Watching President Barack Obama ruin the economy by repeating
every mistake of the 1930s, the one thing you could say was, “At
least he hasn’t passed a Smoot-Hawley.”
Not anymore. The great amateur autocrat has now put his
foot in it, kicking off a back-and-forth with China that is
threatening to envelop other countries of the developing world,
leading to who knows where. And what has set off this world trade
war? Wouldn’t you know, it’s that wonderfully soft and beneficent
solar energy, so clean, green and non-environmentally threatening,
the darling of every liberal politician. In order to protect a
domestic industry that literally lives off government subsidies,
the President has embarked on a path that could take us directly
back to 1931.
In case you haven’t been following, here’s what happened.
Embarrassed by the loss of $500 million on Solyndra plus the
bankruptcy of two other companies, Evergreen Solar and Spectrawatt,
which together totaled one-sixth of U.S. solar manufacturing, the
Department of Commerce has decided that China is to blame. The
department has ruled that the Chinese have subsidized their solar
panel industry by lending it $34 billion, thereby flooding the
international market with cheap products. This has led the price of
solar electricity to drop from $3.30 per watt in 2008 to $1.80 last
January to $1.20 today. In retaliation, Commerce is considering
slapping a tariff of anywhere from 50 to 250 percent on Chinese
solar panels.
Now first notice this. Everywhere you look
environmentalists and clean energy enthusiasts are
celebrating the rapid fall in price of
photovoltaic panels, arguing it heralds a glorious renewable
future. Google just spent $94 million buying a solar station in
California, claiming renewables will soon be “less expensive than
coal,”
according to Forbes. “The price of solar
panels has fallen 40 percent since the beginning of the year,”
exulted Rhone Resch, president and CEO of the Solar Energy
Industries Association, only last week on Huffington Post.
The European Union just announced confidently that by 2050 all
forms of renewable energy will be cheaper than fossil fuels or
nuclear and will be replacing all those nasty things. So is the
price of solar really coming down or is it just the Chinese dumping
subsidized products on the market, in which case the
Administration’s purpose is to jack them back up again?
Well, it’s hard to tell. In any case, the President has
elected to punish the Chinese and teach them a lesson. Are they
being appropriately contrite? No, as anyone would have predicted,
the Chinese have responded by accusing us of unfair trade practices
by subsidizing the thin film industry, the main component of solar
panels. So now we’re in an escalating situation. Will it stop
there? Not likely. This week the Indian Ministry of Commerce
announced it too would yield to a petition from its solar industry
and will investigate unfair trade practices by both China and the
United States, targeting Arizona-based First Solar, our largest
make of thin-film panels, and Suntech Power Holdings Co., the
world’s largest producer of solar panels based in China. So now
it’s a three-way trade war and growing fast.
Will that be the end of it? Don’t bet on it. Remember,
when President Herbert Hoover called Congress into special session
in 1929, he was only responding to a plea from two Western Senators
to protect farmers in Utah and Oregon. By the time Congress got
finished, every industry in America had carved out its own special
protected niche. The late Robert Bartley argued persuasively that
it was Smoot-Hawley that turned a normal two- or three-year
recession into the Great Depression that lasted for the next
decade.
There’s a more important point to be made here, however,
because it’s gong to be with us a long, long time. Every
country in the world is going to be subsidizing its renewable
energy sector. Spain did it, Germany is doing it, Denmark
and Britain are doing it, and just about every country on the
planet will eventually. Why? Because none of these
technologies are economical in a market environment.
Wind, solar and biofuels are all hopelessly inefficient and
expensive and always will be. All must be propped up by the panoply
of “renewable mandates,” “feed-in tariffs,” production tax credits,
investment tax credits, government loans and outright grants that
governments are providing everywhere.
The result is that every government in the
world will be able to accuse every other government of subsidizing
its renewables industry. The possibilities for future
trade wars are literally endless.
So let’s call a truce. In order to avoid worldwide trade
wars, let’s just have everyone admit that solar, wind, and all the
other renewables will never get anywhere without massive government
intervention in the economy. That way we can experience the “wave
of the future” and still have a world economy left when we’re
done.
