Carpe Diem

Dow, Alcoa for ‘rent-seekers/protectionists of the year’ award

As I reported yesterday, a newly-formed organization called America’s Energy AdvantageMaintaining America’s Energy (Natural Gas) Advantage for Some Big Private Chemical and Steel Companies” is a group of U.S. manufacturers and chemical companies that want to restrict the ability of U.S. oil and gas companies to export natural gas. In classic rent-seeking/protectionist behavior, U.S. companies like Dow Chemical and Alcoa are devoting resources to influence public opinion and the political process, partly by suggesting that they are concerned about issues like national energy security and the public interest. But public choice theory helps explain that these companies are really trying to use the power of the government to protect or increase their profits, which will be greatly enhanced if they can use the coercive force of the federal government to prevent or restrict the ability of private energy companies to sell their products (natural gas) overseas.

Some companies engage in rent-seeking to secure protection against foreign competition by restricting imports and thereby raise profits, and other companies like Dow and Alcoa attempt to increase profits by restricting exports, in this case for one of their key inputs – natural gas.

And here are some interesting facts that help expose the hypocrisy of the protectionist strategy of Dow Chemical and Alcoa:

According to United Nations data on the world’s 100 largest transnational corporations, almost 68% of Dow Chemical’s $60 billion in global sales in 2011 were outside the U.S., and Alcoa’s sales outside the U.S. represented more than half of its $25 billion in global sales in 2011.

So here in a stunning display of hypocrisy, you have two U.S. companies that both depend on foreign markets for more than half of their sales (and in the case of Dow, more than 2/3 of its sales), and yet both of these transnational companies are attempting to place restrictions on the ability of other U.S. companies to take advantage of the same global markets that are providing them with significant sales and profits.

For their shameless rent-seeking attempts to use the political process to restrict U.S. oil and gas companies’ access to foreign markets and in the process protect or increase their profits, I hereby nominate Dow Chemical and Alcoa for the “Rent-Seekers/Protectionists of the Year” awards.

4 thoughts on “Dow, Alcoa for ‘rent-seekers/protectionists of the year’ award

  1. This is a fascinating issue.

    Let’s see—prevent natural gas exports to hold down the price of a commodity that is giving American industry a boost.

    Tricky.

    Of course, since the dollar is an international reserve currency and we just print money and give it to foreigners who give us back real goods and services….

    Might be better to keep the natural gas here, and keep trading paper money for real goods and services for as long as we can get away with it…..

  2. This is what is known as “chutzpah” or more commonly,
    “a big pair of stones.”

    Here we have a “think tank,” whose sole purpose is promote the business interests of it’s benefactors and paymasters, complaining about OTHER industries doing the same thing by putting up another sham “research” group.

    Great. Someone should form a think tank to study the complete obliteration of intellectual honesty in American public affairs. I’ll write THEM a check.

    • It started in 1789, and began accelerating rapidly with the passage of the Sixteenth and Seventeenth Amendments, and the election of Woodrow Wilson; shifted into overdrive with the election of St Franklin of Roosevelt; and into hyperdrive with the failure of The Divine Prophet Algore I to win his home State of Tennessee in 2000.

      Where’s my check?

  3. America’s new-found gas advantage is radically shifting global energy dynamics with tremendous potential benefits for U.S. manufacturing, including Alcoa’s network of aluminum smelting and fabricating plants and 24,000 U.S. employees. We understand that exports of LNG will be a growing part of the energy market in the US and in fact believe in many cases – particularly where gas is “stranded” because of a lack of ready markets – that is the best use of the resource. But Alcoa joined America’s Energy Advantage because we want gas export decisions made with full understanding of the impact on U.S. manufacturing and American workers.

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