Defining Stupid

“President Barack Obama said Thursday the government should continue to give loan guarantees to help clean energy companies compete with China and other countries that spend billions to subsidize solar panels and other renewable energy manufacturing.”

Would someone please explain to me why we’re in such a hurry to corner the market on a losing industry?  That’s one of those 2 + 2 = 4 questions that Newt Gingrich spoke of in the great video posted the other day by Hardnox.

It would be one thing if China or other countries were raking in big bucks in the solar panel business and measurably reducing their demand for fossil fuel energies; but Obama himself apparently acknowledged that those countries are having to “subsidize” the industry to the tune of “billions” of dollars, and no mention is being made of any miraculous reduction in their demand for oil and coal.  By my definition that makes it a losing industry, at least for the time being. 

Obama’s premise seems to be that renewable energy is the wave of the future, a gold mine just waiting to be discovered.  He could be correct, but if he is then the next 2 + 2 = 4 question is, “If the renewable energy industry is such a gold mine….”  Fill in the blank. 

Smart investors understand that when it comes to exploring new industries, it’s smart to weigh the benefits of being first in the industry against the cost to get there.  Fast food stores will often locate themselves near McDonald’s.  Why?  Because they know that McDonald’s has already invested the resources to find the most viable locations.  Time and again we see new products hit the market only to eventually be overtaken by others who improve on their technology without having to make that initial whopper of an investment.  Sometimes it pays to be first.  Sometimes it doesn’t.  This is what private investors and entrepreneurs are good at figuring out.

China, with its massive population and relatively recent emergence into the competitive industrial world, might have vastly different incentives for investing resources in renewable energy production.  It also has a markedly different system of government in which the government is expected to take the role that we in the U.S. prefer to leave to private industry.  At least that used to be the case.  Theoretically speaking, when China invests billions of dollars of “the people’s” money into something like renewable energy production, then “the people” reap the reward because the technology and means of production belong to them (remember, I said “in theory”).  In the U.S., when the taxpayers are asked to subsidize private companies investing in trial technology, who ends up owning the rights to that technology and the rights to the profits?  It isn’t the taxpayers.  Maybe we’ll benefit in the long run if we’re able to avail ourselves of more cost efficient energy, but that would also be true if private investors put up the money to get this industry going.  So I see no real upside for taxpayers, but of course there’s a big downside if we subsidize businesses that fail. 

The fact is, the renewable energy industry has thus far not solved a free market problem like  successful industries typically do, nor has it given us something that we don’t already have.  We have energy now.  It’s not a perfect market system (thanks to our government, largely), but neither is the “green” market system.  Oil and gas aren’t cheap, but neither is green.  Unless and until renewable energies can improve upon what we already have in terms of cost, efficiency and delivery, it will continue to be a loser industry.  Our wonderful government, which should be letting the free market resolve this situation, is trying it’s best to stack the deck by throwing obstacles in the way of oil, gas and coal and using our money to subsidize “green” energy.  For them, 2 + 2 will never = 4.

Finally, the money that supposedly is lost on deals like Solyndra isn’t really lost.  It’s simply been transferred from the pockets of taxpayers to the pockets of people involved in one way or another with the “green” energy agenda.  In other words it’s been transferred into the hands of the leftwing constituency.  Maybe these people aren’t so stupid after all.