|“Green Jobs” from Government Subsidies Wither on the Vine|
By Ashton Ellis
Thursday, July 21 2011
When it comes to taxpayer money, economic development bureaucrats like to pretend they’re venture capitalists. But when government gambles fail, it’s the average citizen – not some wealthy investor – who’s left to pay the bill.
The latest government subsidized fad is promoting “green jobs” with seed money the private sector won’t sow. The most recent example comes from Salinas, CA, a city of 143,000, with a prosperous agricultural industry that makes it, along with the rest of the state’s Central Valley, “The World’s Salad Bowl.”
But Salinas’ city leaders aren’t content with feeding the world fresh produce. In the City’s most recent Economic Development Strategic Vision and Recommended Action Plan, government officials want to attract “new businesses and industries that provide higher paying jobs while meeting the sensitivity of no impact or low impact to the region’s physical environment.”
In policy terms, that translated into giving a $300,000 “community development grant” to a cash-strapped start-up electric car company called Green Vehicles to relocate to Salinas in 2009. Flush with public funding, Green Vehicles President and Co-Founder Mike Ryan gushed that a firm that had yet to manufacture a car could create 70 high-paying, low impact jobs, while generating $700,000 in taxes a year to the city.
Unfortunately for Salinas’ taxpayers, that didn’t happen. Along with an additional $240,000 grant from the city, Green Vehicles also received $187,000 from the California Energy Commission.
Total taxpayer subsidies paid to Green Vehicles: $727,000.
Total cars sold: 0.
Total “sustainable” jobs created: 0.
Possibility of getting any of that money back now that Green Vehicles has closed its doors: 0.
In a blog post eulogizing his company’s demise, Green Vehicles’ Ryan laid the blame on not getting enough start-up capital.
Requiring formulas for success that were not satisfied by silly promises, venture capitalists weren’t buying Ryan’s vision to outperform General Motors’ Volt or Nissan’s Leaf (two niche electric cars that combined have sold less than 10,000 units in a nation with over 200 million licensed drivers, despite significant purchase subsidies offered at taxpayer expense).
That’s why Ryan was so eager to move his company from data-driven Silicon Valley to emotionally driven Salinas, which local government wants to remake into an “electric valley.”
The only accomplishment Salinas’ city leaders can claim in the Green Vehicles fiasco is giving false hope to a failed business.
The story continues across the country. Energy tycoon T. Boone Pickens touts the plains of West Texas as “the Saudi Arabia of wind” and wants federal taxpayers to lay down the necessary infrastructure so that he can put up windmills and make a profit.
The ethanol lobby in Iowa has succeeded in turning many otherwise free-market Republicans into would-be subsidizers-in-chief when it comes to diverting the nation’s corn supply into car fuel production. (The mandated increase in the supply of ethanol in fuel is one of the main reasons food prices rise.)
Whether they are local economic development gurus or national political appointees conjuring up new programs to birth an unsustainable industry, bureaucrats fundamentally overestimate the ability of government to create jobs. At best, government can create the conditions for businesses to grow and add jobs, such as by maintaining a low tax rate over a broad base.
The only other action that government can take to make a locale hospitable to economic growth is to provide the right kind of infrastructure.
Ironically, the Central Valley provides a marvelous example with the California aqueduct, a 701.5 mile public waterway that – along with revolutionary irrigation methods – made the Central Valley into “The World’s Salad Bowl.”
Now, that legacy is in danger because of an ongoing fight between the environmentalist movement and Central Valley farmers over the presence of an endangered fish in the aqueduct. Rather than risk killing a few smelt, however, environmental regulators have shut off farmers’ access to the aqueduct, creating miles of dusty wasteland.
All of this shows that government workers are in the wrong position to be venture capitalists. Bureaucrats do not create the wave of the future. They do best when focusing on just trying to keep up with today. In the Central Valley, that means putting the focus back on the original “green jobs”: agricultural work that gave the region the wealth it now throws away on failed economic development.
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