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The Perils of Panda-Wrestling

By Sean Paige | On May 30, 2012 | No Comments | In blog, Featured

The White House continues to use the “Chinese-are-beating-us” argument to justify disastrous “investments” in Solyndra-like green energy boondoggles. Reports the Hill:

Obama campaign spokeswoman Lis Smith accused [Mitt] Romney of opposing renewable energy development while casting the president as fighting to ensure the U.S. doesn’t cede green energy markets to China.”

But the Chinese solar sector is taking a dive, according to this report, as the rest of the bankrupt world decides it just can’t afford endless taxpayer support for an expensive energy gimmick. And when the taxpayer subsidies go away, the industry does away, as we’re constantly reminded by solar power advocates who relentlessly lobby for the perpetuation of R & D funding, subsidies, mandates and whatever other props the solar sector requires to keep it limping along.

The White House keeps telling us we’re in danger of losing the “solar race” to China if we don’t keep the money flowing. But what if we’re racing China down a dead end street? China’s solar industry at the moment seems more like a paper panda, limping along on life support, than the titan of White House lore. China’s solar sector saw a 33 percent revenue decline, and 99 drop in profit, in the first quarter of the year. It’s turning out more product than an increasingly-disillusioned and deflated market can absorb.

Most of the “market” it was serving is/was government-generated and publicly-subsidized. But in Europe especially much of the mania has died down, as it dawns on the broke and the bankrupt that this is a fad they can’t afford. The green energy bubble is bursting, in short, leaving China, the supposed solar superpower, with its butt hanging precariously out. The country’s central planners may stay the course for the time being, in order to save face. But even central planners must bow to market and fiscal forces sooner or later.

The Washington Post doesn’t mention China’s overexpenditures on solar and wind in this pointed (and vigrx plus cheap extremely ironic) critique of Beijing’s alleged misadventures in “stimulus” spending, but it should have. Maybe the Post skipped that part because it would only make Obama’s ”doubling-down” on such follies seem even more ludicrous, and the ironies even more obvious. But unlike in the U.S., where the taxpayers still have some say in the matter when they see their money being squandered, one big difference is that China’s central planners risk little, in terms of popular backlash, when they make risky or bad “investments,” as they’ve been doing in this case. So China can afford to do stupid things, whereas we can’t – at least not indefinitely – given the fiscal realities. If China wants to be a “leader” in pumping-up this bubble, and in riding a wave that already crested, let China do so. We will end up with a little less egg on our faces at the end of the day.

Slapping protectionist tariffs on Chinese solar panels and wind towers may gratify a subset of domestic industry interests — who are every bit as subsidy-dependent as their Chinese counterparts — but they’ll ultimately prove self-defeating, by making solar and wind generation even more expensive, and less cost-competitive, than it already is. And that will only prolong the need for government subsidies, mandates and pro-renewables government interventions, at a time when an angry public is getting wise to the scams (thanks to illustrative cases like Solyndra) and certain fossil fuels are making a comeback, thanks to technical innovations like hydraulic fracturing. Washington’s efforts to keep the domestic U.S. renewable energy bubble from bursting will only hasten the day of reckoning, in short. Ignore the logic of the market and the market will have its revenge.

Punishing the Chinese for being only a bit more command-and-control than we are shows how far we’ve strayed from our own political and economic ideals. This one has the Law of Unintended Consequences written all over it.

Written by Sean Paige

1 Comment

  • Good article, Sean. I’ve never been sure why, if the Chinese government wants to subsidize our solar panels, that is such a problem for us.

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