Obama's Crony Capitalism
What the Solyndra debacle reveals about Obama's economic strategy
The president's address on jobs last night included some soaring phrases, but it left out one crucial word that epitomizes his approach to economics: Solyndra.
Fourteen months ago, the president was using his sonorous baritone to deliver soaring rhetoric about how his policies helped launch that now-broke company, which made cylindrical solar panels. The administration fast-tracked Solyndra's loan guarantee through the American Recovery and Reinvestment Act—i.e. the stimulus—perhaps because Solyndra's principal backers just happened to have donated huge sums to the Obama election campaign. Washington guaranteed more than a half-billion in loans to Solyndra on the promise of 4,000 jobs.
"This new factory is the result of those loans," the president said at the Fremont, Calif., facility—a facility The Washington Post termed a "signature project of President Obama's initiative to help create clean-energy jobs." The result of those loans now? Solyndra has shut its doors, its 1,100 former employees are jobless, and the taxpayers are on the hook for perhaps hundreds of millions of dollars.
Viewed in isolation, the Solyndra story is mildly troubling. But it is nothing Washington has not seen before. The late, great columnist Molly Ivins wrote some crackerjack pieces about the return on investment that corporate sharpies used to get from their campaign donations to Republican politicians. The Solyndra story sounds like the same old, same old.
Except it isn't. The Solyndra story encapsulates a much bigger issue than mere crony capitalism, bad as that is. Because Solyndra is not alone. The Obama administration has sunk billions into loan guarantees for dozens of other renewable-energy companies as well.
This is known as the political allocation of economic resources, and it entails all kinds of problems. The first and most basic: It's wrong. Government should not be picking winners and losers in the marketplace.
Problem No. 2: corruption. When government puts its massive thumb on the market scale, corporations have a huge incentive to try to win government's favor. Hence: campaign contributions and lobbyists galore. Progressives who want to keep money out of politics should help libertarians build a high wall between economy and state.
Problem No. 3: the distortion of market incentives. Although federal policy was far from the only reason for the recent housing bubble and crash, it played a significant role. And even when market intervention does not produce a crash, it can still produce a creature like the Chevy Volt—an electric vehicle for which there is zero demand despite a whopping $7,500 federal tax credit for purchase—or Cash for Clunkers. That idea, now universally derided, seemed bright at the time, at least to some. In retrospect, it seems as smart as paying people to burn down their houses to stimulate demand for new ones.
Such market distortion shifts resources from more productive to less productive purposes, which inevitably produces less prosperity—fewer jobs at lower pay. Want evidence? See last month's New York Times story "Number of Green Jobs Fails to Live Up to Promises," which concluded: "Federal and state efforts to stimulate creation of green jobs have largely failed, government records show." For the Times to concede that government intervention in pursuit of progressive political goals has not worked is like National Review criticizing a Republican. The proof has to be overwhelming.
The fourth problem inherent in the political allocation of economic resources is the biggest: The underlying assumption that it is a good thing because politicians and bureaucrats have more knowledge, wisdom and virtue than everyone else.
But they do not. First, there is simply no way a government of even leviathan proportions can know more about, say, Joe's Auto Parts than Joe himself does. To think it can know more about the entire auto industry than the industry itself is absurd. Repeat this formula for all other industries.
Government and politicians also like to think they know what is best for America. Energy Secretary Steven Chu epitomized this attitude when he argued for new lightbulb standards by saying, "We are taking away a choice that continues to let people waste their own money." (The morons.) But since America is simply the sum of all the citizens who live in it, then to say the government knows what is best for the country is to say the government knows more about what is best for Abigail Anderson of 423 Morris Lane, Wilmington, Del., than Ms. Anderson does herself—and likewise for each of America's other 311 million citizens. Absurd.
Then there is the notion that government action proceeds from a place of virtue because politicians are not motivated by self-interest. Instead, like shepherds tending the flock, they seek only to protect the sheep (stupid and helpless creatures that they are) from the wolves at the edge of the clearing. It is a flattering conceit, and has no more to do with reality than an LSD trip.
It is not disinterested altruism that makes Obama think he can reshape the energy sector for the better, or conjure up jobs where employers do not want them. Such beliefs stem from unbridled hubris. And the result of hubris can be summed up in one word: Solyndra.
A. Barton Hinkle is a columnist at the Richmond Times-Dispatch. This article originally appeared at the Richmond Times-Dispatch.