Foreign Policy’s normally pretty good China Brief has this bit of magical thinking about markets today:
But clashing economic and governmental incentives, not generator capacity, are causing the problems [with China’s electricity supply]. Fifty-six percent of China’s power comes from coal, and thermal coal prices have more than doubled around the world after the initial shock of the pandemic. . . . In most countries, these prices would be passed on to consumers, but Beijing tightly limits the maximum price of electricity—causing generators to reduce their supply or shut down rather than lose money.Palmer J., China Faces an Electricity Crisis. Foreign Policy. September 30, 2021.
Um, if there’s not enough low-cost electricity capacity in China then there’s not enough low-cost electricity capacity in China. Raising prices won’t make the blackouts stop, unless you happen to consider “blackout” too ugly a term to use for having your electricity cut off because you missed your payment. All raising prices will do is ensure that the rich get more of a limited electricity supply, and the poor less. But you don’t need to take my word for it. Just ask Texas.
It’s hard to believe that in 2021 Foreign Policy is still trying to teach China lessons about the virtues of unregulated markets. I mean, this is a country that went from nothing in 1980 to having an economy that’s 20% larger than ours today by purchasing power parity, nationwide blackouts due to the country’s resource poverty notwithstanding. It might be time for us to learn a thing or two from China about how to handle resource constraints equitably.
Or at least to put down our market fetish and actually study a bit of basic economics.