Forced greening to fix the economy?
I ran across this New Scientist piece about how Al Gore’s group thinks a regime of forced greening of the U.S. economy could actually lift us out of our current financial turmoil. It’s the same thing Obama (and, to a lesser degree, McCain) has been blabbing about on the campaign trail. The idea is that having the government force us to use ‘green’ technologies will result in a new economic boom.
Well, let’s think about that for half a second.
Say I’m a business owner who makes widgets and employs a certain number of people at a certain wage, while earning a profit that keeps me coming to work every day. Now the government comes along and says that the fossil fuel plant in my area from which I get my electricity must shut down and be replaced by a “green” power plant of some kind. Now, we know this new green facility will be quite a bit more expensive to operate and will charge more for its output (because if it was cheaper, it would already be there due to market forces). So, I must now pay more for my power, which means I have to raise the prices of my widgets or find other places to cut back. If I raise the prices of my widgets, consumers now either pay more for them (meaning they have less money to spend on other things) or they opt not to buy them—either way, they’re made worse off. If I don’t raise my prices, I need to cut costs somewhere. If we assume for the moment that I’m already operating extremely efficiently due to market competition, my only options are to reduce wages or lay off one or more employees (either way, one or more employees are made worse off) or to reduce my profits (in which case, I’m made worse off). In fact, if my profits are forced down too much (maybe even just a tiny bit below what they currently are), I may find that I can make more money working for someone else. Then I lay off everyone, close the business, and the widget market is less competitive, making society worse off.
Of course, those involved in building and operating the government-mandated “green” power plant and delivery infrastructure are better off, but because their endeavor was not a market action resulting from myriad voluntary decisions using the price system to efficiently allocate resources, it necessarily costs society more than if it had not been done (otherwise, society would have already done it). In other words, this one government policy destroys a significant amount of society’s wealth.
In addition, the government, in order to fund the various bureaucracies that will implement this scheme, will be either directly taking more of my income in taxes or printing more money (which devalues my dollars). I then have even less money to spend on goods and services or with which to pay employees.
Now, apply this to each of Obama’s enviro-economic policy proposals, and you end up with severe and widespread destruction of wealth throughout society. Could it make our air cleaner? Sure, I suppose it’s a possibility. Will it reduce global warming? That’s entirely up for debate. But to suggest that these policies will somehow help the economy and create wealth is bizarre.
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