Coyote Blog

Well, it appears that Solyndra has not scared solar companies off from feeding at the state trough

More subsidies for the solar industry in Arizona are crucial to avoid being left behind by other states and China, a Phoenix business leader said today at a solar-power conference.

Tax incentives and loan guarantees "make a lot of sense" right now in Arizona, which is already a leader in the industry, said Barry Broome, president and CEO of theGreater Phoenix Economic Council at the Solarpraxisconvention.

Despite the high-profile financial failure of the Solyndrasolar plant this year in California, Broome told a packed conference room that solar power is destined to be a major force in Arizona and elsewhere. The only question, as he sees it, is whether sunny-skied Arizona will take full advantage....

Behind Broome on an overhead screen, a chart showed that Texas, Oregon, Nevada and other states provide more "aggressive economic development tools," (a.k.a. public money), for solar power than Arizona, and the state can't compete without doing the same thing.

What is this, a football game?  This strikes me as turn-of-the-century small town boosterism updated to the 21st century, with a dollop of tribal rivalry thrown in. He's talking mainly about manufacturing of solar components.  I am left with a couple of questions

• Why should the fact that Arizona has sunny skies have any bearing on whether or not it is an appropriate spot to manufacture solar panels.   Should Seattle subsidize umbrella manufacture because it is rainy there?   My sense is that transportation costs are a small part of the price to end users.  Arizona clearly will be a great spot for solar panels to be installed -- why does that mean we need to manufacture them?
• If other states like Oregon or China are subsidizing solar products that we might buy, shouldn't we celebrate that?  Thanks, taxpayers of Oregon, for forking over your tax money so we can buy solar panels cheaper in Arizona.  Why in the hell should be try to out-do them at this?  Now we can go invest our capital in a business that actually makes money.
• I am obviously not a fan of government-led economic/industrial policy, but if I were, why in the hell would I want to direct my state's capital and manpower towards a business that requires subsidies, ie can't make a profit  on its own in the marketplace?

Its just too easy to snipe at about everything in this article, but this caught my eye in particular

To help move the industry's message, Broome said, solar advocates must stop infighting over their competing technologies and present a unified and positive position.

Normally, I think an economist would argue that in an immature (both market-wise and technologically) product, competition and creative destruction between various competitors is critical to ultimate success.  So in fact this advice is totally senseless, unless you see the industry as a taxpayer-money-magnet rather than a real business, and then it makes perfect sense.  Politics, after all, demands simple sound bytes and a unified front.

Update:  In the first week of Harvard Business School, I learned a lesson from strategy class, in a series of two cases, that still may be the most important thing I learned there.  The cases were a hot, sexy electronics company, and a boring, dull as dirt water meter company.  To cut to the chase, the electronics company sucked as an investment, and the water meter company was a gold mine.  The moral, among several takeaways, is don't get fooled into thinking the hot, sexy business of the moment is necessarily a good investment.  Our development agencies in AZ are making this mistake in spades.  In fact, the entire history of government economic development efforts in Phoenix has been to chase sexy businesses at the top of the market, spend taxpayer money to get some plant relocations, and then see the businesses struggle.  We certainly did this with semiconductor fabs a couple of decades ago.

The Arizona Republic had this headline on the front of the business section this morning:

Arizona economy will get boost

Oh, is there some interesting structural change in the economy?  Did some local company get a big contract.  No, it turns out that the state government is going to reorganize some of its committees:

Gov. Janet Napolitano announced creation of a new non-profit on
Thursday aimed at improving the state's economy and reducing its
dependence on housing and construction.

The Arizona Economic Resources Organization, or AERO, will bring
together the state's "disorganized" business-recruiting efforts, she
said.

AERO's board of directors will include representatives of government
organizations such as the Commerce and Economic Development Commission,
private enterprise and the state's universities, the governor said.

Is there a single person who reads this and thinks to himself "Oh, that should help?"  Is this really what the Arizona Republic thinks boosts economies and creates value?  Some reorganization among the bureaucrats that run around doling out taxpayer money for relocations so the governor can claim to have boosted the economy, or God forbid, to have created jobs?  How about an income tax cut instead?

Just as an aside, I couldn't help but note this hilarious quote:

"The governor has taken some important and bold steps, probably steps
that we should have taken 20 if not 30 years ago," said Barry Broome,
president and chief executive of the Greater Phoenix Economic Council,
which he said has discussed representation on the AERO board with the
governor.

It's simultaneously "bold" and 30 years late.   Is that possible?

Update:  As to my last question, it probably is possible.  After all, actually limiting the Congress to the enumerated powers in the Constitution would be both bold and about a hundred years late.