Henry Lamb
September 25, 2011
The Solyndra dilemma
By Henry Lamb

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The political dilemma is not that surprising. Politicians can be expected to give special favors to their major contributors. Rarely are these political rewards so brazen, or so costly, as the $535 million loan guarantee given to the company whose major investor just happened to be George Kaiser, a major fund raiser for President Obama. Even more scandalous, was the loan restructuring agreed to by the Obama administration which subordinated repayment to the federal government in favor of repayment of Kaiser's personal investment in Solyndra.

A credit review panel in the Bush administration ruled unanimously against granting this loan. A similar review panel in Obama's administration predicted that Solyndra would go belly-up by September, 2011. Nevertheless, the Obama administration decided to grant the loan guarantee and make a spectacle of the event to promote Obama's new "green" economy.

Politically, this deal stinks to high heaven.

Political hanky-panky is the least of the Solyndra dilemma; the real dilemma is the reason behind Solyndra's failure.

The cold hard fact is that China can produce solar panels, and everything else for that matter, for a cost far less than competing products can be produced in the United States. The question is "why?" The answer is easy.

Start with labor costs. Thanks to the influence of labor unions, Solyndra paid its employees an average of about $100,000 per year. In China, a salary of $100,000 is unheard of. Most factory workers get paid about $.80 per hour. Rarely do they make more than $200 per month. America cannot compete in the face of this disparity.

Now consider regulatory compliance costs. According to Fox News, all American businesses with 100 or more employees have to comply with 855 different federal rules, at an average compliance cost of $10, 585 per employee. Last year alone, five federal agencies proposed 501 new federal regulations.

It's a different story in China. In its "Assessment of Current Practices," the U.N.'s Organization for Economic Co-operation & Development (OECD) said about China: "The general policy framework favouring development over the environment compromises the work of enforcement bodies at the subnational level and results in widespread non-compliance with environmental requirements." (Page 6) Regulatory non-compliance equals little or no regulatory compliance costs in China. America cannot compete with this disparity.

The New York Times reports that:

    "According to the Department of Energy, solar panel prices have dropped 42 percent since January, largely because of $30 billion in Chinese government subsidies to its solar sector. The United States' share of the worldwide solar-panel market has fallen from a peak of 43 percent in 1995 to just 7 percent last year."

China can subsidize its industry because it has plenty of cash from the U.S. annual trade deficit that consistently runs in excess of $200 billion. America cannot compete with this disparity.

America has to choose between two options: (1) continue the present course toward a government-managed economy, or (2) restore the free-market principles which built the most prosperous economy the world has ever known.

Neither the World Trade Organization nor the various so-called Free Trade Agreements are constructed on the principles of free-market capitalism. They are instead, examples of devices used by government in its attempt to manage markets.

The federal government is empowered by the Constitution to "Regulate commerce with foreign nations and among the several states...." The term "regulate," however, is not defined. Fox News' Judge Napolitano says that to regulate means to regularize or standardize; to assure that weights and measures and procedures are the same in every state. For at least the last 60 years, administration after administration has defined the term "regulate" as authority to manage and even to control commerce. The Obama administration seeks more control over the economy than any president in history.

The American economy cannot survive government control. The tighter the noose is squeezed around the neck of America's free market, the deeper the economic disaster becomes. The Obama administration continues to squeeze, insisting that another $10 billion in subsidies be given to his friends in businesses that pursue his "green energy" fantasy. He continues to insist that government take even more money from America's most successful people to redistribute to people who are less successful, as well as to people who don't even try to succeed.

The Obama administration is a clear demonstration of the philosophy "...from each according to his ability; to each according to his need...," or, according to his political reward. Solyndra had a financial need, and George Kaiser earned a political reward. Obama took taxes from successful people to pay his political debt and to reward a business doomed to failure from the start.

America cannot survive a managed economy. America must rediscover and restore free-market principles.

© Henry Lamb

 

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(See RenewAmerica's publishing standards.)

 

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