Industrial Policy and China- Keystone vs. Solar

House Energy and Commerce committee chair Cliff Stearns made the surprising assertion that President Obama does not understand economic matters.

“We should invest in and provide incentives to companies that can exploit our competitive advantages in technology and innovation … and not subsidize industries when these other nations have cheaper labor, no environmental or safety standards, less regulation and easy access to raw materials,” the statement added. “We should not be picking winners and losers, which is a fundamental flaw in his stimulus scheme.”

A confusing proposition. How does one “invest in companies”, and yet not “pick winners and losers”?

The truth is that China is picking winners and losers. GOP philosophy in general has been that industrial policy or anything resembling it is socialism and  the US should not have any of it.  In the 80s,  in response to the Japanese dumping memory chips at below manufacturing cost in the US markets, many in the GOP argued that the US should do nothing. In theory, the government should not intervene if one companies in other countries are simply being a better capitalists.  Counting on this anti-industrial policy philosophy, it was a smart business move on the part of the Japanese companies to wipe out US semiconductor industry so that in the long term no one could compete with them.

Michael Lewis observed that the United States is peculiar in the OECD because we alone do not have an industrial policy.  Representative Stearns reflects this confusion in his self contradictory statement today.  The GOP attempt to portray the Solyndra failure as a failure of industrial policy is nonsense.  If 95% of the investments made by a venture capitalist payed off, then it could be strongly argued that the venture capitalist is not taking enough risks.

Currently, China actually imports  $1.9 billion in PV panels from the United States.  It is a battle we have been winning.  United States PV is the lowest cost per watt- not Chinese.  (Panels from First Solar). This is true despite the widespread belief that the Chinese are dumping panels on the world market (source) and enjoy heavy governmental subsidies.

Politicians opposing  green technologies- are not just those aligned with oil and coal companies- it’s also the teamsters and pipefitter unions who see thousands of jobs laying the Keystone XL pipeline from Canada to the Gulf.  Not building the pipeline does not mean that the markets won’t find a way to buy, refine and burn that tar sand oil.  If the Canadians allow it to be dug, the money will find a way, and the Chinese among others will be eager customers.  The same principle is true for Solar PV panels.  Surrendering US technology and allowing its fledgling PV industry to be strangled in its crib by the Chinese does not mean that the Oil industry wins. It means the Chinese win.

Chairman Stearns must figure out whether he cares more about American industrial strength or whether he wants to go down in history as playing the fool to Chinese strategy for besting the United States.

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About John JMesserly

Mostly harmless

Posted on 2011-10-29, in corporate socialism, energy policy, solar power, Solyndra. Bookmark the permalink. Leave a comment.

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