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Cleantech Crash? Why Government Should Go Green

The government has a definite role to play in the promotion of new green technologies and energy sources, no matter what budget hawks like to think.

A picture of an arrow on a boardwalk

[dropcap style=”font-size:100px; color:#992211;”]L[/dropcap]ibertarians often like to quote that old motto of Jefferson’s “That government is best which governs least” to support their opinion of a low/no tax government responsible for national security and not much else.

The only problem is that Jefferson never uttered that phrase. The quote was made most popular by another American, Henry David Thoreau, who took it to anarchic ends: “Carried out, it finally amounts to this, which I also believe, – ‘That government is best which governs not at all.’”

Americans had a glimpse of that utopia this past year with a government shutdown that lasted for over two weeks; closing parks and national monuments, threatening military payrolls before a last-minute deal, and costing the United States billions in lost revenue.

The Cleantech Crash

In the past several years of attacks on US government improprieties, one of the biggest targets has been so-called ‘wasteful’ spending, particularly in the energy sector. Green energy grants to support wind and solar projects as well as electric cars have drawn the ire of free-market capitalists who decry government intervention as anathema to the proper functioning of supply and demand.

Recently the US weekly television news program 60 Minutes investigated government grants to companies like Tesla Motors, A123, and the infamous Solyndra – a scandal more manufactured than real. 60 Minutes called the piece the Cleantech Crash, which falsely linked failures by venture capitalists in the green industry with government investment. It is only the latest in a series of missteps by the vaunted news show that have included an apology for the non-existent Benghazi ‘scandal’ and uncritical reviews of Amazon’s creeping market dominance and the NSA’s invasions of privacy (both international and domestic).

The Nation’s Zoë Carpenter critically examines 60 Minutes failures on the piece, showing with almost minimal effort that not only did the producers fail to unwrap the numbers on government versus private investment in green tech, but that many of their claims were easily refuted by a call to the US Department of Energy.

[quote]The problem with many

of the most popular

free-market cliches is

that development doesn’t

happen through free markets[/quote]

However, Carpenter’s article does open her to attack by those who are on the fringe of amateur free-market advocates, a fringe that has become increasingly, and frighteningly, vocal. The idea that the government set aside $10 billion for anticipated losses, and has done well with only $3 billion in loan write-offs, is shocking to many who don’t understand why the state has a role in development and in the proliferation of such technology, whether or not it is ultimately successful.

Government as loss leader

Over at Foreign Affairs, former investment banker William Janeway argues persuasively for the government as loss leader in the formation of tech bubbles. Whereas investment and speculation bubbles have come and gone with disastrous consequences (often in sync with decreased periods of financial regulation), bubbles that have crept up in new technologies have often failed only in their initial attempts, while planting the seeds of further growth. The government can go a long way to push these bubbles and lay the groundwork for radically increased development in the future.

The key is infrastructure. Whereas financial bubbles leave only numbers in columns, the quixotic communal dreams of an international system that we all rely upon, infrastructure is something that inherently cannot disappear. Thus former investment bubbles such as canals, roads, rail, electrical systems and telecommunications, while experiencing an initial boom and bust cycle, left behind the transport and communication links that would enable new growth and prosperity.

Once the rails were laid down, they weren’t going anywhere and could eventually be incorporated into a national rail network that still is the envy of the world, carrying nearly 40% of America’s inter-city cargo. The miles of dark fiber (unused optic cables that can carry data over vast distances) leftover from the dot com bust have mostly been turned on, as Moore’s law applies to data just as much as it does to processing power.

If the government had attempted to build this infrastructure when it was needed, rather than when it anticipated a boom and was met by a bust, they never would have been able to keep up with demand, severely weakening growth.

No such thing as a free market

The problem with many of the most popular free-market cliches is that development doesn’t happen through free markets. Indeed, many of the recent Economic Nobel Prize laureates have made their careers proving, as Ha-Joon Chang writes, that “There’s no such thing as a free market.” Infrastructure, especially, is limited by massive investment for very small initial profits. Few entities outside of states have the funds to build a rail network or a telecoms system while retaining liquidity to survive while revenues are low.

Such is the reason (one among many) why the US gave AT&T monopoly control over the telecoms industry for so many years. The major caveat being that the company had to provide service to Americans across the country – not just where it was profitable.

America’s problem today is that the US government has not taken more of a venture capitalist approach to investment. The US is below the median for broadband penetration, speed, and price among OECD countries according to the latest surveys. [quote]With America’s failing

infrastructure, now is the

time to reinvest in something

other than tanks and guns[/quote]The reason is simple – US companies have very little competition compared to many countries in Europe. The government has not mandated companies increase their speed or provide better service, and the oligopoly currently in place has done little to achieve the goals of a ‘free market.’

Freedom of expression

This is especially relevant if, like some at the UN, you consider access to broadband internet a matter of human rights. This may seem laughable to those who have traveled to some of the poorest countries in the world, but if we look at it in a sort of Maslovian Hierarchy, it makes more sense.

Access to health, food, and protection are at the base of the pyramid. However, freedom of expression is highly prized among democracy advocates, and where would we be if, for example, Syrians had no outlet to document the horrors occurring on a daily basis in their country?

Public goods are something that the free market has never handled well. With America’s failing infrastructure, now is the time to reinvest in something other than tanks and guns. The government has a definite role to play in the promotion of alternative sources of fuel and energy, no matter what budget hawks like to think, and it should continue to do so in the cleantech fields, no matter what hack reporting is thrown their way.

Sidebar Image: Sean Keenan


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