Fueling a Competitive Economy

Joseph J. Romm and Amory B. Lovins

From Foreign Affairs, Winter 1992/93

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Summary:  A comprehensive plan to revive America's competitiveness comes from Rocky Mountain Institute - using energy efficiency to prime th economic pump, an industrial policy to guide fresh capital injections and environmental technology to create a cottage industry for the 21st century.

Joseph J. Romm, research scholar at Rocky Mountain Institute, Old Snowmass, Colo., is author of The Once and Future Superpower: How To Restore America's Economic, Energy, and Environmental Security. Amory B. Lovins, the Institute's Director of Research, consults widely on energy strategy for utilities, manufacturers and governments. This work was funded by I. G. Ventures and various foundations including Laucks and General Service.

Profiting from Energy

AMERICA’S ENERGY and economic policies remain tied to Cold War concepts of national security. For nearly fifty years all of America’s vast resources were directed toward one purpose: containing the Soviet threat of global communism. But the need for a military-oriented industrial strategy fell with the Berlin Wall; long subordinated economic, energy and environmental concerns have risen to the top of the national agenda. Integrating those elements with a refocused military strategy can create a coherent American approach to national and global security for the post-Cold War world: one that is not costly but profitable, and not centrally planned but market-oriented.

The most fruitful starting point for boosting America’s economy and reordering its priorities is energy. Wise energy policy creates both a healthier economy and healthier environment. But energy policy does not work in isolation. Only in combination with farsighted economic, environmental and military policies can it help secure America’s global position for the 21st century. Taken together, those interconnected policies constitute a new and comprehensive approach to U.S. security, defined in the broad sense of sustaining and improving the quality of life of Americans.

America remains an enormously wealthy nation. Reordering priorities and redirecting resources would be enough to ensure that a new national strategy does not require higher taxes for the vast majority of Americans. A coherent national approach combining energy, economic and environmental security creates higher-paying jobs and puts more money in the hands of consumers and businesses. Sensible energy policy reduces the civilian and military costs and the risks of importing foreign oil and frees up huge amounts of domestic capital. Sensible economic policy guides more of that capital, as well as some shifted from military restructuring, toward investments that enhance the nation’s long-term competitiveness. The two policies together reduce the costs of unsustainable resource depletion and environmental damage. The result, an "industrial ecosystem," would make America a more efficient and competitive manufacturer.

Harnessing the market to promote resource efficiency is the first step. Both energy and economic policy must share a least-cost, resource-efficient emphasis. America’s current subsidized supply?side focus exacerbates the causes of energy waste. That energy waste bleeds the economy: oil imports alone have accounted for nearly three-fourths of the U.S. trade deficit since 1970, or $1 trillion transferred to OPEC nations. For decades a persistent and fundamental misunderstanding of energy’s role in national security has needlessly distorted energy policies and diminished America’s security.

Decouple Supply and Consumption

THE CHEAP AND ABUNDANT resources that underlay America’s postwar economic success began to disappear in the 1970s. In the mid?1950s America extracted roughly half the world’s oil, twice as much as Middle Eastern and north African states. That surplus vanished by the 1960s, and by 1973 America imported 36 percent of its oil.

After the 1973 oil shock a supply cutoff was seen as a central threat to American security: a cutoff could raise prices and slash living standards; even its threat could give foreign powers leverage over U.S. decision?makers, constricting options ...

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