Rare Earth Metals: A Testament to China's Economic Power
Rare earth metals are allegedly in short supply and threaten our way of life. But unfortunately, the only time they seem to pop on our radar screen is when America and China throw diplomatic barbs at each other. Those inevitable collisions between superpowers unearth an unavoidable reality check: The entire globe is very dependent on China to get these essential metals, minerals or elements, depending on what terminology you use.
These 17 metals, which appear to be the real-life incarnation of the fictional unobtainium, are an essential component in the nifty gadgets you and I take for granted, like cell phones, wireless earbuds and the Internet of Things (IoT). But, even more critically, we need them for the electrification of our economy and national defense.
As it stands, China has explored flexing its muscles and wreaking havoc on the supply chains that support the production of necessary military hardware like F-35s. Over the past 20 years, China has come to control 80 percent of the world’s supply and has repeatedly reminded global industrial powers of their market power.
These elements are plentiful in the Earth’s crust. Still, they’re widely dispersed and require an intense and environmentally damaging process to be commercialized. China positioned itself for dominance over rare earth metals because they don’t have the same standards that most developed countries enjoy. Add in Chinese state subsidies, and these factors all but annihilated our homegrown rare earth metal production in the West.
Even now, the only rare earth mine in America in the California desert ships its product to China for final processing. Our dependence is dangerous as China’s monopolistic dominance threatens to derail our plans for an independent eco-friendly economy.
Our current situation sounds remarkably like when cheap Chinese imports destroyed our nascent domestic solar industry. It seems we never learn our lesson when it comes to national security and cheap Chinese manufacturing.
As politicians such as President Biden extoll a green economy, they might want to reconsider the promises they’re making. Supply constraints and dependency on China will continue without a radical overhaul of the way we currently source rare earth metals. Fortunately, a few initiatives are underway to develop domestic and overseas production of rare earth metals in friendly countries such as Australia.
Still, the artificial scarcity of rare earth metals—which I mentioned earlier are not rare at all—is more a symptom of the problem than the actual problem. The real problem is the total hollowing out of our domestic industrial base in the name of efficiency. Corporate America’s obsession with short-term profitability has made our supply chains very weak, as you’re probably painfully reminded of every time you make an important purchase in today’s world.
The past decisions that allegedly led to cost savings are wreaking havoc on American business. Decades of rosy quarterly reports created an industry supply chain nightmare that companies, governments and citizens worldwide are paying for dearly.
Innovation and creativity are lacking in the rare earth metals business, as a new, more eco-friendly process could completely disrupt the market. Instead, we continually export our pollution elsewhere and do not work toward a solution. What was supposed to be someone else’s problem is now a serious dilemma for America’s, and its allies’, future.
Still, the most important takeaway from the rare earth metals debacle is the behavior we see from China repeatedly, and somehow we never learn to adjust our policy and business practices. China is in it to win it, and they don’t care about the free market or environmental protection. They are more concerned about being the world’s global superpower, and they’re willing to do anything to get there.
Here in America, we’re busy arguing about nonsense and put our heads in the sand about the real environmental cost of modern life. However, American ingenuity can fix this problem, and strategic public policy that cuts bureaucratic red tape can help us further develop our own supply chains. Make no mistake—rare earth metals are only rare because we fell asleep at the wheel in our corporate boardrooms and Washington.
David Grasso is the host of the Follow the Profit Podcast, where he shares simple ideas for financial success and lessons learned the hard way. He is also the CEO of Bold TV, Inc, a nonprofit media company dedicated to entrepreneurship and millennial economic empowerment.