ECONOMIC GROWTH and technological innovation are directly related to the availability of low-cost electricity. Each percentage increase in real GDP between 1970 and 2000 has resulted in a 1 percent rise in demand for electricity. Not surprisingly, the price of electricity is one of the determinants of the competitiveness of industries, with the U.S. enjoying lower costs per kilowatt hour than, for example, Germany, Spain or the U.K. Coal currently supplies 51 percent of America‘s electricity, and because the U.S. has 250 years of proven reserves-more than the oil reserves of Saudi Arabia-coal will be used for some time. The problem is that as a fossil fuel, burning coal contributes to greenhouse gases that affect climate change.
Nuclear power, which supplies 20 percent of the U.S.‘s electric power, is safe, reliable and free of carbon emissions. Yet it has been over 30 years since a nuclear power plant has been built. We’ve let the fears of 30 years and an endless squabble over waste storage make it almost impossible to build new plants. In New York State, for example, power demand is up more than 12 percent since 1993, while generating capacity is up only 2.6 percent. The state has built no power plants since 1994, and the one nuclear facility in the southern part of the state is the target of environmental jihadists, who want to replace it with solar and wind.
Sources such as solar and wind are intermittent and unreliable and cannot replace reliable base load sources such as hydro, fossil and nuclear. Yet many of our feckless politicians and folks in the environmental movement and in media say we can do without nuclear power. But as time goes on the logic has to emerge. It is not logical to assert that climate change is the most important issue of our time and that reducing fossil fuel usage is the principal aim and then thwart the very technology that best accomplishes that. From France to Finland, other countries around the world have concluded that there is at present no other technology that offsets as much carbon emissions as nuclear. It’s time we did as well.
The Long View
TURMOIL IN THE CREDIT MARKETS coupled with the implosion of housing has triggered a precipitous contraction of liquidity and concerns that a recession is upon us. Chief Executive’s own CEO Confidence Index showed the largest one-month drop in August since we began tracking sentiment in October 2002. Yet having endured six financial meltdowns since Penn Central’s demise in 1970, we should keep a perspective. A lack of liquidity in mortgage securities may depress housing prices further, but the impact may not be so severe as to force the economy into recession. Job growth has been positive, with even a modest decline in the unemployment rate. In prior housing downturns, the jobless rate peaked by 3 percentage points in the 1980s and 2.2 percentage points in the 1990s.
In addition, most analysts are sanguine about continued growth in the world economy. Given that the market capitalization of the U.S. stock market is almost $14 trillion, larger than most other markets combined, wealth in stocks is still rising as real estate falls. Our CEO Index also reveals that many CEOs still feel their businesses and many areas of the economy are fundamentally sound. Almost 46 percent of those responding said that the financial performance of their own companies increased their confidence this month, and an additional 13 percent said that it “significantly” increased their confidence. Tighter credit will force some sectors of the economy to hit an air pocket, but market turbulence also creates opportunity.