In the most appropriate city.
Tag: eco-corporatism
The Vegetarian Mandate
On October 31st I wrote:
It’s so simple, just find a big ‘social problem’ with dozens, or hundreds, of different causes and impose a single 2,000 page solution. I don’t know why we didn’t think of this approach to solve the obesity epidemic. We’ll just put nutrition labels on candy machines, ban soft drinks over 16 ounces and move toward taxing calories.
While we’ve already done the first two of those things, the part about taxing calories was half tongue-in-cheek. I needn’t have worried that it was over the top, though I did get the wrong social problem. I should have known “Climate Change” would be the real reason: UK Researchers: Tax Food to Reduce Climate Change
“Emissions pricing of foods would generate a much needed contribution of the food system to reducing the impacts of global climate change,” said Dr Marco Springmann of the Oxford Martin Programme on the Future of Food, who led the study. “We hope that’s something policymakers gathering this week at the Marrakech climate conference will take note of.”
Much of the emissions reduction would stem from higher prices and lower consumption of animal products, as their emissions are particularly high. The researchers found that beef would have to be 40% more expensive globally to pay for the climate damage caused by its production. The price of milk and other meats would need to increase by up to 20%, and the price of vegetable oils would also increase significantly.
This is a perfect example of MIT Technology Review editor David Rotman’s demand for an updated command-and-control industrial policy:
[There is a] compelling argument that we need more coherent and deliberate strategic planning in tackling our economic problems, especially in finding more effective ways to reduce greenhouse-gas emissions
The 2000 pages needed to implement this will consist of 1) tax credits for pregnant mothers, exemptions for starving third worlders and waivers for Senators and Congressmen and their aides; 2) lobbyist provisions for Archer Daniels Midland; 3) definition of the bureaucratic requirements; 4) determination of the amount of tax for protein content, say tofu vs. hamburger; 5) surtaxes based on greenhouse gas contribution variation due to processing and transportation; 6) all manner of amendments entirely unrelated to the taxing of food and 7) other things you’ll have to read the bill to find out.
Stick to your knitting
I keep thinking about the MIT Technology Review article mentioned in my previous post.
Editor of Technology Review David Rotman strays into territory far removed from his magazine’s titular mission by reviewing Rethinking Capitalism:
A series of essays by authors including Joseph Stiglitz, an economist at Columbia University who won a Nobel Prize in 2001, and Mariana Mazzucato, a professor of the economics of innovation at the University of Sussex… Together, the essays provide a compelling argument that we need more coherent and deliberate strategic planning in tackling our economic problems, especially in finding more effective ways to reduce greenhouse-gas emissions…
[The book attempts] to counter the view that free markets inevitably lead to desirable outcomes and that freer markets are always better: the faith that “the ‘invisible hand’ of the market knows best.” In fact, she argues, we should admit that markets are created and shaped by government policies, including government support of innovation.
What keeps me coming back to it are the straw men, unconscious assumptions and the anti-scientism buried throughout. Economics is neither technology nor science, nor does Mr. Rotman even understand it.
First up, “[T]he essays provide a compelling argument that we need more coherent and deliberate strategic planning in tackling our economic problems, especially in finding more effective ways to reduce greenhouse-gas emissions.“
Government intervention never works out to be either coherent or strategic: Obamacare is an example where the government lent its full weight in time, expertise, money, subversion of the political process and publicly repeated big lies. Thank god it was health care and not the “Affordable Energy Act.”
Fracking for natural gas has done more to reduce carbon emissions than a dozen Solyndras – despite government opposition.
Second, I know of no one who claims “free markets inevitably lead to desirable outcomes.” Free markets lead to better outcomes than manipulated markets, and that includes failure when freely invested private money is lost. This Obamaesque straw-man premise additionally implies that if free markets aren’t perfect we must turn to government for such perfection.
Admitting that “markets are created and shaped by government,” begs a question while assuming a conclusion. It’s true that governments choose to create and shape markets. No natural law says they have to, but if Rotman’s admiring analysis is correct, Mazzucato takes this as a given. However, it is something governments choose to do. As Rotman later grudgingly concedes, this choice is rife with drawbacks.
In fact, placing the average bureaucrat as market arbiter is only better than the free market if that bureaucrat’s decisions are consistently better: More informed, more enlightened, more efficient, than free choice market decisions. This never happens. Assuming command-and-control industrial policy as an immutable consequence of having government indicates such endeavors aren’t market-based at all.
Finally, “government support of innovation,” can be accomplished passively. Ask John Cowperthwaite.
Mazzucato and Rotman only see government support as beneficial when it is active market intervention. A fair look at this question would also include examination of the ways in which government stifles innovation with command-and-control industrial policies, not the least of which is the misdirection of resources and prevention of new ways of doing business. Examples are growing corn for ethanol and taxing Uber to protect existing taxi businesses.
To summarize, Mr. Rotman proposes that government should do a better job when it actively creates and shapes markets. No one would disagree government should do better. The question begged is whether government should be actively involved at all. It would “do better” if it weren’t.
Free markets are not perfect nor ever claimed to be. They are better than any alternative, and, as repeatedly demonstrated, vastly better than command-and-control industrial policies.
I think I’ll be doing more detailed fisking of other bits of this horrendous MIT article in future posts.
Corporatism behaving predictably
You would be disappointed if you expected a publication called MIT Technology Review would eschew half baked, agenda driven articles about economics.
The MIT School of Economics needs to give some remedial instruction to David Rotman, Editor of Technology Review. In a recent article, Capitalism Behaving Badly, he reviews Rethinking Capitalism,
A series of essays by authors including Joseph Stiglitz, an economist at Columbia University who won a Nobel Prize in 2001, and Mariana Mazzucato, a professor of the economics of innovation at the University of Sussex… Together, the essays provide a compelling argument that we need more coherent and deliberate strategic planning in tackling our economic problems, especially in finding more effective ways to reduce greenhouse-gas emissions…
[The book attempts] to counter the view that free markets inevitably lead to desirable outcomes and that freer markets are always better: the faith that “the ‘invisible hand’ of the market knows best.” In fact, she argues, we should admit that markets are created and shaped by government policies, including government support of innovation.
Maybe we should admit that markets are distorted by government and result in misallocation of resources. Whatever we admit, we should not pretend that the United States is a capitalist country. It is a corporatist economy where government decides for policy reasons to give money to favored industries. Mr. Rotman apparently favors ‘green’ industry as a major part of a command-and-control industrial policy.
Rotman explains the failures of Solyndra, A123, Fisker, Navistar, Evergreen Solar and others, by arguing the wrong people were in charge, and they spent the money wrongly or stopped supplying it when more was needed, as if the politics were irrelevant and “some people” are not only above such things, but have nearly perfect appreciation of all market forces.
Mr. Rotman specifically addresses Solyndra:
Take, for example, the failure of the solar company Solyndra. It is often held up as the kind of thing that occurs when government picks winners. But, writes Rodrik, Solyndra failed largely because competing technologies got much cheaper. Such outcomes are not necessarily an indictment of industrial policies. The real problem, Rodrik argues: the U.S. Department of Energy loan guarantee program that supported the solar company had a mixed set of goals, from creating jobs to competing with China to helping fund new energy technologies. What’s more, it did not properly define procedures for evaluating the progress of potential loan recipients and, importantly, terminating support to those companies when appropriate. Instead, according to Rodrik, in the absence of such rules, money was lent to Solyndra for political reasons—President Obama and his administration used the company as a high-profile way to highlight its green-energy initiatives. Having singled out the solar company for praise, the administration was then reluctant to end its commitment…
The stimulus bill was well-intentioned, and the instinct to use government spending for a specific social goal, supporting the development of green energy, was laudable…
1-Competing technologies got cheaper. Failure to recognize that likelihood is not external to government decisions, it is central to why the government shouldn’t be making them, and most certainly counts as a failure of industrial policy.
2-A mixed set of goals is likewise a failure of government policy. In this case, its execution of the “strategy,” if one should be so generous as to call such a mess strategic. Close enough for government work, I guess.
3-Slack control of money lent is also a clear failure of government execution of its confused and shortsighted planning.
4-Money was lent for political reasons. Duh.
This is not to be laid at the feet of capitalism, since it had no role in the matter.
Creating a rigorous industrial policy to encourage green technologies is no doubt a worthwhile objective. Economists and the lessons from efforts like the stimulus bill can teach us how to design such policies to be robust and effective…
No, they have demonstrated again and again and again that they cannot. We do not learn from experience. We do not learn from Smith, Hayek, Bastiat, Sowell and Ricardo, et. al..
Mr. Rotman’s actual agenda is clear. He wants more public/pirate partnerships for his pet cause, only better than the last ones. The pirates aren’t capitalists, they are robber barons whose victims are taxpayers.
But won’t wise industrial policies also require wise politicians?
No, there is no such thing as a “wise industrial policy” such a thing requires prescient politicians who have the ability to anticipate market changes, develop focused policies and implement them very efficiently. All while avoiding the opportunities for graft and corruption. Can you name such a politician?
Update Oct 25 11:40
How command-and-control industrial policy actually works:
Hillary Clinton’s campaign chairman met and corresponded on multiple occasions in his capacity as a top White House adviser with a previous employer seeking energy policies that it described as a potential “gold rush,” hacked emails and public records show.
John Podesta was a top White House energy policy official before joining the Clinton campaign last year. He previously served on the board of renewable energy investment firm Equilibrium Capital. He owned stock in the firm and drew $4,000 in annual “board fees.”
White House ethics rules bar employees from working on issues affecting former clients or employers for two years after taking their jobs. However, internal emails show that Podesta was in contact with Equilibrium within months of joining the White House as the company pursued a new energy efficiency financing model that would steer it significant revenue.
Picking losers
From National Review:
SunEdison, which billed itself as the “largest global renewable energy development company,” is on the verge of bankruptcy after sucking up $650 million in federal grants and tax credits and $846 million in federal loans, loan guarantees, tax-exempt federal bonds, and federal insurance.
Also in April, Spanish energy company Abengoa SA filed for bankruptcy in Delaware, having disappeared $2.6 billion in federal loans and loan guarantees, as well as $986 million in federal grants and tax credits.
That adds up to about $5 billion taxpayer dollars, 70% of it to a foreign company.
Maybe MIT Technology Review should revisit its story on the limits of “clean coal” for balance.
#Cleanfail
Since I posted Headline at MIT Technology Review: (April 15, just below), it has been nagging at the back of my mind that “clean coal” projects probably were not exempt from the crony capitalist excesses of the eco-industrial complex. So there was likely more to the Peabody Energy bankruptcy story than simply deploring all the failed wind/solar/battery #Greenfail projects we’ve funded. I had some time this morning to check.
Turns out, the Feds spent $2.5 billion between 1978 and 2008 on “clean coal.”
In 2002, the Bush administration picked up the baton and allocated almost $2 billion (of which $200 million was actually spent) over 10 years to the idea. They killed it in 2008.
It was revived in the Obama administration’s 2009 stimulus package before being killed again in 2015.
So, “clean coal,” even though industry had to pay 50% of project costs, is another example of the government promoting failed environmental projects. In this case, deciding to go the additional mile to make sure the entire coal industry disappears.
All that money could have resulted in quite a bit of carbon-emissionless nuclear power, and it would have been financed entirely by industry – if they’d been allowed to.
Headline at MIT Technology Review:
Peabody Energy’s Bankruptcy Shows the Limits of “Clean Coal”
I’m not sure what MIT’s point is here. Peabody’s bankruptcy is the result of unlimited political manipulation. It was the intended result of Federal planning:
“So if somebody wants to build a coal power plant, they can. It’s just that it will bankrupt them because they are going to be charged a huge sum for all that greenhouse gas that’s being emitted.”
– Barack Obama, January 2008
The real issue is eco-corporatism, not “clean coal,” so it’s worth looking at other energy company bankruptcies that didn’t follow the Fed’s political script.
Solyndra’s bankruptcy was not the government approved plan.
Barack Obama visited Solyndra’s facility on May 25, 2010. Solyndra filed for bankruptcy in September 2011.
On whether he he regretted holding up Solyndra as a model for jobs and clean energy: “No, I don’t, because if you look at the overall portfolio of loan guarantees that have been provided, overall it’s doing well.“
“And what we always understood was that not every single business is going to succeed in clean energy, but if we want to compete with China, which is pouring hundreds of billions of dollars into this space, if we want to compete with other countries that are heavily subsidizing the industries of the future, we’ve got to make sure that our guys here in the United States of America at least have a shot…“
For A123, if the plan was to compete with China, the result was exactly the opposite:
“What we want to do is to have energy independence in America, and have control over our own ability to be free of Middle Eastern oil. That means that we want to manufacture the cells and do the assembly, and do the R&D all here in Michigan.“
– Jennifer Granholm, January 2009
(While Governor Granholm was fertilizing A123’s bankruptcy seeds, the frackers were actually doing something about our dependence on foreign oil. In spite of government interference.)
“This is about the birth of an entire new industry in America — an industry that’s going to be central to the next generation of cars…”
– Barack Obama, September 2010, during an event celebrating the opening of the A123 plant in Livonia
A123 was sold to the Chinese at bankruptcy prices. So we heavily subsidized the R&D on behalf of the Chinese.
In sum:
- Peabody Energy was bankrupted by an administratively engineered avalanche of absurd and unconstitutional Federal regulations.
- A123 went bankrupt despite $100 million in Michigan tax credits and $255 million in Federal grants.
- Solyndra failed despite a $536 million Federal loan guarantee and a $25.1 million California tax break.
Yes, MIT, there are limits. So, consider these headlines for a future story:
A123’s Bankruptcy Shows the Limits of Advanced Battery Manufacturing
Solyndra’s Bankruptcy Shows the Limits of Thin Film Solar Cells
Or maybe: Green Bankruptcies Show the Limits of Winner Picking Corporatism