Nevada politicians and business leaders hoping to cash in on government money have been busy promoting “green” as a wonderful thing for both the Nevada economy and for the environment. I am highly suspicious of the entire idea. None of the green technologies are economically sustainable by themselves without huge government subsidies. this may change sometime in the future.
This article from the Times of the UK compares government officials falling all over themselves to get on the “Green” bandwagon to those politicians that were so eager to support the subprime loans that contributed to our foreclosure situation. It suggests that the effort could ultimately make the economy worse.
Electoral bribes apart, there is a more serious misconception behind the idea that ploughing subsidies into the “green economy” is a sure-fire way of boosting domestic employment. At best it will move people from one economic activity to another. Labour’s plans would subsidise car production workers to move from making conventional models to electric vehicles, which hardly anyone wants to buy. Osborne’s proposals would subsidise the double-glazing and home insulation industry and suck in many workers gainfully employed (without subsidy) elsewhere.
The key to a successful, wealth-generating economy is productivity. Saving energy is what businesses have done already, because it lowers their production costs. The problem with any form of subsidy is that it makes the consumer (through hidden taxes) pay to keep inherently uneconomic businesses “profitable”. Meanwhile, diversified energy companies such as Shell, with plenty of speculatively acquired wind-farm acreage, are salivating at the plans by Obama to introduce cap-and-trade carbon emissions targets for American industry.
Obama’s energy secretary, Steven Chu, had some soothing words for US manufacturing companies that complained that the new policy will make them even less competitive with Chinese exporters, since the people’s republic has indicated that it has no intention of inflicting a similar increase in energy costs on its own producers. He suggested that America might have to introduce some sort of “car-bon-intensive” tariff on Chinese goods. One of China’s envoys, Li Gao, immediately retorted that such a carbon tariff would be a “disaster”, since it could lead to global trade war.
Actually, Mr Li is right: and this is how an achingly fashionable and well-intentioned plan to create “millions of new green jobs” could instead end up making the global economy even sicker than it is already.