By Doug Magill
It is hard not to be fascinated by the many ways we are inundated with propaganda for the green movement. In advertising, published articles, radio and TV commentary, and even casual conversations the messages are consistent: recycling is necessary, the earth is warming, beware of carbon footprints, and we need to invest in green energy.
Being somewhat contrarian in nature (somewhere both of my parents are howling in agreement), I find that aside from the ethos of the sanctification of all that is green, the actual business news relative to all this goodness is… well, bad.
Some of the darlings of the political left are lousy businesses.
Take, for example, Solyndra.
Lauded by the president as a potential source for those desired but elusive green jobs, the company received a $535 million loan guarantee from the Energy Department despite internal misgivings and criticism from outside analysts. Now under investigation by a House subcommittee, it appears that the Obama administration applied pressure to approve the loan before due diligence was completed. The company declared bankruptcy, putting more than a thousand employees out of work, and vaporizing more than a half-billion dollars of taxpayer money.
It just so happens that one of the primary investors was a significant bundler for the Obama campaign. A theme that tends to run through most of Obama’s dealings with business. Payoffs matter, even though business success does not.
The company apparently could not compete, particularly against Chinese solar cell manufacturers. Before the loan application was submitted, the Chinese were heavily subsidized and likely to undercut the market. The company folded even after outsourcing some of its manufacturing – to China.
In January, Evergreen Solar – the recipient of $58 million in subsidies from Massachusetts – closed its domestic manufacturing plant, costing 800 jobs. The company also had ventured into manufacturing in China, although it claimed Chinese manufactures prevented it from achieving profitability. The state’s governor had touted Evergreen as a source of future green jobs, and had pushed hard for the subsidies.
All this is not to say that solar cell manufacturing cannot be a successful business. The issue is whether we can do it viably in California or Massachusetts where labor and overhead costs are high. Or anywhere in a high-cost country competing against a country willing to provide subsidies that will be eventually ruinous. Businesspeople should be making those investment decisions – not government bureaucrats or elected officials who arrogantly assume that they can force winners and losers in a global economy.
Maybe it’s a business we shouldn’t pursue right now. Criteria for making those decisions are easily understood by business people, but apparently not by politicians and bureaucrats.
Our elected leaders blithely squander our tax money, but don’t have a clear picture of what America is really trying to do: create jobs (which is something government cannot do), reduce carbon emissions, gain energy independence. They keep forgetting to ask how America creates a business environment in which individuals and firms want to invest.
In the last presidential campaign candidate Obama admonished us that Spain was crushing us in creating green jobs. The facts, however, did not support that contention. Studies showed that more jobs in other industries were destroyed than were developed in green industries. And, that the country’s unemployment had shot above 20 %.
England has also found that its efforts in the wind industry destroy jobs. Its politically correct decision to reduce carbon emissions through wind energy has run into the spinning blade of estimation error. It turns out that the original assumptions of carbon to be saved is really half of what was originally planned. That means twice as many wind turbines are needed to meet their goal – which will raise prices for everyone in the country. This too, will soon founder on the rocks of environmental blindness relative to costs and viability.
Last spring there was considerable excitement over the idea of taking California’s community colleges off the grid. The system spent about $8 million in 2010 on power from the utilities. The cost of going on their own was estimated to be between $1 and $2 billion. Even politicians can recognize that this is not generally considered a good bargain. Even more to the point is the fact that a demonstration wind turbine was unable to provide enough power to illuminate a 60-watt light bulb because of sporadic and insufficient wind.
T. Boone Pickens placed a $2 billion bet on wind energy in Texas, and now has no use for all of those turbines. It turns out that even with government subsidies he can’t make money on the business.
And, environmental groups are now howling about the number of birds being slaughtered by turbines.
A number of studies have also shown that for some communities the use of wind energy increases the use of fossil fuels through the need for standby generators that have to be constantly running.
Weatherization has also been a bust. Because of the way subsidies are written many programs have been held up for years over fights about union wages (there’s that payoff thing again) and end up being too expensive for most homeowners.
At some point we will have to recognize that government investment is an oxymoron. Government picks favorites, but the market will decide winners. No matter how long subsidies continue, sooner or later market forces or new discoveries will change the focus of a business. And by the time the bureaucracies figure it out, millions more will have vanished, and everyone will be poorer.
Doug Magill is a consultant, freelance writer and voice-over talent. he can be reached at firstname.lastname@example.org