In recent memory, the case for free markets has seldom been made as forcefully or as eloquently as it was this week by Larry Summers.
President Obama’s first director of the National Economic Council gave the introductory remarks Tuesday at a Brookings Institution event about crude oil exports. He delivered a tour de force that should make the Washington, D.C., policy community – and Summers’ former White House colleagues in particular – sit up and take notice.
Summers framed the export issue skillfully, issuing a clarion call to defend the country’s historic principles of free trade:
The question of whether the United States should have a substantially more permissive policy with respect to the export of crude oil and with respect to the export of natural gas is easy. The answer is affirmative. The merits are as clear as the merits with respect to any significant public policy issue that I have ever encountered.
He offered a history lesson to explain why the ban on crude oil exports was established in the first place. Summers noted it was instituted as a bulwark to support the price controls unwisely offered as a policy prescription in the early 1970s to address fears of oil scarcity.
But today is a very different time. The price controls on oil were scrapped decades ago. Meanwhile, abundance from America’s shale regions is the big story, not scarcity.
“The market is sending signals that it is desirable on free market grounds to export U.S. oil,” said Summers. “There’s nothing in the history of the establishment of the policy that gives any reason for believing that it is functional on a continuing basis today.”
More than that, he noted, the longstanding policy of the United States has been to encourage other nations to remove export controls on their own products:
On dozens if not hundreds of occasions the United States, at the World Bank and at the IMF, has voted in favor of programs that included conditionality where the conditionality stopped export controls with respect to raw materials that were motivated by helping domestic producers.
In other words, our nation’s current policies limiting energy exports are grossly at odds with what we preach to allies and trading partners around the world.
Summers further explained how the purported advantages of limiting exports of crude oil or liquefied natural gas are actually harmful, whether those policies are judged in terms of economics or the environment.
Given the low-growth doldrums in which our economy has been mired since the economic crisis, he argues, it makes no sense to deprive the country of the overwhelming economic and national security benefits that a number of experts – including Brookings’ Charles Ebinger and NERA Economic Consulting – have concluded would flow from liberalizing energy exports.
Summers strongly urged the president to take the steps necessary to remove restrictions on the export of oil and natural gas.
“There may be policies in different spheres that would have larger net benefits than repeal of the oil export ban.” But, he said, “I know of none that have as high a ratio of benefits to costs, because there are essentially no costs.”
It is an inspiring message from an importance voice in Washington. I encourage everyone to watch.
