The panic was that the situation would cause drastic harm, not that it wasn't a real issue. The fact that they fixed the problem is exactly the reason why it was overblown. (according to the article, anyways).
With (e.g.) the Y2K example, things were fixed due to massive amounts of money invested in fixing the problem. If every says "Y2K wasn't a big issue, we really shouldn't invest in fixing the next problem" that will cause issues down the road...
It wasn't overblown. You should see some of the systems large businesses use. Marriott still uses green screen terminals, for example, others use mainframes. ATMs often run archaic versions of Windows CE. If all air carriers shutdown because their archaic systems couldn't have handled the change over, then it would have been a disaster. It wasn't because it made news and everyone knew about it and remedied the systems. Clueless people sitting in front of modern mac books running modern OSes have no clue.
Mate, I'm probably older than you. It was 90 % overblown nonsense. Countries like Russia spent pretty much zero 'fixing' it and had no issues. Meanwhile the US had 'Y2K consultants', shysters selling $20 'patches' to fix your windows install, breathless documentaries about how your toaster and VCR would explode, planes would drop from the sky, the financial system would collapse...
Yup. I personally patched an air traffic control system that would invariably crash because of Y2K - in other words without the patch, there was no ATC... Some people miss this - the only thing we were doing with that date was showing it onscreen. But someone had written code into a fixed length buffer, expecting the year to only be two digits long, and that year was calculated as (current-year - 1900), so when 2000 ticked around, boom! Buffer overflow, system crashes and you're screwed. It went from being a minor bug to being a system destroyer.
The problem was real, and even if the patch to fix it wasn't rocket science, it still took time to track down the problems. Much of the affected code was more than 20 years old, and no-one had looked at it or even compiled it in years. Bringing that code back to life to be able to insert a fix was no small issue that could be corrected in the middle of a crisis. Multiply that by all of the other potentially critical systems, such as power transmission, medical equipment, factory plant, and you're staring down the barrel of a potential disaster. I don't understand why some people today want to pretend that there wasn't ever a real problem for Y2K - I saw failing systems with my own eyes.
In many cases it was overblown. We were forced to upgrade to Y2K compatible versions of pretty much every OS and 3rd party software we used. We also had to show that we were taking it seriously which, effectively, meant showing we were spending a lot of money on it.
We spent about a week proving we weren't affected then spent about a year testing and shipping all the random upgrades. Ironically, the effect of all the change was much more risky than the original issue would have been even if we had been susceptible.
On the plus side, we ended up with the latest versions of tooling etc which we didn't usually get budget for but it had nothing directly to do with Y2K.
Spoken like somebody who wasn't pulling 16 hour days remediating crucial financial infrastructure in the months leading up to it.
The panic in that case was not overblown in the tech community (I tend to ignore the panic in the general media because that's always overblown). The non-event of y2k was an amazing accomplishment, and replies like yours demonstrate just how under-appreciated it is.
Yes, there's no national stranglehold, but it's an area of risk that nobody really seems to be aware of - it wouldn't take much to completely disrupt the global materials supply chain for the electronics industry.
Tantalum capacitors are only "trivial to substitute" in some applications; as someone who works in electronic hardware, I can assure you that it is often impossible to use any other part, and achieve the same performance.
Sorry, you're right - tant caps are irreplacable in some applications. I overcorrected on madaxe_again's assertation that tantalum used universally in electronics, when really the number of places that it's used, and couldn't be replaced if supply was cut off, isn't huge. That number certainly isn't zero though.
> Yes, there's no national stranglehold, but it's an area of risk that nobody really seems to be aware of - it wouldn't take much to completely disrupt the global materials supply chain for the electronics industry.
Sure, it could disrupt the electronics industry, but for how long? Haven't we just learned that even in the cases where we have few current producers of a rare earth, the market can fairly quickly adapt, and new producers appear. After all, that is exactly what the article in question is about.
Interestingly, this is partly because the very fear of few producers being a fragile constellation drives the price up, and the higher price entices more companies to starting mining rare earths, because they can make more money from it.
What can happen is that the fear of fragility in the supply chain of a certain rare earth, will cause speculators to buy futures contracts for the rare earth in question (because they think the rare earth in question will be worth more in the future, because of supply constriction). This drives up the price of the futures contract. Now other speculators can earn money by buying the rare earth in the spot market while simultaneously selling a futures contract. This arbitrage between the futures and spot market pushes up the price in the spot market and the price in the futures market down.
And when the price increase reaches the spot market, existing producers will start producing more and new producers will appear, thus alleviating the original concern: that the supply chain was too fragile.
Imagine if the Chinese were able to patent the process of mining and processing the rare metals. And bombarded everyone with frivolous lawsuits. Good thing these crazy scenarios don't happen.
> patent the process of mining and processing the rare metals
If they were to make big and non-obvious improvements that allow everyone to mine and/or process more efficiently, then that's exactly what patents are supposed to do: they get a temporary monopoly on those improvements in return for sharing them with the world.
But I have the feeling you're just spouting off a bit :-)
I suppose you don't agree with the phrase "standing on the shoulder of giants".
The fact that, through history, people create novelty & discovery without the "incentive" of ownership, invalidates the "need" for patents to provide an "incentive" of exclusivity.
Re: patents, those who own the capital also own the patents. It's simply a mechanism to control others by restricting who can use an idea originally developed by "standing on the shoulder of giants". So if you own lots of capital, patents allow you to control others. If you don't own lots of capital, patents are oppressive.
> The fact that, through history, people create novelty & discovery without the "incentive" of ownership, invalidates the "need" for patents to provide an "incentive" of exclusivity.
But are they creating at an optimal rate? Without patents, would they still create nearly as much stuff? It's a fascinating question. My view is that it's all a bit of a messy compromise, and neat, clean answers like "abolish patents" are probably a bad idea. I'd be in favor of some major reforms, and severely limit them in some fields.
We made lots of progress without the systems of capitalism and patents. I dare say that the progress before the systems of capitalism & patents was more sustainable (environmentally & humanely).
Much of the paradigm of economic scarcity is a false. Economic scarcity is a tool to enforce social order so those on top can control all of the resources. Capitalism needs scarcity for the profit motive. Farmers can't make as much profit if everybody has enough to eat and can receive food in a decentralized manner.
We can have abundance. Hunger does not need to exist. We already produce enough food. We already produce enough ideas & innovation. Humans naturally create. No coercive incentive is needed.
> clean answers like "abolish patents" are probably a bad idea
It's probably a good idea to decentralize power & control. Power corrupts after all.
Imagine if the Chinese were able to patent the process...
One of the big holes in our current system of patents is that they have inconsistent enforcement internationally. This is simultaneously a good and a bad thing.
Not that well. The main reason they were the sole supplier in the first place was because they sold rare earths at prices low enough to drive all the other suppliers out of business; because of the amount of time it took mines and smelters to start running again, that gave them several years of monopoly. Repeat that a few times and other companies will learn not to even try competing.
Can you point out to any practical examples where this has happened? The article in question demonstrates the market working well, I would say. Your hypothetical scenario goes against what we observed happen. I think it's reasonable to ask for an example or two in this case.
Personally, I don't think your scenario will play out in real life. Competitors will appear when it is profitable for them to appear. Sure, there's a start-up cost (as with most forms of business), and this cost must be included when calculating profitability. But that doesn't change the fact that they will appear when it's profitable, it only increases the profit margin required for a profitable investment.
Bottom line: a competitor will not appear until it can produce a commodity more cheaply than the market. And this is exactly what we want.
> Not long after China restricted exports, other countries quickly began producing their own rare earths — or finding ways to reduce their reliance on the metals. As a result, China's control of the market is much diminished today.
This reminds me of how Google Reader had near ubiquity in the RSS reader market, and as soon as they announced the shutdown 20 new RSS readers popped up.
I am not that familiar with the CFR. But it seems the article has been written by someone who is a member (or at leasy associated with it). Is anyone familiar with the CFR from an insider`s perspective? What biases should I expect when reading content from their web site?
Eugene Gholz is an Associate Professor who works primarily at the intersection of national security and economic policy. From 2010-2012, he served in the Pentagon as Senior Advisor to the Deputy Assistant Secretary of Defense for Manufacturing and Industrial Base Policy, where he led initiatives to better understand the complex defense supply chain and to apply that understanding in the budget process. He also focused on policy regarding reimbursement of industry's Independent Research and Development (IR&D) expenditures. Before working in the Pentagon, he directed the LBJ School's master’s program in global policy studies from 2007–10.
Dr. Gholz works on innovation, defense management, and U.S. foreign policy. He is the coauthor of two books: Buying Military Transformation: Technological Innovation and the Defense Industry, and U.S. Defense Politics: The Origins of Security Policy. His recent scholarship focuses on energy security. He previously taught at the University of Kentucky's Patterson School of Diplomacy and International Commerce. He is also a research affiliate of MIT's Security Studies Program, a member of the Council on Foreign Relations, and associate editor of the journal Security Studies. His PhD is from MIT."
So he seems to be the pretty standard international power academic.
As for the Council, what you can always expect is a globalized view biased towards big business interests. That's who started it, and that's who have run it ever since. It's essentially the non K-Street American government "mind lobbying" program for the international elite.
If you are still curious I would highly recommend research along the following lines. Paris Peace Conference, Woodrow Wilson and Edward House, and the Reece Committee.
Thanks, but I did read that bit from his paper (at the end of it). What troubles me is that it seems that the CFR is referred to a lot by some alternative news outlets (in not so glowing terms). Also it seems to try hard to portray itself to be a non-partisan think tank. I will look at the references you gave me, much appreciated ...
The USA has plenty, we just don't have the underpaid labor to mine it and actual regulations that make it more expensive to mine.
Ironically some of the best land for it in the USA is owned by Canadian corporations. Why are we selling something considered a national resource to foreign owners?
Because Canadians are easy to keep under control and the actual land containing the rare earth metals is in the US, which means that we can take it back if that ever becomes necessary.
You seem to be saying here that the USA isn't economically able to use certain natural resources but that these unprofitable resources should not be open to purchase on a free market by Canadian companies. That sounds a lot like a soviet style planned economy.
You don't have to be the USSR to manage at least substantial portions of a country's infrastructure and natural resources in a rational way, designed to maximize national welfare. It's a reasonably common way to operate in prosperous western democracies: Statoil (Norway), Hydro-Québec (Canada), DONG Energy (Denmark), Vattenfall (Sweden), Électricité de France (France), LKAB (Sweden), Deutsche Bahn (Germany), are all well-run state-owned companies, with no gulags in sight.
None of those countries ban companies from other countries they are at peace with from ownership of land containing mineral reserves, which is the policy that was suggested.
edit - one of the consequences of which would be foreign investors hiding the existence of useful minerals on any land they own and are using for something else, so it doesn't get taken away from them.
For minerals and energy, it's usually not done by restricting ownership of the land itself, but by retaining at least some mineral rights in state hands (or at least managed under a different legal regime). For example, the Norwegian state owns Norway's oil and gas reserves (originally outright, now via the partially privatized company Statoil). Anyone can buy land in Norway, but it doesn't come with ownership of oil/gas reserves.
Separating ownership of surface rights and mineral rights is fairly common in the U.S. as well, it's just that it's usually another private company that retains the mineral rights, not a publicly owned company. For example, the house I grew up in in Indiana did not come with ownership of mineral rights. The company that developed the subdivision sold us surface rights to the 1/4-acre lot our house was on, but retained the mineral rights underlying the entire subdivision (presumably just in case there turned out to be something there).
There is a massive difference between stopping all companies trading by enforcing national ownership of a resource and stopping foreigners trading resources that are legally on the market.
The question posed was not:
"Why are we selling something considered a national resource?"
It was:
"Why are we selling something considered a national resource to foreign owners?"
edit - also, I fully support mixed market economies with nationalised infrastructure, I think they seem to get more benevolent outcomes, but not with protectionist markets on the bits that are privately owned.
I agree with that, yeah (especially the last edit). I think the "national capitalism" approach, where things are privately owned but preferential access is given to important domestic corporations, often ends up mixing together the bad parts of public/private ownership rather than each of their good parts.
Rocks are passing by us all the time at distances comparable to the moon's orbit. Some of them are rich in rare metals. Some of them threaten the Earth itself. So let's deflect them onto the moon, noting the crash sites. This will (a) teach us how to defend the Earth, (b) create an incentive for mining companies to build a moon base, (c) increase the supply of rare metals.
The perspective is that humans can't be trusted with asteroid deflecting technology in case they use it to attack Earth.
But this ignores the fact that nature has already placed an asteroid out there with our name on it. Which will kill us if we don't do our duty and prevent it!
I was not surprised at the rise in production, I spent my college years driving by the old rare earth mine at Mountain Pass[1] but what really surprised me was that China totally blew it on this. They had a near monopoly on the production of rare earths, and if they had just moved the prices up slowly, I believe they would have captured far more value before it triggered a ramp up of external suppliers.
[1] Las Vegas to LA and back. Got out to look around once when the workings were basically abandoned but decided against it after seeing all the radiation warning signs :-)
China totally blew it on this. They had a near monopoly on the production of rare earths, and if they had just moved the prices up slowly, I believe they would have captured far more value before it triggered a ramp up of external suppliers.
I think this is a valuable observation with respect to how well the Chinese government works with regards to long term decisions.
> in the 1980s, China ramped up production massively, driving out competitors and cornering the market. (China could do this, in part, by going easy on environmental oversight of mining, which can be a horrifically dirty process.)
> When China decided to restrict exports in 2010, that drove prices up and suddenly made it profitable for other countries to start boosting their own production again.
This in an example where "free markets" cause major environmental issues.
If China wants to give us some free money for a while, I'm not too concerned. We can start these companies back up faster next time and anyone concerned with a temporary future price increase can either pay a premium to keep some of these companies going, or stockpile the metals.
The US steel industry would be fine if all the foreign steel producers raised their prices to try to screw us. The problem with US steel is that foreign steel is cheaper.
Much like how high enough oil prices mean processing oil shale and digging deeper/sideways start to make economic sense, which then prevents further price rise.
I guess I shouldn't be surprised that the mostly-American HN will upvote an article with such a blatant anti-Chinese bias. From the first sentence this article paints China as the "bad guy". China is not the only country that has used economic pressure to protect its interests.
Maybe some people feel this way, but you're assuming far too much. I don't want any country (including mine) to have a monopoly on any resource. At best, it enriches that country to no one else's benefit. At worst, it leaves room for threats to the world economy.
Sure, I trust China less than I trust Denmark (but I also trust Denmark more than the US), but that's not even the point.
Point taken. It was foolish of me to assume that HN users support the author's biases.
Still, I do not necessarily agree that China deserves much blame here. We should not expect any more from China than what we expect of other countries. That national export restrictions are motivated by selfishness and are harmful to the world economy is not in dispute. The point is that they are not the only country playing that game. On the world stage, everyone cashes in their unfair advantages, only paying attention to the WTO when it is profitable. Why should China abstain from manipulating supply to their benefit when other nations would not return that courtesy? If other world powers want China to play nice with exports, they will have to pay for it.
Does it matter if there's cheap minerals when a patent, exclusive licence agreement, or lack of adequate engineers blocks any possibility of making a competing product?
Raw materials are not the only resources that can be subject to monopolies. There is only one Gordon Ramsey, and he uses this monopoly to get asymmetric profit out of the horribly competitive restaurant market.
No, capitalism is a system wherein the means of production are privately owned and can be bought and sold. Capitalists can pursue anything they wish and still be capitalists, including monopolies, but usually they try to maximize their profits rather than their market share.
In a market with perfect competition there are no profits.
I hope you can see that that claim doesn't fit the observed evidence. Gas stations somehow generate enough profits to stay in business despite the fact that they're competing to sell something that's an indistinguishable commodity.
Now, in the special case where the marginal cost of production is very low and you're selling a commodity it is true that competition destroys profits. Like if there are two people selling txt files of The Prince neither is going to make much money (that's why we have copyright). But we're talking about rare earth minerals here and those have a substantial cost of production with a corresponding upward slowing supply curve and I assure you that the people mining minerals are making a profit without having a monopoly.
"a substantial cost of production" is often a barrier of entry exploited via a monopoly, whether in the form of superior patetended technology, exclusive production agreements, government subsidy, a distribution cartel, etc, etc.
Are gas stations making profit off the gas or is that often a lost leader for high margin snack sales? I've heard that stations make nothing off gas sales.
Copyright is a government supported distribution monopoly.
"Perfect competition" can only exist in the long term. In the short term, there are start up costs and new improvements. With perfect competition, if you are making a profit someone will come along and undercut you, but that takes time, capital, skill, and luck.
Exactly. In the short term you have some kind of monopoly. Maybe you have the only ice cream shop with a licence to sell booze, or a new supply restricted piece of equipment, or exclusive supply of a rare ingredient, famous partner, etc. product differentiation is at its best, a monopoly. All lasting businesses are built on monopolies.
China is the largest most repressive regime the world has ever seen.
The Chinese internet Firewall makes the NSA look like child's play.
I have been to Tibet. I have seen it with my own eyes.
I have heard about the concentration camps, the deaths from forced-sterilization operations, the disappearances.
I am outspoken about civil rights in America too. In China, not only would I not be a web developer, I would be dead.
I agree, but that is all outside the context of the article. The article specifically takes issue with China's export restrictions. I argue that limiting exports to produce political pressure is fair play, as it is not exclusively a tactic of the Chinese government.
No it wasn't. The panic caused changes that fixed the problem.
A self fulfilling prophecy in reverse if you will. Y2K was the same way - because of the panic people fixed things and there was no problem.