufacturing.

There are a lot of sides to this, but one thing that shows up is the degree of state/industry alliances (NB re Japan, Sanyo are about to be taken over by Panasonic - who according to this blog are joined now to Toyota - and to the Japanese state. So - big, and state connected, and for the benefit of Japanese people overall).

Obviously state and industry are in same direction in China, including ensuring that they pull all the global manufacturing their way, from everywhere else.

But what does it say about the UK state, selling everything it can off to foreign companies ie liberalising, and allowing the Intellectual Property to go with it too? That we are just a base for international financial firms? And UK people arent in the picture?

#22 Kenn

I agree it is now in China's gift to do as you suggest, the power shift is not happening, it has happened.

However, I dont think they will take that option and I dont think there is anything to be afraid of either except the Wests own fear of that process.

Chhina just want its fair share and respect on the world stage as equals when stood next to the so called 'advanced' nations they have outwitted despite all the geographical and demographical disadvantages it has.

I do so wish the west would stop looking down its nose at China and banging on about corruption and poor quality and human rights. I can understand China's frustration at this, particularly on the human rights card continually thrown in their faces by the west, particularly the USA whom are deluded in this respect that they hold any kind of moral high ground in comparison.

Torture flights, death row, Guantanomo, the Iraq war, and the shame of one of the richest nation on earth not providing basic healthcare to a large chunk of the populus. It is not all bad, but there is plenty of room for huge improvement in the US as in China.

I think the Chinese have shown remarkable restraint and a deep understanding of how the world really works to keep their cool and carry on building key international relationhips with minnows and large countries alike and gaining influence in the world using far less violence than the USA have used from Hiroshima (surely 1 demonstration bomb would have done not 2 on highly populated areas)to Iraq.

What have we got to be afraid of exactly?

Tianoman Square perhaps...I dont think they took any pleasure in that crackdown at all, a democratic revolution at that time would have thrown the country of 1 billion plus into absolute chaos and carnage which would have been no good for China or the rest of the world. China has (and is) moving towards a form of democracy at its own pace, the pace that is required given its particular set of circumstances,this is no irresponsible crackpot regime.

Who should we really be afraid of in the world, China or the USA?

It occurs to me that we all are now living in a post-Lisbon Treaty world where what the UK cares or wants is subsumed into a pan-european agenda. Paul, the 5th EU China Business Summit is being held in Nanjing on 30 November. Baroness Ashton, the former EU Trade Commissioner and now special EU foreign ambassador,has been conducting the EU China High Level Economic and Trade Dialogue with Vice Premier Wang Qishan of the PRC. Why dont you, Paul, put your very important points to Baroness Ashton. She is bound to be aware to the REE debate and could tell you where on the agenda it has or will be raised. Could you let us know what she says.

#15 Paul,

Thanks for explaining the confusion on rare earth.

The intention of my original post was to draw focus on mass scale energy production itself, rather than small scale storage items (such as batteries). A battery is absolutely no use whatsoever without the energy to put into it in the first place.

Therefore you should take a look at what the Chinese have been doing in terms of hydro-electric power generation:



"It is the world's largest electricity-generating plant of any kind."

Not sure if you came across it on your recent trip to China. But I attended a presentation in the UK by one of the project directors a few years back. After blowing us all away with the sheer scale & efficiency with which they had built this, he then completely knocked our socks off by saying that this was just a practice run for the next 10 (!!) dams they plan to make on this scale!

As you state the Chinese have completely blindsided the West, but would add to that they have also quite shrewdly been using the finite supplies of oil & gas energy (which is stupendously cheap & efficient at the moment) to invest in renewable energy production infra-structure.

Rather than fret about whether we in the West will all get over-charged on the cost of mobile phone batteries, or worst still have to forgo some of our car usage, we should be far more concerned about our mass-scale domestic & industrial energy production needs (essential for food, heating, waste disposal, clean running water, medical facilities etc.).

The pinch we might feel on luxury items will pale into insignificance compared with when we get squeezed on our energy needs for essentials.

#28

Nicely explained and reflects a lot of my views on this as well. As an engineer getting anything built (whether it is of vital strategic importance or not) is anightmare or proceedures and consultations in the UK.

The current badly needed scheme I am working on at the moment was first identified as being essential to the development of an area of the UK in 1974!! 3 false starts and several planning enquiries later it looks like it may actually happen this time...it will take about 18 months to build it....

Meanwhile in China when they see something is needed for strategic national importance they just do it!!

Instead of a VAT cut why dident we ''just do'' one or both of the major tidal barrage schemes that have been talked about for 40 years?

In so doing we would have created tens of thousands of jobs actively engaged in something that would keep the lights on in a sutainable way for our children for generations to come.

instead we use the money to 'stimulate the economy by encouraging people to buy cheaper goods in the shops....made in China!!!

the lack of a coherent vision and desire to execute it in this country drives me (some may have noticed) absolutely crazy!!!!!

Its such a waste of hundreds of years of socio- economic and political development, often hard one by the struggle of our ancestors.


ARGHHHHHHHH!!!!!!!!

Jericoa
" Meanwhile in China when they see something is needed for strategic national importance they just do it!!"

This is at the heart of it..strategic action in this country can never respond as fast as the Chinese. First you would have consultations with interested parties ; they, in turn, would have access to planning systems and courts to hold up action and argue the science; running parallel you would need to consult with national and european quangos to gain technical agreement ; european directives would need to be satisfied on environmental and social protections ; parliamentary debates and press investigations would need to run their course to argue the case for and against ; assuming you get to a point of 'consent' you would then need to "procure" construcion contracts according to european legislation - more red tape to ensure the fitness of contractors, their financial standing, health and safety plans,making sure every contractor in Europe gets a fair chance, free and fair competition, habitat protection plans and zero carbon goals set out for achievement.

Meanwhile the Peoples Republic of China Grand Council pass down an order and the state apparatus ensures delivery!

Just one more comment on these important issues. I have read Baroness Ashton's various biographies and some of her limited trade speeches. The one issue that stood out was her belief that the EU economy is a sophisticated "transformation" economy as opposed to China etc. I've heard simlar nonsense coming from Digby Jones. In essence, the belief is that China etc. can act as the world's widget makers but we here in Western europe are the ones who cleverly add value and transform widgets and manufactured goods into high tech products. Who are they kidding? It is paying the Chinese disrespect to believe that they will confine themselves to the role of world widget-maker. It is also strategic nonsense and dangerously misguided and arrogant to assume that the Chinese and others can be dealt with on this basis.

Congratulations to Baroness Ashton on her elevation. I see she has extensive experience starting with her sociology degree and then running health authorities, negotiating pan-european legislation, protecting the rights of minorities / women and the vulnerable in business.I see also she was a management consultant at one point. I do believe she could benefit from reading these blogs however to get an angle on reality. By contrast I see Vice Premier Wang has come through the Chinese Agricultural and Construction Banks and communes to get his grounding in what counts.

All smiles and handshaking will be early awaited at Nanjing on 30 November....

I find myself in agreement with so much of what's been said above. It must be some of what I inherited from my late father who was an engineer and a member of the armed forces. He didn't suffer fools gladly and I agree sometimes it's better just to get on with it instead of constant hand-wringing. We could have been streets ahead with investment in green technologies such as a Severn Barrage. We are apparently the best served country in Europe to benefit from wave and wind power. If not a barrage there are other ways to harvest wave power being developed but how much do we hear about them and how interested is the government? Not very obviously.

My daughter has been working in Beijing for the past 3 years in a British company helping to reduce carbon emissions. She much prefers her Chinese co-workers and rates them as mostly very clever and hard-working. We are soft and complacent here in Europe and it will serve us right if/when China rules the world.

Eureka!

In my efforts to fully unearth the underlying intellectual dogma that has created this financial mess, it seems that all roads seem to lead to the following assumption of Neoclassical economics:

- "There is only one true measure of wealth, and that is the exchange value. From this proposition it is assumed that price reflects the reality of an assets real value."

The crux of Marx's dissent was against this very assumption (unfortunately the subsequent focus on the labour theory of value was an obfuscation by Marx and many of his followers). This article rewards careful reading:



Clearly Steve Keen was well on his way to fully establishing this, until the early 1990s when he instead followed the Minsky trail instead:



The modern construct of money serves purely as a medium of exchange, and therefore we have lost touch with its far more portentous manifestations: as a store of value, and a reliable measure of value.

Until we can again accept that exchange value (i.e. money) is capable of diverging wildly from real (intrinsic) value we have learned nothing from this crisis:

/blogs/newsnight/paulmason/2009/05/welcome_to_shizuishan_city.html

no.33 hawkeye

Maybe it is boring agreeing all the time, but, again, I agree, but I would add how it is interesting how these same threads on the lines of your post above keep re-appearing here under many different topics and from many differnt people who clearly come from different backgrounds.

I would go a little further, the same affliction which blights the proper functioning of the economy also blights mans perception of itself.

There is am impasse between the intellectual knowledge and it being manifested as real value in the real world. We are in the era of Churchills '' empires of the mind'' .

we live so much in our heads now that we mistake solving the intellectual problem for solving the problem itself, when, in fact, the intelletual part is only the beggining.

''knowing is not enough, you must take action'

otherwise a 'eureka' moment, no matter how profound, whether it be a Paul Mason scoop on rare earth or a hawkeye unravelling of the fundamental basis of the problems we face in the economy make no difference.

Back to the chinese again, and their manufacturing and resource empire building. It would appear to me that the Chinese are the ones that do understand that ' knowing is not enough, you must take action to effect change'.

They understand the current status of money, they are using it to aquire 'real assets, esource leverage and behind the scenes diplomatic influence. They are turning the money into something of real value, they are ''de-intellectualising' money and in sso doing obtaining great influence.

On the other hand the west (as Shireblogger has also alluded to in his perceptive comments on baroness Ashton) seem to believe that we dont need the 'real stuff' anymore to add value.

hence we dont build landmark syustainable power projects, we intellectualise them, we talk about them endlessly and worry about intelleftual impacts on this that and the other spending billions of intellectual pound in the process.

It seems like this 'empire of the mind' is so entrenced now that we will not snap out of this trance until the real world slaps us accross the face and compels us to 'wake up'.

That will probably happen when the real value of stirling is such that we can no longer afford the nations energy and food requirement by the purchase of imported goods.

Fuel costs continue to creep up by a process of stirlings steady de-valuation and incresing demand again as the rest of the world recovers, food will follow, inflation will follow that, as sure as night follows day.

As i (and many others) have said we must use the last of stirlings intellectual credibility in world markets, not to buy ourselves a VAT ccut but to buy ourselves a new vision, which involves updating our energy and food production infrastructure fi for the 21st century.

The victorians did not build an intellectual empire, they built a real one, we are still living off the victorian legacy of the UKs infrastructure, whether it be the london underground or the network or dams and pipework that keeps us in fresh water and deals with our human waste.

The chinese are in the process of doing what the victorians did, except they are building it fit for 21st century purposes (huge sustainable energy projects etc as others have mentioned).

we have the intellectual know how and, believe it or not, the money to build our country fit for the 21st century and beyond, far better than the chinese are, we could lead the way.

instead over the last 15 years the divident has been spend on NHs computer systems that do not work, and the creation of several hundred thousand 'non jobs' in the civil service ( champions of street football , diversity consultants, quangos etc etc.).

we have everything we need except the grander vision to pursue, noboddy is offering it to the people. it is supposed to be a democracy but we are not offered real choice.

I wish camerons ' emergency budget' within 50 days of an election is something on the lines as i have described above.

It will be very disruptive to the current modus operandi of this country but we are good at pulling together in a crisis, we are good at pursuing sharing and making real a collective vision.

All we need is our so called 'leaders' to give us a coherent vision to get behind so we can provide a compelling new example for the world to look to based on good governance coupled with technology and mechanisation in a sustainable way.

It is all possible and we can do it, but we have to snap out of our collective catharsis first and i fear that will be via an external shock rather than an internal realisation.

Jericoa @ 34

I am with you on the thrust of your frustration but lets look at some sobering realities. I am not quite sure whether your vision is to be implemented by the State or private business. If it is the former, unfortunately it will be spending the next decade paying off its debts and balancing the books. Mandelson's current vision for the UK Government is one of an enabler for that reason I suspect. He says we are now in a new global economy and we must find our comparative competitive advantages which can sustain our exports of good and services to the rest of the world into the long term. He has targeted Low carbon technology, Ultra low carbon vehicle technology,digitalised Britain,life sciences and pharmaceuticals,advanced manufacturing in aerospace / non metal composites, biotechnology and plastic electronics,professional and financial services (!),engineering construction and services to ageing populations. So, Government gives individuals and businesses the skills, training to innovate and compete in global markets utilising the global supply chains ( say, in China / India). In a way he looks to corporate Britain like the old trading companies to trade us to Utopia.

The increasingly large social state then thrives on corporate profits and home consumerism ( which is going to retract)and pan european cross subsidy.

Regarding the home market and its infrastructure he doesnt say a great amount but says that government spending and schemes can be used to lever global investment inwards. Again, Government sets the strategy of balance between nuclear, renewables and other sustainable methods of UK self-sufficiency/security of supply in energy. I understand we are producing food at a surplus to our needs.

He knows well we are entering a more brutally cut-throat and competitive world where other emerging economies will catch up with our developed economies and will themselves level the field.

Where does your vision take us either toward or away from this analysis?Do you want us to issue more gilts to sponsor a home infrastructural renewal by Government and/or do you want this funded from growth and taxes?

33 ~ Nature Bats Last.

Seems a long time ago since the 'Soddy posts ' but I still think your 'energy' discourse holds fast.

For me it was drawn into ever sharper focus for me by a guy called Sir Moses Finley :



I was interested to read his discussion on the variety and subleties of ancient world slavery and its correlation with present day class divides.

But more profoundly I was impressed by his reasoning for the fall of ancient empire.

For Finley the economics were simple: the principle staple was grain, and this was transported overland by oxcart. Long overland supply chains were unsustainable - the ox and driver would literally eat the profits.

Given that the empire was defended at it's borders with standing armies, these had to be fed with locally grown grain. The upshot is that once the empire surpassed a critical size, and a critical number of enemies it's downfall was inevitable.

If we translate this thinking forward to 2009, then the price of oil becomes paramount- too high and the economy implodes.

Thus future of the dollar hegemony may well rest on a stream of new discoveries ( Brazil, Kurdistan, Ghana , Canada, Greenland.........) OR a new low carbon technology and Carbon Credits. However if that new technology is beyond it's control , then the US influence may be thrown into decline.

Peak Oil ? or Plateau Oil plus a synthesis of new Tech ?

The Chinese Eleventh Five Year Plan puts it in a nutshell for Baroness Ashton, Digby Jones, Lord Mandelson and Uncle Tom Cobley :

" The draft outline proposes to adjust and optimize industrial structure, corporate structuring and industrial arrangement with increasing independent innovation as the core link so as to increase overall technological level and improve competitiveness of industry.

It requires the extension of high-tech industries from processing and assembling to independent research and development and advancement of independent innovation commercialization; a series of leading industries with core competence should be formed; a group of industrial bases with concentration effect and a batch of transnational high-tech companies should be established and a raft of brand names of proprietary rights should be raised.

The outline proposes to make breakthrough in core technologies, increase the level of development and design of key technologies and equipment, localization of core components, the manufacture and system integration. A stable, economical, clean and safe energy supply system must be built."

#35 shireblogger

Sobering realities indeed!

If that was not bad enough, as far as I can research we only produce about 60% of the food we need to be self sufficient in the UK. It has been declining from approx 70% in the last decade.

I don't have a problem With Mandelsons hi tech economy vision, I don't think it will fly though unless it is on solid foundations, we have neglected the basics which leave us badly exposed, particularly in the UK.

To rely on a high tech economy for both your foundations and growth is to build upon the shifting sands. Technology can be easily copied now, intellectual property is becomming increasingly worthless in the age of the internet. As for professional services, a million graduates a year come out of India, more than that in China. Hence the growth of 'non jobs' for graduates in this country.

When I first graduated civil engineers from the UK could work all over the world, now it is becoming increasingly rare except for the very top end brilliant engineers who design landmark projects, by their very nature that is a small export market and ever shrinking as the global population becomes more educated.

There is no way we can be sure to stay ahead of our competitors sufficiently to pay our way in the world using the type of economy madelson and baroness Ashton seem to believe in (Empires of the Mind). Their individual careers and prosperity have been built on intellectualising problems and communicating answers quickly i.e. nothing that is 'real', hence the growing disconent between the political class on those it is supposed to serve.

As a nation we should hedge our global position against exposure to energy and food security, not by invading Iraq, but by the alternative type approaches we have been discussing here.

Human conflict is often related to food and energy security. We should surely be concentrating on those first and look to roll out that good governance and basic sustainable technology to the rest of the world. But we need to do it here first and it is possible if we stop wringing our hands and start believing in a collective vision again.

How to pay for it? Borrow more or tax more you suggest are the options.

There are other options but they have become taboo to talk about as they involve challenging the superior notion we seem to carry of ourselves at the moment, the notion that as an advanced economy our population does not have to roll its sleeves up, get its hands dirty and pitch in to contribute to the delivery of something worthwhile.

If we were on a war footing we could build the severn barrage in a few years because all the red tape would get thrown in the bin and the full measure of human industriousness and inginuity could be utilised.e

I have worked on some very worthwhile badly needed overseas projects, the sense of comaradery that develops in the team and well being you get from it far outweights the renumeration part, I would have done those jobs for food and shelter, not because Ii am a saint but because I felt like a complete human being by so participating in them. As a human being you feel happy, as a nation we would be happier once you get past this dreadful culture of 'the self' that has developed here fed by rampant consumerism which has filled the vacuum that was left when communism collapsed and took any ideological debate with it.

I can not do the math on the nuts and bolts of how it gets paid for (maybe you can?)as I am not an economist, I just know it can be done, we have the technology, we have the education, we have the geography all we need is genuine political leadership.

The current crop of 'professional' politicians seem to have come up through well established institutions and think tanks, they have not (for the most part)earned their stripes by being engaged in any kind of ideological or physical struggle.

Governance has become reduced to the level of theoretical intellectual sparing matches between rival brains, to which it matters not who wins or loses, few real people feel any affinity with politicians any more. That did not use to be the case.

Why has the US closed her own rare earth mines?

Not economical? Then we can expect sharp price rises.

Thorough article. Rare earth market watchers will also want to pay attention to a report from the World Trade Organization on China’s export restrictions due out later this year. A WTO dispute settlement panel is scheduled to report its findings on whether China’s raw material export restrictions are in accordance with WTO regulations by the end of October. If China's export restrictions are found to be not in accord with WTO rules, it is widely expected that a case against rare earth export restrictions will follow soon after.

More coverage and analysis here:

What this article has re-enforced is that the americans really aren't very intelligent.

From the political sphere to the business boardrooms, as well as deep into america's "prestigious" academic circles, none of them were intelligent enough to foresee this; to foresee the importance of rare earths (gee you'd think the name 'rare earth' would be the beacon hitting them over the head). But also the seeing the importance of being sincere and steadfast with developing cleaner technologies.

All of this has reminded me that we cannot trust america to be any sort of 'leader', except in the field of making terribly crippling decisions for itself.

American democracy and economics are proving to be a resounding failure.

If everything here stated here pans out, then China, will still be a 3rd world country. Let's be generous and say 500 million live in a "middle class" (the number is 100's of millions less), that leaves 1.2 or so BILLION people in poverty.

Let's see, the world 2nd largest deposits are in California (then ones published, as many lands in this country are federally protected and what is under them is not published), and the mines are closed. So, if China holds back, the mines go back into business. The "rare" earth minerals aren't going anywhere.

Brazil, ahh, the lovely women of and in Brazil. The 33.3% import tax on EVERYTHING that is not made in Brazil. Shall America follow? I think America should impose a huge import tax, on everything not made here.

That $1200 dollar U.S. TV should cost $1599. You will see TV manufactures popping up everywhere. Production is extremely modular. It would do many countries well to impose import tariffs on countries that insist on dumping their products. There is nothing made anywhere on this planet that could not be made in the U.S. better. That statement could be made for many other countries, including the U.K.. This problem is with the elitist who sell out production for profit.

The notion that Asia is not doing the same thing is foolish, considering the abject poverty that most Asian people live in.

I wonder how China will deal with Islamic fundamentalism? It will be in their face real soon. Islam does not suffer atheists well at all, not even as well as Communism suffers Buddhism.

For you people waiting for America to collapse. Not yet.
Yes, China holds a lot of U.S. debt. What purpose would it serve China to destabilize the World when the vast majority of it's people are poor. President Hu's brilliant interview on GPS with Zakarias made it pretty clear.

Someone earlier mentioned Hiroshima. Yes, the U.S dropped bombs and now we have bombs that don't hurt property (Neutron). We also get most of our Oil from Canada, Mexico, Venezuela. The oil supply that the U.S protects is Europe's and I think it is high time Europe does it share, hopefully without starting WW3, as Europe is really good at starting world wars.

China has a long memory. Their Navy is a joke as is their air force. These will suffice to subjugate the people that they have their eyes on. They could never project what America can. The first shot is going across China's bow now as Congress starts it debates. A 33.3% tax on China would really hurt China (it would never be that high). There are many many countries that would love to fill the gap. It takes 2 to tango.

Oh, not so sorry to be the bearer of bad tidings for the china-philes but there's some information which pertains to things which has not been illustrated here previously. It is humorous this tiny needle in a haystack thread will go unnoticed by anyone who really matters but it will be fine for the gallery, still.

Comment #6 identified China's leadership being laden with trained engineers, at the expense of the "west". Well, consider the Chinese may have too few historians among their leadership because history shows us that when the "west" built up, during the 1800's, and 1900's, they acquired natural resources for pennies on the dollar compared to today's prices, and they acquired them from nearby distances relative to where their final end-use is concerned, compared to the logistical hurdles emerging economies today face... Simply, there are fewer resources to be had, they are vastly more expensive and difficult to access and China is staring down the barrel of one problem it will never, ever, escape: population. How can they fathom there are 15 times the resources the U.S. needed 100 years ago to service the growing needs of it's approaching 1.5 billion inhabitants? The U.S. built it's infrastructure with plentiful and cheap materials, the Chinese are paying through the nose for a dwindling supply. No wonder they've expended the efforts they have to secure far-flung stockpiles.

But now to the math portion of the history lesson: There is not enough money in existence to fund any notion of China's aspirations as far as industrial development is concerned. Sure, they are the asian tiger of the day, but in twenty years when the oil is gone, the iron is 100 times even more expensive, and global food production lags well behind consumption, what will the Chinese do, then? Use rare-earth metals to feed themselves?

What will they drink? Does anyone believe there's enough fresh water available for the entirety of Asia, forever? Just when will it begin to run out? Perhaps the "west" has used their historians to posit just this and decided rightly so the rare earth metals will be practically free for the taking in twenty years because fresh water will have a value anywhere between crude oil and gold. Where does 90% of the planet's fresh water reside? North America.

How can anyone believe China will trample on them when there will be 1.5 billion Indians to vie for the same resources? Of course they have a head start, but there will also be hundreds of millions of other hungry and thirsty mouths from across Asia and the western Pacific who will greatly offset China's clout, and compound China's quandry. Simply, three to four billion individuals concentrated in the most heavily polluted and over-populated areas of the planet add up to one thing and one thing only WITH the reality of dwindling natural resources over time.

There's not enough metal in the ground to build up for them what we enjoy and take for granted today, there's also not enough land to grow food on or fresh water to be had, so, today's Asian tiger is a bit of a chimera, it's here now, but will vanish, yes, instead of being a permanent world fixture.

Now, given twenty, or even fifty years of innovation and possibly cooperation, the world will see a better outcome than the one described herein, but it would be ludicrous to assume the "west" will have no leading role!

There are so many possible paths here. My guess is that new technologies will spare us some of the worst of the predicted pain, and just as likely unforeseen challenges will crop up to change our focus again. On nuclear and battery power, there seem to be developments at the macro and micro levels that are nearly ready for prime time. I believe I read here last year of a tiny cell that will run for a hundred years producing a small but usable current from a chip of a radioactive metal much smaller than that in your home smoke detector. On the other end of that scale is the nuclear power plant - perhaps decades away from a totally safe design, but coming along in that direction. Now the challenge is to extend this to the midrange of portable power from the cellphone to the car/bus/train level. I'm not saying nuclear is the only way to go, but that tiny battery story did give me hope that a game-changer is still possible.