Wednesday, October 26, 2011

Desalting the Sea

Desalination has long been an interest of mine—entirely due to chance and personal history. My first assignment as an analyst at Midwest Research Institute, which actually marked my career as an analyst, was to write a report on that subject for a client. Back in those days half the people in the field still called it desalinization. The change in name had humorous aspects. It was the big joke at the first ever industry conference I attended. Yes, on this subject. Those were the days of Nikita Khrushchev—and a thaw in Russia. The name of the conference was changed at the last minute at the request of a Russian delegation; the Russians had requested it because the old word was too close to destalinization—which was too hot a topic in Russia. Or this is what the talk and snickers at the conference were all about…

Now today comes an interesting story in the New York Times. It’s about a $4 billion desalting plant built in Tianjin in China (quite near Beijing). The thrust of the story is that it costs the Chinese more to desalt the water than they receive for it—thus they are desalting at a loss. “In some places,” says the Times, “this would be economic lunacy. In China it is economic strategy.” This neatly summarizes the differences between worshippers of the Hidden Hand and users of the Human Hand. China subsidizes technologies with an eye on the future—while we bow heads praying to Adam Smith.

Some interesting factoids here. Some of these the Times includes. One is that the technology used by the Chinese is from Israel, entirely imported. It was just assembled in Tianjin. Another is that the project is owned and operated by a state-owned conglomerate called SDIC (State Development & Investment Corporation). What the Times omits is that SDIC is a rather sizeable venture with 2010 revenues of 64.6 billion renminbi ($10.3 billion). SDIC also achieved profits of RMB 6.8 ($1.07 billion). That’s a profit of 10.4 percent. Not bad, actually—and that includes whatever red ink the desalting operation spilled on SDIC’s books.

Someday third-world will come to mean countries that still hew to superstitions worship of old secular gods. If we don’t convert to the new secularism, we might become denizens of that third world ourselves.

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