The Solyndra disaster is the perfect example of what happens when the federal government decides to play venture capitalist with taxpayer’s money.
Private venture capitalists invest with the sole intention of creating successful companies. Whether a company comprises two MIT geeks with little to recommend them but a groundbreaking search algorithm, or has a labor-intensive manufacturing operation that requires tens of thousands of workers, the focus is on turning a profit. The number of people employed is not the primary issue.
In contradistinction, when the Department of Energy decided to play venture capitalist with its loan guarantee program, it focused less on building successful companies, and more on finding which companies it could fill with the most warm bodies. And then it carelessly threw money at them in pursuit of improving the employment statistics. Here is an instructive excerpt from the DOE website, highlighting how the department regarded its investment in Solyndra:
The Department of Energy finalized a $535 million loan guarantee for Solyndra, Inc. to finance construction of the first phase of the company’s new solar manufacturing facility in Fremont, California. The project, eligible under Section 1703 and Section 1705 of Title XVII of the Energy Policy Act of 2005, will create 3,000 construction jobs.
The Department of Energy undoubtedly hoped Solyndra would become a successful company, but their interest was clearly primarily in employment for the sake of employment.
Solyndra is the poster example of this mindset and a story whose plot we can expect to see repeated. It goes like this: A bunch of extremely rich people invested in the company in the hope of both making a fortune and changing the world in the process. When reality hit, and investors decided they didn’t want to put more money into the company, the endeavor looked as if would come to a sticky end. But then, Obama was elected, the heavens opened, the light came down, and the celestial choirs started to sing. The stimulus was passed and, all of a sudden, a company that was about to go under — for the oh-so-old-fashioned reason that it wasn’t viable — gets a lifeline from the DOE. Fast forward a couple of years: Solyndra ran out of money again and, since none of the investors would put additional capital into the company, it had to shut down. It happens every day, except this time the ship went down with $535m of your dollars in the hold.
This is not a partisan issue. Solyndra was taking advantage of a Bush-era program, but Team Obama picked up the ball and ran with it, and under this administration the project has become the stimulus-enhanced monstrosity it is today. Take a cursory look at the DOE website and note how it highlights, right there in the middle of the page, how much has been loaned and how many jobs those loans have created. The numbers show that in return for $38.7 billion invested, 65,578 jobs have been created.
That’s comes to a staggering $590,000 per job.
Come Thursday September 8, when the president outlines his big, bold job bill, just remember how well his last one did.
How great would it be if the Republican debate next week was all about THE FAILURE OF GREEN JOBS, specifically the Solyndra story? Then the next day Obama's "clear plan for jobs" is largely about . . . MORE GREEN JOBS!
Of course it is an NBC debate, so most of the questions will be about pressing matters of creationism and climate change "denial" -- which is hardly what Americans want to hear more about from these candidates.
So it will be up to the candidates to steer the topic to "Green jobs." Such as when the moderator asks them about their "plan to create jobs by giving taxbreaks to the super-rich, even though Warren Buffet says it's a bad idea" they will have to respond by changing the subject to "well one thing I won't do is waste taxpayer money on stimulus for phony-crony corporations like Solyndra."
Reply to this commentLinkReport AbuseIn this particular case I believe they made back most of this money the transactions between employees and supply chains were taxed primarily by the US government. Generally in this situation the problem about solar was that the united states did not compete in the international arena as they offered less money for the ventures as a whole, and this is necessary in order to build up economies of scale. In particular to this situation I think because this company was relatively small and they were trying to vertically integrate from the start it was troublesome as they had to manufacture both the modules and the silicon thin-film solar cells running on $1.5 billion equity/loan. Furthermore in a concentration type configuration typically they would use less solar cell surface area and dissipate heat better.
Reply to this commentLinkReport AbuseIn this particular case I believe they made back most of this money the transactions between employees and supply chains were taxed primarily by the US government. Generally in this situation the problem about solar was that the united states did not compete in the international arena as they offered less money for the ventures as a whole, and this is necessary in order to build up economies of scale. In particular to this situation I think because this company was relatively small and they were trying to vertically integrate from the start it was troublesome as they had to manufacture both the modules and the silicon thin-film solar cells running on $1.5 billion equity/loan. Furthermore in a concentration type configuration typically they would use less solar cell surface area and dissipate heat better.
Reply to this commentLinkReport AbuseIf the government gives away a dollar, they don't get a dollar back in taxes paid, especially if the company that is subsidized never turns a profit.
Reply to this commentLinkReport Abuse$590,000 per temporary job. When the tax money stops, so does the job. Worse than "make work" and much more along the lines of a broken solar window fallacy. You're left with a factory that doesn't work in a vain attempt to fix something that isn't broken in the first place.
Maybe it's just me, but it seems pretty twisted to call for even bigger support from U.S. government so that it can compete with China's government over a market that is created and subsidized entirely by the U.S.government.
Reply to this commentLinkReport AbuseRegarding your last paragraph:
This is related to the fact that in all the statements, by Obama and others, about "we cannot lose leadership in green energy/birdshredders/solar panels" or "China is going to be ahead of us in ...", the three separate "leadership" positions of
-R&D in said technology
-market share of manufacturing
-rate or total amount of installation of said technology
are freely mixed without distinction.
So you get situations like "the Chinese are the largest manufacturers of green technology X, so we must now respond by subsidizing/forcing X usage, so that we will be leaders in buying and having X."
Utterly insane. If you look back at those speeches full of green pathos, you'll always find the word "leader" either not qualified as to sell or buy, or blatantly mixed - and no-one has ever called him on it.
Reply to this commentLinkReport AbuseThe problem with public "investing" is the profit motive. Public "investing" isn't interested in the profit motive, and its the most important part of investing! If you aren't interested that the "investment" isn't going to generate income and profit it probably won't.
Worse yet it ends up losing money, requiring more "investment", making sure you can't even get the original money put into it back. So that money is gone forever. That is tax money. Tax money comes from those who made money. Had that money been left in the private sector, it would likely still exist at minimum. Why are we taking money from those who know how to make money and put it into the hands of people who cannot?
Private investors want their investment to make money. So they don't bother with projects that are clearly money losers. Yes, they can lose money, but its some private persons money. The public isn't on the hook. They shouldn't ever be bailed out by the public. Ever.
Government should be prohibited from "investing". Solyndra should have gone out of business years ago at minimum. Of course it probably shouldn't have been created to begin with. The loses should have stayed in the private sector. Now another half a billion of tax money is down a rat hole.
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