Political analysts and historians realized that world politics is entering a new phase. They have not hesitated to proliferate visions of what will be the end of history, the return of traditional rivalries between nation states, and the decline of the nation state from the conflicting pulls of tribalism and globalism, among others.
In his famous and controversial book “Clash of Civilizations”, Samuel Huntington hypothesised that the fundamental source of conflict in this new world will not be primarily ideological or primarily economic. The great divisions among humankind and the dominating source of conflict will be cultural. He noted that nation states will remain the most powerful actors in world affairs, but the principal conflicts of global politics will occur between nations and groups of different civilizations.
Samuel Huntington’s “Clash of Civilizations” is considered one of the foundation texts of our time, given its appearance in the decade prior to the destruction of the World Trade Center towers in September 2001. But Huntington’s focus on “the West” and “Islam” has done little to illuminate an even more fundamental and far-reaching clash, the one pitching the waning fossil fuel civilization against the waxing civilization based on renewables and resource-efficiency.
The evidence for this “civilizational clash” clear in terms of the struggle of the renewables industries to be born and prosper, while the fossil fuel industries along with the companies, subsidies, regulations and laws that uphold their privileges refuse to leave the field. China and the United States represent the polar extremes in this clash, with China acting to build renewable energy industries. It is racing ahead as fast as is physically possible in order to ensure energy security, even as it builds a coal- and nuclear-fired thermal energy system. The United States, in contrast, is focusing on innovation, while Congressional leaders are subject to heavy fossil fuel lobbying and act to delay the transition to renewables.
Several American economists indicated that the clash is heating up in the current spat over trade in solar photovoltaic modules, where the United States now, and potentially the European Union as well, is leveling countervailing tariffs on Chinese solar equipment imports into the United States. This move is inviting tit-for-tat retaliation by China against United States energy exports where the United States currently runs a strong trade surplus with China. The dispute even threatens an all-out trade war.
According to Matthew Stepp, an American energy specialist, this is actually a clash of civilizations becomes evident when examined the ideological support for each side’s position in this dispute. China is supporting its policies to promote its solar industry at home, and for companies that then export their product, on the grounds that it is a developing industry that needs support in order to become established in the face of incumbent intransigence. It is a market-oriented strategy that is proving to be extremely effective. The United States, by contrast, is ideologically promoting a transition away from fossil fuels through support for innovation and creative destruction.
In its first term, the Obama Administration promoted renewables against fossil fuel incumbents through tax credits and loan guarantees, sometimes at very high levels. This policy was aimed at offering strong support for a few chosen recipients to help them bring new versions of existing products to market. Where things become interesting is on the ideology-based flanking moves undertaken by Washington-based think tanks in support of the United States position. It conveniently labels the two sides in this clash as “innovation” which is the United States approach, on the one hand and “green mercantilism” which is China’s approach, on the other . Innovation is “good” and green mercantilism is “bad.”
As Washington Post reported in August this year, many think-tanks have taken sides in the current trade dispute, arguing that the United States Department of Commerce and a coalition of companies led by SolarWorld urging it forward are simply trying to enforce the rules of global competition, while the green mercantilists are threatening the survival of the rest of the industry.
A number of American energy analyst argued that the problem with this position is that it ignores the reasons for China’s success. Chinese firms are not “dumping” products on the rest of the world, but are benefiting from the cost advantages they have reaped through scaling up production. According to them, this is a time-honored approach to reducing costs and enlarging the market, perfected in the United States ever since it was applied so effectively by Henry Ford to the luxury automotive market at the time.
In the solar race, United States firms are in difficulties not because of Chinese dumping, but because their market in the United States was not allowed to expand fast enough, thanks to Congressional hostility linked to fossil fuel lobbying. The American slowness to diffuse renewable energies does not so much reflect a lack of innovation as a plethora of regulatory and institutional blockages. In China, by contrast, there is strong focus on building a national smart grid as counterpart to policies promoting renewables. This is not just a “fast follower” technology strategy, but one where China intends to take the lead through development of new standards and their promotion through domestic market creation.
The European giant, Germany finds itself mid-way between the United States and China in this clash, making it a somewhat reluctant party to the EU-initiated trade dispute over solar panels. Germany has been promoting renewables through a policy targeted at market expansion mainly in the form of the very successful feed-in tariff policies, which encourage independent power producers. But this carries cost burdens for consumers that appear to have hit their ceiling in Germany.
Mercantilist or not, China’s approach to highly-focused building of new export-oriented industries and expanding the markets for their products to drive down costs is winning. The United States-led approach that focuses exclusively on innovation and creative destruction as drivers of market transformation is too slow. As Matthew Stepp adamantly argued, most painful for the United States perhaps is recognition of the fact that its traditional advantages over other Western economies in the global era have been transferred to China.
According to him, all of this is good news for developing countries around the world, in that they are provided with an alternative to fossil-fuelled industrialization. It is also good news for entrepreneurial innovators in the EU and Japan, who can take advantage of the lower costs to fashion new business models. And it is good news for our industrial civilization, which has to de-carbonize rapidly if it is to have any hope of a future.