Honoring the vitality of America’s private sector
The docket of whoever wins today’s presidential election will quickly fill up with unsolicited advice, so I’ll get mine in preemptively: When the White House decides on the next set of recipients for the Presidential Medal of Freedom – the nation’s highest civilian award – George P. Mitchell* and Elon Musk deserve to be on the roster. Amid astounding prophecies of how China is set to rule the world (here and here), they exemplify Alexis de Tocqueville’s classic observation that “Boldness of enterprise is the foremost cause of [America’s] rapid progress, its strength and its greatness.”
Established in 1963 by President Kennedy, the award recognizes individuals who have made “an especially meritorious contribution to the security or national interests of the United States, world peace, cultural or other significant public or private endeavors.” Presidents have tended to devalue the honor by giving it as a sort of commemorative badge to outgoing officials of their administrations. But the upcoming selection offers an opportunity to underscore how America’s strategic prospects are being revived by the dynamism of its private sector.
More than any other person, Mr. Mitchell is responsible for the marked surge in domestic oil and natural gas production that has transformed the country’s energy outlook over the past five years and promises to fuel an economic renaissance. The 93-year old wildcatting entrepreneur played a singular role in perfecting the hydraulic fracturing techniques (“fracking”) that have unlocked gas and oil deposits previously thought inaccessible within tightly-packed shale rock beds that underlie large sections of the United States. Due to this new-found energy bonanza, America has become a net exporter of petroleum products for the first time since the Truman administration.
As a recent article in the Wall Street Journal notes, Mitchell’s “refusal to accept failure when testing unconventional tactics to extract natural gas from rock formations eventually paid off, revolutionizing the American energy industry.” The Economist magazine also lauds his exceptional contribution, writing that “Mr. Mitchell spent ten years and $6m to crack the problem (surely the best-spent development money in the history of gas). Everyone, he said, told him he was just wasting his time and money.” A recent piece on Slate compares Mitchell to J. Robert Oppenheimer, the physicist who played a key role in the U.S. development of the atomic bomb. The energy entrepreneur, the piece notes, turned the idea of extracting natural gas from shale rock “from a technological pipe dream to very real economic powerhouse.” A business columnist for The Telegraph newspaper in London calls the shale energy revolution “a magnificent feat of engineering and panache, a perfect example of why one should never write off the US.”
Previous posts (here and here) have outlined the revolution’s far-reaching economic and geopolitical ramifications. Since then, other analysts have amplified these points (including an op-ed Mitchell jointly authored with New York City mayor Michael Bloomberg) and offered a few more worth pondering.
Here are some quick updates:
First, the superabundance of domestically-produced natural gas has lead to dramatically lower energy costs. One new study estimates that the effects of this windfall contributed more than $100 billion to the U.S. economy in 2010, while a UBS report forecasts that energy savings will add 0.5 percentage points to real GDP. A study released last month by the IHS Cera consultancy estimates that the energy boom has created over 1.7 million jobs in the past few years and could add 1.3 million more by the end of this decade. It also concludes that surging energy production will increase federal and state tax receipts by $62 billion this year, as well as shave off about $175 billion from the country’s bill for oil and natural gas imports.
Two new forecasts by PricewaterhouseCoopers (here and here) argue that lower energy costs are helping to shore up the competitive position of the U.S. manufacturing sector. A report by the Boston Consulting Group reaches the same conclusion, predicting an industrial resurgence that could generate 2.5 million to 5 million new jobs by 2020 as well as boost manufacturing exports by an extra $130 billion. Similarly, the Wall Street Journal observes how the energy boom’s knock-on effects are reviving economic hopes in former steel towns in Pennsylvania that are located near the gas-rich Marcellus shale formation.
Peering beyond the nation’s shores, both an op-ed piece by John Deutch, a former CIA director and Deputy Secretary of Defense, and an article in the Financial Times underscore how America’s oil and gas revolution is transforming energy dynamics around the world, including shifting market power away from the OPEC cartel and Russia. Other speculate (here and here) that greater energy self-sufficiency, combined with a growing fatigue with the Muslim world, will result in a general U.S. retrenchment from the Middle East. And with the United States now looking like it will become a major exporter of natural gas in the years ahead, some argue (here and here) that it now has real leverage to extract important trade concessions from such energy-dependent countries like Japan, South Korea and India as well as in Europe.
My second candidate for presidential honors is Mr. Musk, the entrepreneurial wunderkind and technological virtuoso who has inaugurated a new era in space flight. Co-founder of PayPal, the world’s largest internet payment system, he is now the driving force behind two cutting-edge ventures: Tesla Motors, a Silicon Valley-based electric car company that has started to wow the automotive world (here, here and here); and the Space Exploration Technologies Corporation (popularly known as SpaceX), which two years ago became the first private company to launch and return a spacecraft from orbit. Over the past few months, SpaceX has begun carrying supplies to and from the International Space Station (here and here), filling the void left by cutbacks in the U.S. manned-space program and demonstrating a capability to do what no national government currently can do: deliver and bring back to Earth significant amounts of cargo from orbital platforms.
Musk’s triumphs are matched by gargantuan ambitions, so much so that he is the central exhibit in a recent New York Times column about how economic prosperity is driven by a handful of individuals with outsize personalities who continually push the limits of what is possible. A profile in Bloomberg BusinessWeek reports that his friends and colleagues “describe him as Steve Jobs, John D. Rockefeller and Howard Hughes rolled into one.” He also is the inspiration for the character of genius billionaire/superhero Tony Stark in the Iron Man movie series and indeed had a cameo appearance in Iron Man 2.
The SpaceX example illuminates a strategic trend that underscores America’s staying power but which tends to get lost in the adulation about China’s state-centric brand of economic management: How private-sector dynamism is supplementing and in some cases supplanting governmental efforts to push forward the frontiers of science, technology and imagination.
Beyond just hauling around cargo, SpaceX, along with another start-up called Blue Origin and run by Amazon.com co-founder Jeff Bezos, is in the running for NASA contracts to send humans into space. A new company, called Planetary Resources, has announced plans to extract minerals from asteroids. Co-founded by Peter Diamandis, the impresario behind the X Prize, the firm has received investment capital from Google executive chairman Eric Schmidt and co-founder Larry Page, as well as James Cameron, the Hollywood director and explorer.
Cameron is also busy in the ocean’s deepest recesses. His solo journey to the bottom of the Mariana Trench three months ago, in a submersible designed by himself and financed by private groups, accomplished a feat that none of the world’s governments can duplicate at present. Other private deep-sea expeditions are also in the works, including vessels financed by Eric Schmidt and swashbuckling entrepreneur Richard Branson.
There is no question that the global order is being reshaped by Asia’s economic rise, with China in the lead. But the prognosticators of American decline have focused too much on the quality of governmental decision-making in Beijing while overlooking the vitality of the U.S. private sector. It is here where America’s continued strategic resiliency resides. The next president would do well to drive home this point by honoring Mitchell and Musk.
A final note: Both Mitchell (born in Texas of Greek immigrant parents) and Musk (who arrived from South Africa via Canada) underscore the necessity of far-sighted immigration policies. Given the crucial role played by immigrant innovators in fueling economic vitality throughout the nation’s history – and most recently in Silicon Valley – resurrecting the Startup Act 2.0 should be a priority on the next White House’s to-do list.
*Not be confused with George J. Mitchell, the former U.S. Senate majority leader and U.S. emissary to peace negotiations on Northern Ireland and the Israel-Palestinian conflict, who by the way received the award in 1999.