Here in Oregon, there is always a dream of "green jobs." The latest is SoloPower that is proceeding with its plans to build a solar panel manufacturing plant in Portland, thanks to the federal government guaranteeing the loan. Yes, in the post-Solyndra world, this federal backing is generating a lot of controversy.
But, that controversy is not the reason for this blog post.
The larger question is whether a federal or state government ought to have any such industrial policies to pick winners and invest in them.
If private investment is not available in plenty, might there be a reason or two for that? After all, isn't the market notorious for backing risky investments? Remember Enron, where private investments went down the drain? Or, how about Google, where private investments have delivered a gazillion dollars as returns?
Anyway, the industrial policy to favor "green jobs" gains momentum. Along the lines of what one finds in this op-ed in the Oregonian:
The good news is that Oregon is well-positioned to capitalize on the latest trends in sustainable innovation thanks to its wealth of natural resources, close proximity to Pacific Rim markets, and strong history of acting as an environmental pioneer.
The bad news is that you're already behind due to growing global competition along with the politics in Washington, D.C. failing to provide adequate momentum and leadership. The current U.S. mindset remains mired in now passé second industrial revolution thinking based on fossil fuels, coal, natural gas and nuclear power.
In contrast, the green economic revolution -- and its adopters in the EU and Asia -- deploys renewable energy, new smart technology, and incorporates natural resources like water and land through sustainable policies and business practices.
Thus, one might conclude it is a win-win for the economy and the environment.
But, if it is really a win-win-win ... then wouldn't the market forces rush in to realize the profits? Is the absence of a market rush indicative of how much there is no profit to be made, without taxpayer subsidy?
Why might there not be the big profit? Megan McArdle explains:
Even if we succeeded in creating, via subsidy, a vibrant domestic solar panel manufacturing industry, there's no reason to think it would stay here . . . unless you're planning to continue the subsidies forever, which is like trying to get rich by paying yourself to mow the lawn.This is why it's so stupid to focus on "green jobs". The reason to promote green energy is to mitigate global warming, lessen economic dependence on some very volatile and unstable parts of the world, and build enough scale and demand that you maybe someday usher in an era of power that's "too cheap to meter", as they used to promise about nuclear. I understand why it makes sense politically for Democrats, but it's also dangerous, because if you can't produce the jobs, a lot of your support for the "green" evaporates, a long with a lot of green money.
Where does China come into this? McArdle channels Matt Yglesias:
What's at issue here, basically, is that China is trying to give us a bunch of free solar panels. It's quite true that insofar as we've been organizing economic activity around the (reasonable) assumption that China won't give us a bunch of free solar panels, that getting the free panels will cause some dislocations. But it seems implausible that the best possible way of dealing with the situation is to refuse to accept the panels. That (poor) China has chosen to boost domestic employment by subsidizing consumption in (rich) America is slightly bizarre, but we may as well try to enjoy it while it lasts.
See, a simple issue of green jobs is not as straightforward as one might wish, which is why policy-making is awfully difficult. I am way suspicious of people--especially politicians and academics--who pretend or, worse, believe, that there is a right way and a wrong way and that is it.
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