THE COSTS AND BENEFITS OF THE SHALE GAS AND TIGHT OIL IN USA

The Shale Gas and Tight Oil Boom: U.S. States’ Economic Gains and Vulnerabilities

A CFR Energy Brief

COUNCIL ON FOREIGN RELATIONS (CFR)

Authors: Stephen P.A. Brown, Professor of Economics and Director of the Center for Business and Economic Research, University of Nevada, Las Vegas, and Mine K. Yucel, Senior Vice President and Director of Research, Federal Reserve Bank of Dallas

Introduction

U.S. policymakers have been concerned about the country's dependence on imported energy since World War II. Those concerns were highlighted in the 1970s when episodes of sharply rising oil prices led to recessions, economic stagnation, and high inflation. However, recent gains in U.S. oil and natural gas production are changing the dialogue about U.S. energy strengths and vulnerabilities.

The "shale revolution" has stimulated tremendous production of oil and natural gas in the United States. The revolution is the product of advances in oil and natural gas production technology—notably, a new combination of horizontal drilling and hydraulic fracturing. These technological advances combined with high oil and gas prices have enabled increased production of the abundant oil and natural gas resources in the United States.

Greater availability of domestic energy resources benefits the United States by reducing dependence on imported energy and diversifying the economy.¹ But the boom also brings new vulnerabilities. Examining how changes in U.S. oil and natural gas production may affect individual state economies shows that some of the states providing new energy resources are becoming less economically diversified and more economically vulnerable to energy price declines.

Oil Prices and Employment in the U.S. Fossil Fuel Industry

Until recently, the U.S. oil and natural gas industry mostly followed the ups and downs of world oil prices, but with a long-term decline that reflected the decreasing availability of U.S. oil and natural gas resources. At the height of the early 1980s oil boom, the five industries most sensitive to oil prices—coal mining, oil and gas extraction, oil field machinery, petroleum refining, and petrochemicals—accounted for 1.6 million jobs, 1.8 percent of total U.S. nonagricultural employment.² By 2000, the share of these five industries had dwindled to 0.4 percent of total U.S. nonagricultural employment, only 457,000 jobs. With oil and natural gas prices rising beginning in the early 2000s, employment in the oil and natural gas sector began growing too. The boom in production of oil and natural gas from shale formations became a significant factor after 2008. Figure 1 shows that rising energy prices and the shale boom led to strong growth of U.S. oil and gas employment from 2005 to 2011.

Figure 1. U.S. Fossil Fuel–Related Employment

Sources: U.S. Bureau of Labor Statistics; author calculations.

Despite recent gains, however, the fossil fuel industry has a smaller share of U.S. employment than it did in the early 1980s, and the industry's share of national economic activity is relatively small. After the end of the recession, between 2010 and the end of 2012, the industry added 169,000 jobs nationwide, growing at a rate about ten times that of overall U.S. employment. The industry's output shares follow a similar path. The share of oil and gas extraction was 4.3 percent of U.S. gross domestic product (GDP) at its height in 1981, but declined to 0.6 percent by 1999. The share of oil and gas rose to 1.6 percent of GDP in 2011 as a result of the shale boom.³

Fossil Fuel Industries and State Employment

As energy prices and U.S. oil and natural gas production fell from the mid-1980s to the early 2000s, most U.S. energy-producing states diversified away from energy production and energy-intensive industries. In 1982, the states with the greatest concentration of energy-related industries were West Virginia, Wyoming, Delaware, Oklahoma, Louisiana, and Texas.⁴ Oil and natural gas accounted for much of the activity except in Delaware, which had a high concentration of the petrochemical industry, and in West Virginia, the heart of coal country. Shares of energy-related employment ranged from 7.3 percent in Texas to 13.7 percent in West Virginia. By 2000, these shares had declined to a range from 2.5 percent to 7.4 percent.

Rising oil and gas prices since the early 2000s prompted a resurgence of energy employment. Increased use of horizontal drilling and hydraulic fracturing led to further gains in oil and gas hiring. As of 2011, the states with the highest shares of energy employment were Alaska, Louisiana, New Mexico, North Dakota, Oklahoma, Texas, West Virginia, and Wyoming. As shown in Figure 2, energy employment shares increased in all eight of these states from 2000 to 2011.⁵ Although there is little oil and gas activity in West Virginia, its coal production grew because coal prices followed the upward trend in oil prices in the 2000s. Despite these gains, however, almost every one of these states depends less on the five main energy-related industries than they did in 1982.

Figure 2. State Employment Shares

Sources: Author calculations with data from the U.S. Bureau of Labor Statistics.

Fossil fuel production has been important to these states' recent economic performance. Since the early days of the shale boom in 2006, the four states with the highest rates of employment growth are the states with the highest shares of oil and gas employment (Figure 3). The greatest growth has been in Texas and North Dakota, states with production from shale and the largest production increases. As seen in Figure 3, between 2006 and 2012, U.S. employment declined 0.05 percent per year on average, while employment in North Dakota and Texas grew by 3.4 and 1.5 percent, respectively, the fastest growth in the country.

Figure 3. Shale Oil and Employment Growth

Note: 2006–2012 yearly employment growth rates; U.S. average annual employment growth of -0.05.

Sources: Author calculations; data from U.S. Bureau of Labor Statistics; U.S. Energy Information Administration.

Oil Price Shocks and Regional Economic Activity

Because the United States is an oil importer, its economy has been hurt by previous episodes of sharply rising oil prices that resulted from oil supply shocks.⁶ Given the oil production increase in the past couple of years, has the response of the U.S. economy to oil price shocks changed? The economic composition of individual states affects their responses to oil price shocks. We find that the economies of forty-two states and the District of Columbia would suffer if oil prices rise. In contrast, the economies of eight states—Alaska, Louisiana, New Mexico, North Dakota, Oklahoma, Texas, West Virginia, and Wyoming—would benefit from such increases.

To assess the effects of oil price shocks on states' economies, we first estimate the responses of individual industries to changes in oil prices using methods we used in a 1995 paper.⁷ As shown in Table 1, the estimated price elasticity of total U.S. employment, based on data for 2000–2011, is -0.02, which means that a 10 percent increase in oil prices reduces U.S. employment by 0.2 percent.⁸ Employment in the fossil fuel industries is considerably more responsive to oil price movements than employment in the overall economy is, but the responsiveness is less than we estimated eighteen years ago.⁹ These differences are the result of changing relationships between the industries, such as the reduced sensitivity of coal and natural gas prices to oil prices, the closure of some U.S. refineries, and how relative changes in oil and natural gas prices affect the U.S. petrochemicals industry.

Table 1. Elasticities of Employment With Respect to Oil Prices¹⁰

	Elasticity
Total U.S. Employment	-0.02
Coal Mining	0.24
Oil and Natural Gas Extraction	0.40
Oil Field Machinery	0.29
Refining	-0.03
Petrochemicals	0.36
Sources: Author calculations.

To calculate the employment response of each state to an oil price shock, we combine these elasticities with the input-output analysis framework we previously developed and published in 1995 (updated with new multipliers).¹¹ The framework takes into account the composition of each state's economy, quantitative differences in multiplier effects across states, and the response of individual fossil fuel industries to changes in oil prices. Differences across the states in concentrations of energy-producing and energy-consuming industries account for most of the variation in the response of employment to oil price changes across the states. Differences in multiplier effects also account for some of the variation between states.¹²

The results show that a 25 percent increase in oil prices (for example from $100 to $125) would result in a loss of more than 550,000 jobs nationwide.¹³ None of the states stand out as being hurt by rising oil prices by much more than the country as whole (Table 2). Several states without much of an oil and gas industry would see somewhat stronger negative effects from rising oil prices than the country as a whole.

Table 2. Estimated Employment Response to a 25 Percent Increase in Crude Oil Prices, 2012

	Percent			Percent
United States	-0.43
Wisconsin	-0.74		Ohio	-0.61
Minnesota	-0.73		Missouri	-0.60
Tennessee	-0.72		Illinois	-0.59
Rhode Island	-0.71		Massachusetts	-0.59
Florida	-0.71		Delaware	-0.58
New Hampshire	-0.70		South Dakota	-0.57
Idaho	-0.69		New York	-0.57
Nevada	-0.69		California	-0.56
Arizona	-0.68		Alabama	-0.56
Indiana	-0.68		District of Columbia	-0.50
Nebraska	-0.67		Kentucky	-0.48
Vermont	-0.66		Pennsylvania	-0.47
Iowa	-0.66		Utah	-0.38
New Jersey	-0.65		Kansas	-0.35
Washington	-0.64		Mississippi	-0.35
Maryland	-0.64		Arkansas	-0.34
Georgia	-0.64		Montana	-0.31
Michigan	-0.64		Colorado	-0.15
Virginia	-0.64		New Mexico	0.36
South Carolina	-0.64		West Virginia	0.36
Oregon	-0.64		Texas	0.60
Connecticut	-0.63		Louisiana	0.78
Maine	-0.62		Alaska	0.87
North Carolina	-0.62		North Dakota	1.01
Hawaii	-0.61		Oklahoma	1.16
			Wyoming	2.14
Sources: Author calculations; data from U.S. Bureau of Labor Statistics and the Wall Street Journal.

Figure 4. Estimated Employment Response to a 25 Percent Increase in Crude Oil Prices, 2012

Sources: Author calculations; data from U.S. Bureau of Labor Statistics and the Wall Street Journal.

Several states with larger fossil fuel industries see positive effects or a smaller negative effect than the country as a whole. Alaska, Louisiana, New Mexico, North Dakota, Oklahoma, Texas, West Virginia, and Wyoming would benefit from rising oil prices. Combined, these eight states would add around a hundred thousand jobs in response to a 25 percent rise in oil prices.

Wyoming would benefit most from an oil price spike because it has a small population and a large share of oil and gas extraction employment. Alaska's economy has traditionally depended on the oil extraction industry, has the second highest share of extraction employment among all states, and remains a beneficiary of higher oil prices. North Dakota's fossil fuel industry has grown rapidly since the onset of the shale boom and extraction is now 4 percent of state employment. West Virginia, with a strong coal industry, benefits from higher oil prices, but by less than what we previously estimated in 1995 for 1982 and 1992.¹⁴Coal prices moved together more tightly with oil prices until the global recession. Although coal prices have slowly trended higher during the recovery, the relationship with oil has weakened. As long as coal prices move with those for oil, the West Virginia economy will benefit from higher oil prices, albeit in a more muted manner than in the past.

The Louisiana and Texas economies are helped by rising oil prices, but employment response is less than in some energy states. These two states are home to 40 percent of U.S. refining capacity, and refining is hurt by rising oil prices. In addition, Texas has a large and diverse economy: the share of oil and gas extraction is about 2 percent of state employment, much less than in other energy-producing states.

Louisiana and Texas are also home to a substantial portion of U.S. petrochemical production. Rising oil prices help the U.S. petrochemicals industry as long as natural gas prices remain low. If enough domestic natural gas were exported such that U.S. natural gas prices again moved with oil prices, the U.S. petrochemicals industry would no longer benefit from rising oil prices.¹⁵

These employment responses differ substantially from those we previously estimated for 1982, a year at the height of the last U.S. oil and gas boom.¹⁶ For that year, economies of thirteen states would have benefitted from rising oil prices. In addition to the eight states mentioned above, rising oil prices would have aided Colorado, Kansas, Montana, Mississippi, and Utah. Over the past thirty years, the economies in these five states have diversified away from crude oil production, and they no longer respond favorably to rising crude oil prices. Nonetheless, the presence of sizable oil and natural gas industries in these five states mutes their negative response to rising oil prices.

State Vulnerability to a Decline in Oil Prices

Increased energy prices and technological improvements were catalysts for the U.S. fossil fuel industry's turnaround. Would declining prices reverse those gains? A brief look at history is telling.

From 1972 to 1982, when oil prices increased more than tenfold, Texas economic output and employment averaged annual growth rates of 7.5 percent and 5.5 percent, respectively. When oil prices collapsed to about eleven dollars per barrel in 1986, the Texas economy went into a deep recession for two years. Economic output contracted 5.6 percent and employment fell 1.1 percent.

Even though oil and gas extraction accounted for 19 percent of the Texas economy in 1981, that share was the second smallest among the eight oil-sensitive states (West Virginia was smallest). As a percentage of state GDP, the oil and gas sector accounted for 49 percent in Alaska, 37 percent in Wyoming, 35 percent in Louisiana, and 20 percent in North Dakota. The 1986 oil price crash also caused a recession in most of these states, with employment declines largest in Wyoming (-5.9 percent) and Alaska (-4.5 percent)—states with the largest oil and gas output shares. The economies of these oil-sensitive states rebounded after 1987, but their growth rates were weaker than that of Texas.

Table 3 shows how the fossil fuel industry's output shares contracted after the oil industry peak in 1981 and later expanded with the shale boom, especially in North Dakota, Oklahoma, and Wyoming. The 2012 shares of state GDP from oil and gas extraction should prove even higher, given that oil production has been increasing in these states.¹⁷ If oil prices were to collapse, these states with the highest concentrations in oil and gas extraction would be the hardest hit.

Table 3. Share of Oil and Gas Extraction in State GDP

	Percent
	1981	2000	2010
Alaska	49.5	15.1	19.1
Louisiana	35.5	11.1	9.7
New Mexico	26.1	5.2	5.1
North Dakota	20.3	0.9	4.3
Oklahoma	21.6	4.8	9.1
Texas	19.1	5.8	7.8
West Virginia	2.4	1.0	1.5
Wyoming	37.1	9.8	18.5
Source: Author calculations; data from U.S. Bureau of Economic Analysis.

This finding is consistent with the results reported in Table 2. Applying our model in the same way for a price decline as for a price increase shows that falling oil prices would cause overall employment losses in Wyoming, Oklahoma, North Dakota, Alaska, Louisiana, Texas, West Virginia, and New Mexico, with the greatest percentage losses in the first three.¹⁸

States like Texas and Louisiana that have downstream oil and gas industries that benefit from falling energy prices such as refining and petrochemicals would be less affected. In addition, states in which natural gas is more prominent than oil are likely to see less harm from falling oil prices. With the recent weakening in the relationship between oil and natural gas prices, a decline in oil prices does not necessarily imply as big a change in natural gas prices as it once did, lessening the effect of an oil price decline.

While many states have diversified away from either a heavy reliance on energy consumption or energy production, others have seen and will continue seeing an increasing dependence on energy production as a result of the shale revolution. Economic activity in these states is vulnerable to energy price declines. The smaller and less diversified the state, the larger the vulnerability. This vulnerability will increase with growing oil and natural gas production.

Yet most states that currently benefit from falling oil and gas prices will still gain from such developments even if their oil and gas production rises significantly in the coming years. For example, California, Colorado, and Pennsylvania produce a considerable amount of oil and natural gas, but these states would still gain from falling oil prices—even if their oil and gas sectors grew substantially. The California oil and gas sector, for example, would need to be more than 9.5 times larger than it is today for an oil price fall to hurt the California economy. Similarly, the sector would need to be more than 3.9 times larger in Pennsylvania and more than 1.3 times larger in Colorado for oil price declines to hurt the relevant state economies.

Conclusion

Given that oil is priced on an international market, increased domestic oil production will not do much to lower prices for U.S. consumers, as any gains in U.S. production will be spread across the international market. Greater reliance on domestic oil resources in substitution for imports will reduce the vulnerability of the economy to oil supply disruptions, although not by much.

Reduced energy use has lessened the vulnerability of the U.S. economy to oil price shocks. A similar phenomenon is seen at the state level, with many state economies having diversified away from energy-using industries. At the same time, the growing prominence of energy production can make states with small, undiversified economies more susceptible to an economic downturn during an energy price decline.

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1. See Stephen P.A. Brown and Hillard G. Huntington, "Assessing the U.S. Oil Security Premium," Energy Economics vol. 38 no. C, July 2013, pp. 118–127; and Stephen P.A. Brown and Ryan T. Kennelly, "Consequences of U.S. Dependence on Foreign Oil," Center for Business and Economic Research, University of Nevada, Las Vegas, 2013.

2. U.S. Bureau of Labor Statistics.

3. U.S. sectoral GDP data come out with a lag. The latest data are from 2011.

4. See Stephen P.A. Brown and Mine K. Yücel, "Energy Prices and State Economic Performance," Economic Review, Federal Reserve Bank of Dallas, Second Quarter, 1995.

5. Latest detailed state sectoral data are from 2011, as of this writing.

6. Lutz Kilian provides evidence that rising oil prices that result from demand shocks do not adversely affect U.S. economic activity. See Lutz Kilian, "Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market," American Economic Review vol. 9 no. 4, June 2009, pp. 1053–1069.

7. Stephen P.A. Brown and Mine K. Yücel, "Energy Prices and State Economic Performance," Economic Review, Federal Reserve Bank of Dallas, second quarter, 1995.

8. This estimate of the overall U.S. employment response is in the range of estimated GDP responses to oil price movements.

9. We previously estimated the oil-price elasticities of employment in coal mining, oil and natural gas extraction, oil field machinery, refining, and petrochemicals at 0.45, 1.01, 1.23, -0.56, and -0.32. See Stephen P.A. Brown and Mine K. Yücel, "Energy Prices and State Economic Performance," Economic Review, Federal Reserve Bank of Dallas, second quarter, 1995.

10. The industry elasticities are obtained from regressions of sectoral employment on WTI crude oil prices, using monthly data for the time period 2000–2011. The total U.S. employment elasticity is taken from empirical work in the economics literature. See Stephen P.A. Brown and Mine K. Yücel, "Energy Prices and State Economic Performance," Economic Review, Federal Reserve Bank of Dallas, second quarter, 1995.

11. Stephen P.A. Brown and Mine K. Yücel, "Energy Prices and State Economic Performance," Economic Review, Federal Reserve Bank of Dallas, second quarter, 1995. We used the RIMS II multipliers for 2010 from the U.S. Bureau of Economic Analysis to update the analysis.

12. See Stephen P.A. Brown and Mine K. Yücel, "Energy Prices and State Economic Performance," Economic Review, Federal Reserve Bank of Dallas, second quarter, 1995, for an exposition of the model.

13. Previous research on the response of U.S. economic activity to oil price shocks, such as James Hamilton's 2003 paper, finds the U.S. economy responds more strongly to oil price increases than oil price decreases. See James D. Hamilton, "What Is an Oil Shock?," Journal of Econometrics vol. 113 no. 2, April 2003, pp. 363­–98.

14. Stephen P.A. Brown and Mine K. Yücel, "Energy Prices and State Economic Performance," Economic Review, Federal Reserve Bank of Dallas, second quarter, 1995.

15. We showed in 2009 that there is coordinated movement in natural gas prices across the Atlantic, which can be accomplished through LNG shipments. But their results strongly suggest that the coordination of natural gas prices across the Atlantic is facilitated through oil prices, especially given that natural gas contracts in Europe are linked to oil prices. See Stephen P.A. Brown and Mine K. Yücel, "Market Arbitrage: European and North American Natural Gas Prices," Energy Journal vol. 30, special issue, 2009, pp. 167–185.

16. Stephen P.A. Brown and Mine K. Yücel, "Energy Prices and State Economic Performance," Economic Review, Federal Reserve Bank of Dallas, second quarter, 1995.

17. At the time of this writing, the most recent detailed GDP data for the states were from 2010.

18. Because the results for the energy-producing states are dominated by shifts within the fossil fuel industry, applying our model to oil price decreases creates only a slight upward bias to our estimates. That bias increases as we shift our attention toward energy-importing states.

CHUCK HAGEL, THIS IS THE NEW COLD WAR FOR USA?

LEADING CHINA: SOME TOPICS OF XI JINPING

Ten Fun and Fascinating Facts About Xi Jinping

by Elizabeth C. Economy

ASIA UNBOUND
October 15, 2014

Residents hold posters of the newly appointed chief of China's Communist Party Xi Jinping during a "Shehuo" performance to celebrate the Chinese New Year in Xi'an, Shaanxi province, on February 22, 2013. (Stringer/Courtesy Reuters)

1. Xi loves the classics. Although many of Xi’s speeches suffer from the same tedious socialist rhetoric that characterized those of his predecessors, Xi often enlivens his remarks with sayings from Chinese philosophers. When discussing the development of Chinese youth, for example, he reflects, “Learning is the bow, while competence is the arrow” and “Virtue uplifts, while vice debases” (55-57). Indeed, in a speech before professors and students at Peking University, Xi relates at least forty different quotations from ancient Chinese thinkers (185-199). No one says it better than an ancient Chinese philosopher.A friend recently dropped off a hot-off-the-press copy of Xi Jinping: The Goverance of China. It is a compilation of speeches, main points of speeches, pictures, interviews, and a biographical sketch of Chinese President Xi Jinping. Several different parts of the Chinese government bureaucracy participated in producing the book, which runs more than 500 pages. While I can’t do justice to all the material presented, here are some things I learned from reading through Xi’s musings and the musings of others about him.

2. Xi is a true believer—but only in the Communist Party. Indeed, the Chinese president has no kind words for officials who “worship Buddha”; seek “god’s advice for solving their problems”; “perform their duties in a muddle-headed manner”; “yearn for Western social systems and values”; “lose their confidence in the future of socialism”; or “adopt an equivocal attitude towards political provocations against the leadership of the CPC” (463-464). He may have a revelation later in life, but for now there is no room at the Inn.

3. Xi never lets you see him sweat. Xi does not whine. Although he states that he spends all his private time on his work, he doesn’t complain. Instead he simply says: “Since the people have put me in the position of head of state, I must put them above everything else, bear in mind my responsibilities that are as weighty as Mount Tai, always worry about the people’s security and well-being, and work conscientiously day and night; share the same feelings with the people, share both good and bad times with them, and work in concerted efforts with them” (114). Xi’s life in pictures similarly suggests someone who is calm, in control, and generally enjoying serving as president. Either he is constitutionally better suited to being president of a large power than most recent U.S. presidents or he just has a better public relations team.

4. Xi plays to win. Xi has the soul of a competitor. In discussing his desire for China to become an innovation nation, Xi clearly is unhappy with China’s second-tier status, stating: “We cannot always decorate our tomorrow with others’ yesterdays. We cannot always rely on others’ scientific and technological achievements for our own progress.” The answer for him rests overwhelmingly in indigenous innovation: “Most importantly, we should unswervingly follow an independent innovation path featuring Chinese characteristics…. Only by holding key technology in our own hands can we really take the initiative in competition and development, and ensure our economic security, national security, and security in other areas.” He concludes: “Scientific and technological competition is like short-track speed skating. When we speed up, so will others. Those who can skate faster and maintain a high speed longer will win the title” (135-136).

5. How did I get here anyway? While Xi may enjoy being president of China, he may not quite understand how he got there, claiming “Since the people have put me in the position of head of state…” (114).

6. What you see is what you get. While it is possible that there is an alternative Xi Jinping lurking beyond these 500 pages, there is remarkable consistency in the ideas and values that he espouses through his speeches and his actions. Morality, virtue, and responsibility to the people, for example, emerge as consistent themes in his discussions of the necessary qualities for Chinese officials. His efforts to streamline the bureaucracy, understand the needs of the people, and ensure proper oversight of Party officials are also hallmarks of Xi’s long tenure as a Communist Party official.

7. Almost there but not quite… Xi’s musings on soft power suggest some remaining confusion about how it all works. While he calls for bringing back to life “relics sleeping in closed palaces, legacies of the vast land of China and records in ancient books”—all of which would serve Chinese soft power desires—he nonetheless holds fast to the CCP’s traditional—if misguided—approach to soft power: “To strengthen our cultural soft power, we should intensify our international right of speech, enhance our capability of international communication, and spare no efforts in establishing a system for international speech to tell, in the right way, the true story of our country…. we should also enhance education in patriotism, collectivism and socialism through school, film, and television to help our people build up and persist in a correct concept of history, national viewpoint, state outlook and cultural perspective, so as to fortify the will of the Chinese people, who should be prouder of being Chinese” (180).

8. Lei Feng lives. No biographical sketch of a senior Chinese official can ignore the opportunity to honor the (possibly apocryphal) model communist citizen Lei Feng by embracing his superhuman work ethic and devotion to the ideals of the Communist Party. Xi Jinping is no exception. When as a teenager Xi was sent down to a small village in Shaanxi Province during the Cultural Revolution, for example, he was “able to walk for 5 km on a mountainous path with two dangling baskets filled with almost one hundred kg of wheat on a shoulder-pole.” He also exchanged a motorized tricycle he won after being named a model educated youth for a “walking tractor, a flour milling machine, a wheat winnowing machine, and a water pump to benefit the villagers” (480).

9. A man of letters. Xi talks about reading as one of his favorite pastimes—in fact the only one for which he still has time—and he is apparently a fan of Russian literature. Impressively, he can reel off more than ten different favorite Russian authors, including Gogol—whose writings must resonate with him as he tries to clean up corruption in the Chinese bureaucracy. Of course, he expressed his affection for Russian literature in an interview with a Russian television, so he may have been simply playing to the home crowd (114). Still in the village to which he was sent during the Cultural Revolution (note: the Cultural Revolution is not actually identified as such in the book), the local people remember him as “reading books as thick as bricks while herding sheep on mountain slopes or under a kerosene lamp at night” (480).

10. I have a dream. Xi Jinping’s China dream looks set to become one of the defining elements of his tenure as Chinese president. It represents patriotism, innovation, and unity. “One can do well only when one’s country and nation do well.” For Xi, Chinese everywhere should contribute to realizing the China dream: “For Chinese people both at home and abroad, a united Chinese nation is our shared root, the profound Chinese culture is our shared soul, and the rejuvenation of the Chinese nation is our shared dream” (p. 69). And Taiwan should get ready as well. As Xi says, “Sooner or later we will have to resolve the political disputes that have long existed in cross-Straits relations rather than leave them to later generations” (254).