September 26, 2011

How many ways can we get the Solyndra Scandal Wrong?

I'll admit it, I am a news junky. I have been watching the news about Solyndra with a chuckle at how foolish the current Administration was for it's actions in regards to this company. But as I look at the issue through a pair of Austrian eyeglasses....I see a few things becoming clear so I would like to take a moment to examine this issue from a bit different perspective....
We have one planet ( for now), and it is in every humans best interest to preserve and protect it for future generations. On that fundamental principle I think all people would agree in theory. But when it comes to the "green job" hype, I have some concerns and the Solyndra scandal has brought it forefront to my mind.
The political hype about "green jobs" and investment of tax dollars into it has a few problems. Entrepreneurs have to bid away resources from other production functions and relocate them to produce a new product. In the case of Solyndra and other "green jobs"..this presents us with a couple of different issues. Relocating these resources within the economy carries with it risk. Clearly the entrepreneurs at Solyndra thought the risk would pay off at profitable rate of return. But I question why they thought this. We all know the current political prevalence for subsidizing "green jobs"...but I wonder how this governmental involvement is incentivize entrepreneurs to take risks that in an uninhibited and free market they may evaluate differently.
While bidding away the resources from production of energy via fossil fuels to solar power is making the economy move in a different direction, is the political power (force) via subsidies to cause the reallocation of these resources what would naturally happen in an unhindered market? I do not think so. Of course the entrepreneur is free to make his mistakes and learn from them, such is the nature of liberty and economic processes. But it begs the questions; Are we better off for this reallocation of resources, or would we be better off if those same resources were freed to be invested elsewhere...perhaps somewhere that the entrepreneur was free to make the judgment about the profitability and risk of his/her venture without the interventionism of the government. In THAT case I believe we would all be better off.
The second issue that tickled my fancy was this article in particular about the protectionist expressions by members of Congress about China's investment into American companies. Based on what we just read in Mises Lecture 5...I think they have it all wrong. But again, I do not believe the free market was at work in either the decision to take a risk by the entrepreneur OR by the foreign investment made by China. It appears as though these actions were prompted by interventionist policies of the government. Where would the foreign capital have flowed to barring the governmental support for green company investment? We can't know. But we can believe based on Austrian principles that it would have been allocated to a circumstance that may have made us better off rather than worse. I am sure we will have more to discuss on this point after class tomorrow. :)
As Mises wrote about the problems we perceive with our economic reality being caused by bad policy, I think this is a perfect example. The interventionist actions of the governments, while they may be well intentioned, in the end, make us all worse off in the end.

1 comment:

Courtney Camelin said...

Based on our conversation in class the other day...I wanted to add a thought to this post. We talked at length about for. investment. This article is highly critical of Chinese investment in the US. But based on what we learned in class and from the Mises reading, shouldn't we consider it a BENEFIT for other nations that have already developed the capital (tools) to develop alternative energy production in America a GOOD THING?!! We would prosper faster if these other investors reallocated capital in the US in this section of the market and allow us to tap into the global network and stand on the shoulders of the others who have already done the saving and capital production of the intermediary tools our nations companies need. Note to Congress...Protectionism will inhibit our prosperity thus inhibt the expansion of this market, thus inhibiting JOBS.