Arkady
President
For years, Republicans have attacked Obama for the failure of the company Solyndra, a solar panel manufacturer that got money as part of the stimulus plan. Judging this investment the way you'd judge a private-sector investment (in terms of the return on capital to the investor) misses the point. The government shouldn't be thinking of its investments that way. To do so would merely duplicate the role of private sector capital in the system, which would be redundant even if the government could do it as well as private investors. The whole point of the government investing in things is that they can consider broader implications that private investors don't care about.
In the case of the Solyndra investment, there were two broader considerations the government had in mind that private investors would not factor into their decision. One was the overall economy. The stimulus plan was an entirely economically orthodox attempt at counter-cyclical government spending. The government was attempting to "prime the pump" to get the economy flowing again. On that front, the stimulus plan was a qualified success. The economy had started growing again by mid-2009, and it's almost certain things would a have been much worse if the government hadn't helped preserve jobs by financing economic activity through the stimulus plan. Internationally, countries that instead took a more austere approach to the crisis have mostly done much worse than the US.
The second goal of the investment was to try to encourage innovation in solar panel design and manufacture. Although private investors think about those things, too, they do so in a much narrower way. The only such innovations they tend to factor into their decisions are those with fairly short-term returns (few investors are looking to hold their investments for years, much less decades, so a next-quarter or next-year attitude predominates). And private investors are also only focusing on innovations that can be monetized by the company they're investing in. If an innovation isn't patentable, or if any patent is easily skirted with minor variations, then the innovation is likely to have little value to the investor, since all the competitors will benefit equally, and it'll show up as lower costs for the consumer rather than higher profits for the company. The government can take the broader view and support investments that may not pay off for the particular company, but have broadly distributed returns for the society in the form of lower costs.
From the perspective of that second goal, the investment in Solyndra, or at least the suite of investments ARRA made in a host of solar initiatives, might also have been a success. I'm not close enough to the solar industry to know exactly where the innovations of the last several years came from, but they've been colossally impressive in their impact on solar panel prices. Just in the last four years, the cost of solar power has dropped by half. That's the kind of break-neck advances we're used to seeing in the consumer electronics field, not in energy generation.
http://static.newclimateeconomy.report/TheNewClimateEconomyReport.pdf
At this pace, solar may soon be competitive with carbon-intense generation simply on a price point comparison. If that happens, getting our greenhouse gas problem under control could wind up being dirt cheap or even free:
http://blog-imfdirect.imf.org/2014/09/17/carbon-pricing-good-for-you-good-for-the-planet/
http://newclimateeconomy.report/
There is a long history of the government investing in things that end up paying off hugely for the society, even if you can't show a direct return on the capital. We're using an example right now. The Internet originated with a government DARPA program. Without the "loss leader" of all that initial government money building the backbone, it's unlikely a private company would have come along and done it, any more than a private company would have invested the many billions of dollars on space technology before the first commercially viable communications satellites could be launched. Government has the power and freedom to make the kinds of investments the private sector neglects, which can produce immeasurably large returns for the society as a whole in the future.
In the case of the Solyndra investment, there were two broader considerations the government had in mind that private investors would not factor into their decision. One was the overall economy. The stimulus plan was an entirely economically orthodox attempt at counter-cyclical government spending. The government was attempting to "prime the pump" to get the economy flowing again. On that front, the stimulus plan was a qualified success. The economy had started growing again by mid-2009, and it's almost certain things would a have been much worse if the government hadn't helped preserve jobs by financing economic activity through the stimulus plan. Internationally, countries that instead took a more austere approach to the crisis have mostly done much worse than the US.
The second goal of the investment was to try to encourage innovation in solar panel design and manufacture. Although private investors think about those things, too, they do so in a much narrower way. The only such innovations they tend to factor into their decisions are those with fairly short-term returns (few investors are looking to hold their investments for years, much less decades, so a next-quarter or next-year attitude predominates). And private investors are also only focusing on innovations that can be monetized by the company they're investing in. If an innovation isn't patentable, or if any patent is easily skirted with minor variations, then the innovation is likely to have little value to the investor, since all the competitors will benefit equally, and it'll show up as lower costs for the consumer rather than higher profits for the company. The government can take the broader view and support investments that may not pay off for the particular company, but have broadly distributed returns for the society in the form of lower costs.
From the perspective of that second goal, the investment in Solyndra, or at least the suite of investments ARRA made in a host of solar initiatives, might also have been a success. I'm not close enough to the solar industry to know exactly where the innovations of the last several years came from, but they've been colossally impressive in their impact on solar panel prices. Just in the last four years, the cost of solar power has dropped by half. That's the kind of break-neck advances we're used to seeing in the consumer electronics field, not in energy generation.
http://static.newclimateeconomy.report/TheNewClimateEconomyReport.pdf
At this pace, solar may soon be competitive with carbon-intense generation simply on a price point comparison. If that happens, getting our greenhouse gas problem under control could wind up being dirt cheap or even free:
http://blog-imfdirect.imf.org/2014/09/17/carbon-pricing-good-for-you-good-for-the-planet/
http://newclimateeconomy.report/
There is a long history of the government investing in things that end up paying off hugely for the society, even if you can't show a direct return on the capital. We're using an example right now. The Internet originated with a government DARPA program. Without the "loss leader" of all that initial government money building the backbone, it's unlikely a private company would have come along and done it, any more than a private company would have invested the many billions of dollars on space technology before the first commercially viable communications satellites could be launched. Government has the power and freedom to make the kinds of investments the private sector neglects, which can produce immeasurably large returns for the society as a whole in the future.
