Not an Optimistic View

John Mauldin's report from an economic conference in Texas doesn't leave much room for optimism, with its first point being as follows:

John Hofmeister is the former president of Shell Oil and now CEO of the public-policy group Citizens for Affordable Energy. He paints a very stark (even bleak, as he gets further into the speech) picture of the future of energy production in the US unless we change our current policies. First, because of the aftereffects of the moratorium. It is his belief that the drilling moratorium will effectively still be in place until at least the middle of 2012. There won't even be new rules until the end of 2011, and then the lawsuits start.

Gulf oil production will be down by up to 1 million barrels a day. Imported oil is now 67% of oil usage but will go to 75% by 2012. He thinks crude oil will be up to $125 and gasoline between $4-$5 at the pump. And it will only get worse.

Granted, Hofmeister is an insider, but the central difficulty he describes is a critical one. America's political polarization has made it difficult for the energy industry to advance, amidst regulations that shift regularly, depending who's in power. Moreover, the relentless growth of government has led to 13 energy regulation agencies and 22 congressional committees with a hand in oversight.

Mauldin goes on to review dark prognostications in employment and housing, but an interesting question of political philosophy emerges when the conference turns to questions of China:

Among the societies we describe as democratic capitalist there are vast differences in the bargains and hence in the nature of economic activity. America tolerates levels of instability, crime, inequality and pernicious religious zealotry that Europeans and Japanese consider absurd, but it gets in return a much more dynamic entrepreneurial system of wealth creation. Japanese willingly accept levels of social conformity that Westerners consider bizarre, but achieves a high level of social stability and tremendous success in economic areas (such as high precision manufacturing), where self-disciplined social cohesion is a plus.

China, like all societies, is working out its bargain. It is still very much a work in progress but the process is dynamic, not static.

Mauldin's description of the return for America's bargain is far too limited. Dynamic entrepreneurialism is, after all, a subset of broad freedom and has its variations in other social realms than business — religion, science, art, and on and on. Unfortunately, for some of the same reasons that energy is set to become much more expensive, we're drifting away from our heritage, in that respect.