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PLA and the Free Market

by Greg Stevens

 

The Bankok Post reports that NatureWorks LLC, the world’s number one bioplastic company, has been in talks with potential partners to jointly invest in a large-scale bioplastic plant in Thailand worth about $400 million.

This would be only the second large-scale polylactic acid (PLA) plant ever built: the first opened in 2003 in Nebraska.  According to the article:

NatureWorks is currently in the process of selecting the location of the 150,000-tonne facility. Brazil is among the candidates while other potential locations are Thailand, Malaysia and Singapore…  Three basic factors in the final decision are local availability of raw materials including tapioca and sugarcane, markets of the product, and incentive programmes.

This is fantastic news, of course: one of the biggest obstacles to the wide-spread use of PLA is the price, and a big component of the price of PLA is the fact that there simple isn’t the same level of industrial infrastructure (such as manufacturing plants) that there is for regular plastics.

But in addition to the general “hurrah!” and promise of this article, one other thing caught my eye: “Three basic factors in the final decision are local availability of raw materials including tapioca and sugarcane, markets of the product, and incentive programmes.”

In the United States, President Obama gets a lot of criticism in some circles for wanting to spend money to incentivize green energy and green industry more generally.  Some people say that the government shouldn’t be trying to influence private businesses or the free market.

The problem with this mindset is that in other countries, the government is getting involved, is creating incentives for green businesses, and as a result these other countries could emerge as centers of leadership in important new industries.  According to recent reports, China is so dead set on incentivizing green industry that it is breaking international law to do so.  But their motivation is simple and obvious: the short-term cost of pouring government money into an infrastructure of green industry is easily outweighed by the long-term benefits of being the global leader in that industry.  The government is participating in the “free market” by making a very straight-forward market calculation.

And so is Natureworks, by the way.  They are also participating in the free market, and have calculated that they can maximize their profit and productivity by building their plants in locations where there are incentive programs to do so.  This isn’t very complicated, from a business perspective.

So from a purely “free market” perspective, it is important to realize that a mindset dedicated to “smaller governments” and “keep the government out of business” is also a mindset that will be crippling the United States’ ability to be a leader in the global Green Industry market.  Ultimately, it’s a decision that is bad for the “free market” and bad for the United States…. not to mention, bad for the environment.


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