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View related content: Environmental and Energy Economics
For several years now, President Obama and his allies in the environmental movement have promised to usher in a green economy that will create millions of new green jobs that “can’t be outsourced.” Under the wise leadership of our energy bureaucracy, government officials would “invest” taxpayer money in “the right kind of technologies,” ushering them over the “development valley of death,” to produce the industries of tomorrow.
Both theory and a continuing accumulation of evidence tell us this is all feel-good blather.
Let’s look at the theory. First, government bureaucrats do not have magical knowledge of which technologies are going to outperform any other technologies, nor do they have a crystal ball that can tell them how existing technologies might improve, or new superior technologies spontaneously arise. The idea that bureaucrats have such knowledge is an example of that Frederich Hayek called “the fatal conceit.”
Second, economic theory also tells us that governments don’t “create” jobs. What creates jobs is consumer demand for goods and services paired with entrepreneurs willing and able to invest time and money to satisfy consumer demand. All the government can do is subsidize some industries, while jacking up costs on others. French philsopher Frederic Bastiat pointed this out around 1850 in an essay called “What is Seen and What is Not Seen.”
Now, to the empirical evidence. When talking about our bold green energy future, President Obama held up Spain as an example of what America should be doing. Spain invested heavily in wind power and other types of renewable energy. Alas, after studying the Spanish Experience, Professor Gabriel Calzada Álvarez and colleagues at Spain’s Universidad Rey Juan Carlos found if America followed Spain’s example, for every renewable energy job that the U.S. managed to create, the U.S. should expect a loss of at least 2.2 traditional jobs on average. And they found that green jobs are costly: each green job created in Spain’s effort cost about $750,000, and only one in 10 of the new green jobs were permanent. Doing the math on that, creating even 3 million new green jobs would cost $2.25 trillion. Even in a time where the trillion is the new billion, that’s a lot of money.
But we don’t have to look to Europe for examples anymore, right here at home we have a vast quantity of evidence showing that the ‘green job’ promise is hollow: Solyndra, Beacon Power, Ener1, Fisker Automotive, Tesla Motors, Abound Solar, the GM Volt…all recipients of government largesse, all utter failures at creating either market-worthy products, or “green jobs.”
The Mackinac Center for Public Policy reports that in Michigan, federal stimulus money amounting to $34.5 million managed to create a whole 183 jobs amongst 14 companies. As Mackinac details, “Two of the 14 companies, Great Lakes Industry in Jackson and Polar Seal in Grand Rapids appear to have had their awards revoked. Other grant and loan recipients include: Amptech of Manistee ($300,000 grant/$273,000 loan for seven workers); Eaton Rapids Castings of Rochester ($1.36 million grant/$650,000 loan for six workers); Energetx of Holland ($3.5 million loan for 56 workers); Heat Transfer International of Kentwood ($2.2 million grant/$550,000 loan for seven workers); KC Jones Plating of Warren ($150,000 grant/$150,000 loan for six workers); LOC Performance of Plymouth ($1.5 million grant for an unreported number of jobs); LUMA Resources of Rochester Hills ($500,000 grant/$325,000 loan for 12 jobs); and Merrill Technologies of Saginaw ($3 million grant for an unreported number of jobs).”
Polls suggest that the public still supports the idea of government sponsorship of green technologies and the pursuit of green jobs, and a green economy. One has to hope that they come to understand the fatal conceit of government central planning before government blows through all the real green – the stuff inside our wallets.
Kenneth P. Green is a resident scholar at the American Enterprise Institute. He can be followed on Twitter @KennethPGreen
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