New economy shivers in dark . . . Old economy rides to rescue

If a picture is worth a thousand words, then the image of technology whiz-kids and their billionaire bosses shivering and staring at blank computer screens in California’s Silicon Valley speaks volumes about the neglect of the so-called “old economy” by most American politicians.

Bill Clinton and Al Gore prattled endlessly about building a bridge to the next century but forgot about the nuts and bolts and energy needed to support such a structure. The design flaws were such that Clinton was left hanging over troubled waters while Gore sank in electoral defeat.

The high-tech gurus who saw no physical limits and no growth constraints in their New Age Utopia are getting a comeuppance too. Diesel backup generators are selling like hotcakes in Silicon Valley, and the experts never saw that one coming. Too little knowledge in a knowledge-based economy really is a dangerous thing.

To his credit, then-governor George W. Bush was ringing the warning bell even before the rolling blackouts and high energy prices began making a mockery of Gore’s dream of prosperity without nasty mines, oil wells, power plants and hydroelectric dams. During the election campaign, Bush accused his rival of “being consistently hostile to America’s existing sources of power.” No falsehood there. Gore’s disdain for extractive industries is no secret; he once described the internal combustion engine as “a mortal threat to the security of every nation that is more deadly than that of any military enemy we’re ever again likely to confront.” As for power dams, he was mulling proposals to tear them down, not build more.

To be fair, the energy problems in California and elsewhere cannot be blamed solely on environmental hang-ups, such as the not-in-my-backyard syndrome. Factors beyond insufficient generating capacity were at work, including perverse incentives in a half-regulated market and a shortage of capital for new investment.

The financial community had little or no interest in traditional energy projects, or even non-traditional ones, for that matter. It was too busy throwing billions at technology ventures and valuing them at dizzying multiples over blue-chip traditional businesses. It didn’t matter if the companies had no profits, products or assets. A sexy growth story mattered more. Not proven growth — that was judged boring — but probable and possible growth . . . even potential growth. After all, there were no physical limits and growth constraints in the New Economy’s Garden of Giddy Enchantment.

No one believes such nonsense now. As Bush reminded the nation during his election campaign, America’s real economy runs on oil and gas, coal, and the power generated from dams. He reminded Americans that the Internet consumes almost 10% of the electricity produced in the U.S., half of which comes from the burning of coal, and about 15% from natural gas. He reminded them that the nation uses about 20 billion barrels of oil each day, and the need only grows. And he reminded them that each of the three recessions of the past generation was tied to an energy shock.

Unlike his predecessor, who was caught napping on the energy front, Bush intends to waste no time enacting a bold and far-reaching national energy policy that reduces America’s reliance on foreign sources. He has promised to encourage energy exploration and production at home, and in non-OPEC nations, but without compromising high environmental standards. He has pledged US$2 billion over the next decade to fund research into “clean coal” technology, plus funds to help develop renewable sources of energy. He has promised to streamline the regulatory process for new energy projects and to expand refining capacity. And he intends to reach out to Canada and Mexico to develop a North American energy policy based on the free flow of energy across borders.

It’s nice to have adults in the White House again.