Winston Churchill famously quipped, “However beautiful the strategy, you should occasionally look at the results.” What could be more beautiful (or seductive) than the strategy of promoting a “green economy,” an environmentally friendly cure-all for our economic troubles?
But a funny thing happened on the way to green utopia. High-paying clean-tech jobs were a cornerstone of the 2009 stimulus bill, which allocated $80 billion to promote the “green economy.” Yet instead of putting us on the green-brick road to recovery, we’ve learned that subsidizing industry merely results in red — lost jobs, squandered taxpayer resources, scandalous bankruptcies and diminished prosperity. “Green” proponents whose policies produced these shameful outcomes should be red-faced.
With persistently high unemployment and nearly one in six Americans living in poverty — the most since tracking began in 1959 — Americans want to believe the green-jobs predictions of advocates like Van Jones, whose book “The Green Collar Economy: How One Solution Can Fix Our Two Biggest Problems” was a 2008 best-seller.
Yet the reality is that these lofty job-creation projections are wrong, as detailed in last month’s New York Times story, “Number of green jobs fails to live up to promises.” As The Times story notes, wind power costs 50 percent more than conventional power, and solar power costs up to three times more than wind power. Shifting resources toward less efficient purposes inevitably results in less prosperity — fewer jobs at lower pay.
In order to compete, renewable energy sources require costly government subsidies, price floors or purchase mandates. Consequently, green policies actually increase energy prices, undermine the economy, destroy jobs and hurt consumers — especially the poorest, whose family budgets are consumed by escalating costs for everything. Exacerbating things further, energy prices increase when potential suppliers and energy entrepreneurs redirect scarce capital away from government-manipulated markets.
For these reasons, renewable energy produces less than three percent of U.S. electricity and remains a fledgling global industry, despite having enjoyed enormous government support in the U.S., Europe and China. Given the industry’s small size and inherent unviability, allowing China to subsidize production to remain the lower-cost manufacturer is logical and prudent.
The question remains, why didn’t we examine Europe’s experience with the green-economy strategy before launching our own? After a decade of experimentation, and faced with job losses, higher energy prices, economic stagnation and corruption, European governments have cut their green funding. Kenneth Green of the American Enterprise Institute summarizes the findings of research studies conducted across Europe: Green programs destroyed 2.2 jobs in Spain and 3.7 jobs in the U.K. for every green job they created, while the capital needed for one green job in Italy could create almost five jobs in the general economy. Wind and solar power have raised energy prices by 7.5 percent in Germany and caused Denmark to have the highest electricity prices in Europe.
Perhaps U.S. policymakers ignored the European experience because they wanted the power and resources to pick winners and losers in the energy sector and dispense favors to political patrons. But when government presses its massive thumb on the market scale, businesses have huge incentives to win favors through lobbying and campaign contributions. This is not only economically damaging, it’s the definition of crony capitalism, the destructive consequences of which were exposed last month by the bankruptcies of three politically connected U.S. solar companies — Solyndra of California, Evergreen Solar of Massachusetts and SpectraWatt of New York. All were showcases for the green-jobs strategy, and their demise has eliminated thousands of these jobs.
Solyndra, whose major shareholder is a significant Democratic donor, was the first clean-tech company to receive a loan guarantee following passage of the stimulus bill, even though the Energy Department credit committee had unanimously rejected the loan in early January 2009. ABC News reported last week that Solyndra is currently under criminal investigation because newly uncovered White House emails show the company may have bypassed normal vetting procedures in obtaining its loan approval, despite being deemed a high risk.
Even if corruption wasn’t a factor, the Solyndra debacle demonstrates the ineptitude of government bureaucrats when speculating with other people’s money — they’ll never perform as well as experienced investors risking their own capital.
So after examining the results, its clear green policies don’t create jobs. Instead, they’ve lowered living standards globally and weakened the technological progress that market forces usually deliver, distracting us from finding optimal solutions to the economic and environmental challenges we face.
Like the proverbial vampire who fears daylight, optimal solutions are the last thing “green energy” proponents want to see. Given the economic bloodletting, American policymakers must reverse course and drive a stake through the vampire’s green heart.
Melanie Sturm has 15 years of private equity investment experience, previous to which she specialized in project finance at International Finance Corporation and mergers & acquisitions at Morgan Stanley and Drexel Burnham Lambert. She has an MBA from INSEAD and undergraduate degrees in international relations and economics from Tufts University.