Capitalism is Back!

By: Anthony Watson

Capitalism is back and with it, the U.S. economy.

The Manuel H. Johnson Center for Political Economy (in conjunction with the Hall School of Journalism and Communication and the Sorrell College of Business) hosted Stephen Moore, an economist and journalist for the Wall Street Journal, yesterday in the Trojan Center Theatre at 2 p.m.

The title of his presentation was the “Comeback of Capitalism,” and during this he explained how the U.S. is poised for a great economic boom. All through one word: energy.

Moore said that despite economic downturns, raised debt ceilings and trillions of dollars of debt, oil will be the key ingredient in the soup of success, citing his recent visit to Williston, N.D.

“Williston, N.D. sits right atop of something called the Bakken shale,” he said. “The Bakken shale is the biggest energy find in North America in easily 50 years.”

According to Moore, this find would be useless without two key advances in drilling technology only the United States has the technology to produce.

“Now through an incredible new technology called horizontal drilling … drillers can now go two miles deep and then they can go two miles in any direction, like a spider web.”

Hydraulic fracturing, a system of using pressurized water, chemicals and sand to eat away at amorous rock formations guarding oil and natural gas deposits, aids horizontal drilling to deliver a one-two knockout punch for capturing this newly found energy, Moore said.

“To be against hydraulic fracturing is like being against a cure for cancer,” he said. “This technology has totally transformed our energy production.”

Moore said that this domestic oil find coupled with fracking and horizontal drilling, the U.S. is rolling in oil.

“As a result of these two technologies – horizontal drilling and hydraulic fracturing – we now have more oil in North Dakota than Saudi Arabia has oil,” he said. “The sum result of all of this is very simple: if we get our energy picture right and we continue to produce this technology, we now have the capacity in the U.S. within 10 to 15 years … (to) be an oil export country and not an oil import country.”

Approximately 75 to 80 percent of electricity is derived from coal and natural gas, while only roughly two and a half percent of U.S. energy comes from solar panels and wind turbines, he said.

“Anybody who thinks we’re going to be able to power our industrial society with windmills and solar paneling you’re living in a dream world,” Moore said, noting that even if green energy is quadrupled it will still only account for 10 percent of the energy consumption.

Moore said that although oil production, if managed correctly, is a driving force for the successful future of the United States, certain “fundamental trends” that determine the rise and falls of nations will undoubtedly play a role in a dominant U.S. economy.

Using a chart displaying the levels of the S&P 500 over the last 60 years, Moore showed several swings and dips in the economy and how they factored into policy decisions of U.S. presidents.

“This 14 year period from about 1968 to 1982 was the worst period of the U.S. economy since the great depression,” he said. “Over this whole period of time, adjusted for inflation, all financial assets in this country lost 60 percent of their value. A 60 percent reduction of all assets is the exact definition of what we call the bear market in the U.S.”

Moore said that the combination of presidents Johnson, Nixon, Carter and Ford allowed the U.S. economy to dip into an economic recession, but it all changed when the policies of Ronald Reagan were allowed to grow.

“Policy doesn’t matter a little bit, it matters a whole heck of a lot,” Moore said. “If you look at what happens in the middle of the 1980s, you’ll see that the economy goes through this incredible boom period over a 20 year period.”

Moore praised two policies in particular: a reduction in tax rates and a reduction in inflation.

“1982 to 2000 was the greatest period of prosperity in the history of the world,” he said. “No country ever in the history of civilization has ever lived through a period of wealth creation, prosperity and innovation as the United States did over this period. In 1980 the value of all our assets … was estimated to be over $18 trillion, fast forward to the year 2000 … it was $60 trillion.”

Moore said this then gave way to “the lost decade” of the year 2000 until 2012.

“Over this period, the economy is lower in stock market values and employment today than it was 12 years ago,” he said, noting that the dotcom and housing bubbles as major factors.

Moore said that government intrusion in education and healthcare has allowed for growing costs in these fields, yet he points to the free market economy that allows computer companies, apparel companies and car companies to provide cheaper and better products over time.

“The question you all have to ask yourself as Americans, especially your generation is simply this: what country over the next 10, 20, 50 years is going to be the global economic superpower,” he asked. “For the first time we have China biting at our heels, and they think they’re going to overtake us. We as a nation have to get serious about competitors … whatever you’re going to do, be the best at it. I truly believe that the best is yet to come (for the United States).”