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More Green Crony Capitalism

Posted By Nicolas Loris On November 19, 2009 @ 5:02 pm In Energy | Comments Disabled

Green energy investments are coming from every direction. Whether it is the stimulus package or the cap and trade bills proposed in Congress, the government is eager to invest taxpayer dollars in renewable energy technology. As Americans become desensitized to the copious amounts of money the government is spending, clean energy investments are growing from millions to billions. And companies are chomping at the bit [1]:

Last month, for example, President Barack Obama announced $3.4 billion in government-stimulus grants for power-grid projects. About one-third of the recipients are GE customers. GE expects them to use a good chunk of that money to buy its equipment.

The government has taken on a giant role in the U.S. economy over the past year, penetrating further into the private sector than anytime since the 1930s. Some companies are treating the government’s growing reach — and ample purse — as a giant opportunity, and are tailoring their strategies accordingly. For GE, once a symbol of boom-time capitalism, the changed landscape has left it trawling for government dollars on four continents.”

“I think we will do better than most on the stimulus,” says [1]GE Chief Executive Jeffrey Immelt. And herein lies the problem. Businesses know, as Immelt put it, that [1]“the government has moved in next door, and it ain’t leaving.” So they invest time, money and resources to protect their respective bottom lines. Special interest politics, also known as rent-seeking [2], has always been a part of politics, and it’s unlikely to go anywhere and you can’t necessarily blame businesses for dipping their hands in the government’s pocket if they know the money is going to be spent.

But money spent on political lobbying is like an all-pay auction. Businesses don’t get their money back if the ball doesn’t bounce their way. The common example used in public choice is bidding a $1 bill. Let’s pretend the auctioneer is the government and businesses the bidders. Business A bids .25 cents and will profit .75 cents. Business B raises the bid to .50 cents and stands to win .50 cents. Business C bids .75 cents and gains a quarter. Business A and B are both out .25 and .50 cents, respectively. They could each bid a dollar to at least break even. If they do that, Business C will be out .75 and could end up bidding $1.25 – then they’d only be out a quarter. And the game continues. And who knows what policy the government will actually choose to implement. It goes from a game of scheming for benefit to minimizing losses with the consumers losing the most.

Of course the reason the government has to intervene in the first place is that these projects are too expensive to compete otherwise. Any profitable endeavor won’t need the taxpayers’ help. When the government picks winners and losers, Americans lose as taxpayers and consumers, paying for pricier electricity.

The bottom line, as said by [3]UC Davis economist David Zettland, is this: “Politicians benefit from lobbying; lobbyists compete to receive our money and rights; and citizens suffer.”

[youtube]http://www.youtube.com/watch?v=QN_kt97w7Wg&feature=player_embedded[/youtube]


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/11/19/more-green-crony-capitalism/

URLs in this post:

[1] chomping at the bit: http://online.wsj.com/article_email/SB125832961253649563-lMyQjAxMDI5NTE4NjMxMjY5Wj.html

[2] rent-seeking: http://www.thelockeinstitute.org/journals/luminary_v1_n2_p2.html

[3] as said by : http://aguanomics.com/2009/11/political-economy-of-lobbying.html

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