Wednesday, September 12, 2012

Following the Centrally Controlled Chinese Economy instead of Trusting the Free Market on Wind, Solar and Electric Cars ... Not a Good Idea, Mr. President

Americans have long had the highest standard of living in the world. We've always embraced the free market capitalist based system as the way to achieve both individual and general prosperity.

As economic times have become difficult these past few years, the "progressives" have taken center stage in our government and the government smartest guys in the room types are attempting to solve our many financial, energy related and other problems by using their allegedly "superior" intelligence to do so. What a crock!

Why these in reality not-so-smart government officials have the audacity to think that they know more than the common sense ordinaries -- We the People -- know remains a mystery to me. I guess it's because the government elitists believe that those of us who adhere to the MOM way are just not as smart as the free spending super smart OPM government knows best gang.

Here's what I believe and always have --- all of us are smarter than a few of us. That's why the free market works.

I also believe that MOM and self interest will provide ample incentives for average ordinary Americans to make better decisions concerning our own lives than government OPM spenders could ever make for us.

The progressives among us, however, aren't buying that. Not at all. They believe the sophisticated and hard working Chinese will put us poor Americans out of business and under the competitive table if the U.S. government doesn't on our behalf "invest" in our future. At least that's the government knows best story. Well, my friends, that's simply not true. And here's an example of why it's not.

China's Solyndra Economy is subtitled 'Government subsidies to green energy and high-speed rail have led to mounting losses and costly bailouts. This is not a road the U.S. should travel." 

It cautions President Obama and other progressives by telling the story of what happens when we follow non-market policies and attempt to emulate the government knows best policies of the non-free market Chinese:

"President Barack Obama has held up China's investments in green energy and high-speed rail as examples of the kind of state-led industrial policy that America should be emulating. The real lesson is precisely the opposite. State subsidies have spawned dozens of Chinese Solyndras that are now on the verge of collapse.

Unveiled in 2010, Beijing's 12th Five-Year Plan identified solar and wind power and electric automobiles as "strategic emerging industries" that would receive substantial state support. Investors piled into the favored sectors, confident the government's backing would guarantee success. Barely two years later, all three industries are in dire straits. . . .

Chinese solar companies blame many of their woes on the antidumping tariffs recently imposed by the U.S. and Europe. The real problem, however, is rampant overinvestment driven largely by subsidies. Since 2010, the price of polysilicon wafers used to make solar cells has dropped 73%, according to Maxim Group, while the price of solar cells has fallen 68% and the price of solar modules 57%. At these prices, even low-cost Chinese producers are finding it impossible to break even.

Wind power is seeing similar overcapacity. China's top wind turbine manufacturers, Goldwind and Sinovel, saw their earnings plummet by 83% and 96% respectively in the first half of 2012, year-on-year. Domestic wind farm operators Huaneng and Datang saw profits plunge 63% and 76%, respectively, due to low capacity utilization. China's national electricity regulator, SERC, reported that 53% of the wind power generated in Inner Mongolia province in the first half of this year was wasted. One analyst told China Securities Journal that "40-50% of wind power projects are left idle," with many not even connected to the grid.

A few years ago, Shenzhen-based BYD (short for "Build Your Dreams") was a media darling that brought in Warren Buffett as an investor. It was going to make China the dominant player in electric automobiles. Despite gorging on green energy subsidies, BYD sold barely 8,000 hybrids and 400 fully electric cars last year, while hemorrhaging cash on an ill-fated solar venture. Company profits for the first half of 2012 plunged 94% year-on-year.

China's high-speed rail ambitions put the Ministry of Railways so deeply in debt that by the end of last year it was forced to halt all construction and ask Beijing for a $126 billion bailout. Central authorities agreed to give it $31.5 billion to pay its state-owned suppliers and avoid an outright default, and had to issue a blanket guarantee on its bonds to help it raise more. While a handful of high-traffic lines, such as the Shanghai-Beijing route, have some prospect of breaking even, Prof. Zhao Jian of Beijing Jiaotong University compared the rest of the network to "a 160-story luxury hotel where only 11 stories are used and the occupancy rate of those floors is below 50%."

China's Railway Ministry racked up $1.4 billion in losses for the first six months of this year, and an internal audit has uncovered dangerous defects due to lax construction on 12 new lines, which will have to be repaired at the cost of billions more. Minister Liu Zhijun, the architect of China's high-speed rail system, was fired in February 2011 and will soon be prosecuted on corruption charges that reportedly include embezzling some $120 million. One of his lieutenants, the deputy chief engineer, is alleged to have funneled $2.8 billion into an offshore bank account.

Many in Washington have developed a serious case of China-envy, seeing it as an exemplar of how to run an economy. In fact, Beijing's mandarins are no better at picking winners, and just as prone to blow money on boondoggles, as their Beltway counterparts.

In his State of the Union address earlier this year, President Obama declared, "I will not cede the wind or solar or battery industry to China . . . because we refuse to make the same commitment here." 

Given what's really happening in China, he may want to think again."

Summing Up 

Have we lost our sense of perspective and an understanding of what made us the freest, most moral and prosperous society in the history of the world?  If not, then what's the deal?

Why do we want to follow the non-free centrally controlled Chinese economy when deciding how best to satisfy our energy needs and compete globally in the future?

Haven't we done pretty well these past few hundred years by following free market principles and allowing free people to choose how to invest and spend their MOM?

What makes anybody believe our future depends on the "smart" OPM progressives instead of ordinary people acting freely in a MOM centric manner? 

Why do the American progressives believe the Chinese dictators have it all figured out and we don't? Why do they insist on emulating the top down ways of the Chinese?

Is it because the progressives believe We the People aren't as smart as the government knows best elitist politicians think private sector participants would need to be before being "trusted" to make our own decisions about wind, solar, electric cars, high speed rail, oil, natural gas, coal and atomic energy in a free market and using MOM principles?

Or is it perhaps because our progressive government knows best elitist politicians aren't nearly as smart as they think they are? Could it instead be that We the People aren't so dumb after all?

And by the way, what's wrong with the U.S. policy makers once again embracing free market principles and individual freedoms as fundamentally necessary to best provide for the general welfare of a self governing society of equals?  Isn't that also the moral way?

So let's get government out of the way and permit the oil and other private sector companies to drill for oil and gas, and permit the coal companies to mine more coal. And invest in wind power, solar energy and electric cars as well, assuming they do so with their own money, of course.

Think of the trillions of dollars that would mean for the taxpayers and citizens. More MOM and Less OPM. More freedom and less government intrusion. What a great plan!

Thanks. Bob.

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