No more Solyndras: time for the sun to go down on public spending

$535 million

Whenever I watch Dragon’s Den (Shark Tank to readers in the United States) and I see some entrepreneur waking away with £50,000 in his pocket I try and come up with my own ‘Dragon’s Den idea’.

I wonder how far I’d get if I turned up and said “I want $535 million and I’ll go bust in two years”? I might not get too far with Duncan Bannatyne, but if I was pitching to Steven Chu, Barack Obama’s Energy Secretary, I might be in with a shot.

That, briefly put, is the story behind Solyndra, a California based solar energy technology company which filed for Chapter 11 bankruptcy in August.

There are rumours that something murky went on in the approval of the loan. Perhaps, perhaps not.

But there is certainly a question mark to be raised over the willingness bordering on mania of western governments to throw taxpayers money at any business prospectus with the word ‘green’ in it.

Apparently terrified of global warming, our political leaders also harbour the hope that burying Sussex under wind turbines or covering Nevada with solar panels will boost the economy, a variation on Keynes’ old bottles full of banknotes.

But this is to miss the central lesson of Solyndra; governments aren’t much good at spending money.

In his 1980 classic, ‘Free to Choose’, Milton Friedman set out the four categories that all spending must fall into. Category I, you can spend your money on yourself; Category II, you can spend your money on someone else; Category III, you can spend someone else’s money on yourself; Category IV, you can spend someone else’s money on someone else.

Friedman gave a trip to a supermarket as an example of Category I spending, saying that “You clearly have a strong incentive both to economize and to get as much value as you can for each dollar you do spend”

Category II spending was exampled by buying presents for Christmas or birthdays. “You have the same incentive to economize as in Category I”, Friedman wrote, “but not the same incentive to get full value for money, at least as judged by the tastes of the recipient”

Friedman described Category III spending as being like lunching on an expense account. “You have no strong incentive to keep down the cost of the lunch, but you do have a strong incentive to get your money’s worth”

Category IV spending, Friedman wrote, is like paying for someone else’s lunch out of an expense account and “You have little incentive either to economize or to try to get your guest the lunch that he will value most highly”

Yet it is into this last category that all government spending falls. As D R Myddelton wrote in ‘They Meant Well’, a look at some similar examples of government profligacy in Britain, “Making a profit is the raison d’être of commercial enterprise, and company directors must account to shareholders for their success or failure in doing so. Government quasi-commercial projects may aim to make a profit, but if they fail, taxpayers have to pick up the tab”

Governments are not incentivised to get value for taxpayers’ money because they have no skin in the game. Hence debacles like Solyndra.

The obvious reply, especially given events of the last few years, is that the private sector is no better at spending its money. The multi-billion losses racked up by the likes of Merrill Lynch, JP Morgan, Citigroup, Morgan Stanley, Lloyds, Royal Bank of Scotland etc would make most governments blush.

But here’s the thing, they weren’t risking their money. When these banks saw their investments go sour they were bailed out with taxpayers cash. They were risking your money. And what’s worse, given the close relationship between Wall Street and Washington, the City and Westminster, they knew it.

None of this is capitalism despite what some might say. Capitalism is a profit and loss system with loss just as important as profit in allocating capital. Eliminate losses and you eliminate capitalism.

As has been proven from the Tanganyika ground nut fiasco to the Solyndra mess, government should leave capitalism to the capitalists.

But capitalists and government should also leave taxpayers money in taxpayers’ pockets. It is not the job of government to throw the public’s money at failing businesses or ‘green’ investment pipedreams. That is not capitalism, it is corporatism. And as the Dragons might say, I’m out.

This article originally appeared at The Commentator

Some Inconvenient Truths Emerge

They weren’t right then

I’d planned to follow up last weeks item with some more on the economy but I couldn’t resist a few words on the leaking of emails from some of the worlds leading climate scientists. Quite simply, it doesn’t look too good for them.

The emails come from The University of East Anglia’s Climate Research Unit which, we are told, is a “world-renowned centre” on the subject. One, from the CRU’s Phil Jones to Michael Mann, Raymond Bradley, and Malcolm Hughes, authors of the utterly discredited ‘Hockey Stick’ upon which Al Gore based ‘An Inconvenient Truth’, is dated November 16th 1999. It reads

“I’ve just completed Mike’s Nature trick of adding in the real temps to each series for the last 20 years (ie from 1981 onwards) and from 1961 for Keith’s to hide the decline.”

Another, dated October 12th 2009, comes from Kevin Trenberth, Head of the Climate Analysis Section at the National Center for Atmospheric Research. It reads

“The fact is that we can’t account for the lack of warming at the moment and it is a travesty that we can’t.”

Another, from Keith Briffa of the CRU and dated June 23rd 2008, concerns the requests made under the Freedom of Information Act (FoIA) for the CRU to release the data it bases its conclusions on (the CRU has turned down 60 such requests). It reads

“I have been of the opinion right from the start of these FOI requests, that our private inter-collegial discussion is just that – PRIVATE. Your communication with individual colleagues was on the same basis as that for any other person and it discredits the IPCC process not one iota not to reveal the details. On the contrary, submitting to these “demands” undermines the wider scientific expectation of personal confidentiality . It is for this reason, and not because we have or have not got anything to hide, that I believe none of us should submit to these “requests”.”

Back to Professor Jones again. On May 5th 2008 a request was submitted under the FoIA for correspondence relating to AR4, an IPCC report that Keith Briffa and others at the CRU worked on together. On May 29th 2008 Prof Jones sent the following email

“Can you delete any emails you may have had with Keith re AR4? Keith will do likewise. He’s not in at the moment – minor family crisis. Can you also email Gene and get him to do the same? I don’t have his new email address. We will be getting Caspar to do likewise.”

Under the FoIA destroying information once a request has been put in is a criminal offence.

This indicates some pretty alarming behaviour at the CRU. Even George Monibot, a leading believer in Man Made Global Warming, said ‘”There are some messages that require no spin to make them look bad“.

The aforementioned Professor Mann, director of Pennsylvania State University ‘s Earth System Science Centre, was indignant; “I’m not going to comment on the content of illegally obtained emails. However, I will say this: both their theft and, I believe, any reproduction of the emails that were obtained on public websites, etc, constitutes serious criminal activity. I’m hoping the perpetrators and their facilitators will be tracked down and prosecuted to the fullest extent the law allows.” Mann’s outraged sense of justice is commendable but as the world’s leaders gather in Copenhagen to commit ever greater sums of our money to fighting Climate Change, isn’t it worth noting that obtaining money (or research grants) under false pretenses is theft as well?

‘Climate change’ is the new religion of the age. Skepticism earns you the epithet of “Climate Change Denier”. We must all tithe only now it’s called Green Taxes. And non belief earns a wrath which wouldn’t be out of place in the medieval Inquisition. Environmental blogger David Roberts once thundered “When we’ve finally gotten serious about global warming, when the impacts are really hitting us and we’re in a full worldwide scramble to minimize the damage, we should have war crimes trials for these bastards—some sort of climate Nuremberg.”

Indeed, Climate Change even has its own Holy Trinity of boosters; the media, the scientists and the politicians.

An article on the Climate email controversy in The Guardian complained that that the “The emails show the frustration some climatologists have had at having to operate under such intense, often politically motivated, scrutiny” (1). My heart bleeds for them. But whether the scrutiny is “politically motivated” or not (the Guardian must have a mind reader on staff to be able to report that) releasing your data so that your conclusions can be checked and corroborated is a basic part of scientific research. If the scientists involved can’t even match this basic standard then why should we take them seriously?

The BBC, it was revealed, had been sent these emails back on October 12th but had decided to sit on them (2). This brought to mind the comments of BBC anchor Peter Sissons that “The Corporation’s most famous interrogators invariably begin by accepting that ‘the science is settled’” and that when it comes to skeptics “it is effectively BBC policy… that those views should not be heard”. Would they have been so reluctant to report a similar set of emails suggesting fraud and deception at, say, a bank?

The reason for the media’s fondness for the theory that we are all about to die is simple enough to understand. Ask yourself which newspaper front page will sell more copies; “We’re all going to die!” or “Natural Processes at Work as They Have Been Since Time Immemorial – Nothing to Worry About”?

The scientists also have a pretty obvious reason for shoveling coal into the engine of the gravy train. According to reports, Phil Jones, the man who may soon be facing a £5,000 fine for offences under the FoIA shouldn’t be unduly concerned. Since 1990 he has brought in $22.6 million worth of funding (3). Would so much money have come his way if he hadn’t been offering solutions to the end of civilization as we know it?

The politicians’ case is slightly more opaque. After all, wouldn’t a politician who told us what we’d like to hear, that everything is ok, clean up at the polls? Possibly, but this overlooks the fact that the Holy Grail of modern politics is to raise taxes without it getting you kicked out of office.

Politicians want money as it enables them to dispense patronage. We should also not forget that many of them think (and some of them are right) that they genuinely are doing good by spending money on this or that. But the desire to tax eventually outruns the public’s desire to be taxed. So Climate Change offers the perfect solution. Politicians can dig their hands ever deeper into your pocket and its all for your own good.

And the beauty for the media, the scientists and the politicians is that Climate Change is the gift that keeps on giving. Ronald Reagan once said “the best sign that our economic program is working is that they don’t call it Reaganomics any more.” Indeed, the best sign that we have less to worry about than we are told is that they don’t call it Global Warming anymore. Hands up if you remember Global Warming? Like Pearl Jam it was quite the rage when I was a kid. Indeed, it’s best year ever came in 1998 when record breaking temperatures proved we were all about to be fried.

But then the world stopped getting warmer. As Paul Hudson, the BBC man who sat on the email, reported recently “For the last 11 years we have not observed any increase in global temperatures” (4) Indeed, in the last couple of years it’s started getting colder again. Could it have been that the scientists had been as far out with their predictions as they had been in 1973 when falling temperatures prompted the world’s leading climate scientists to put an article on the front page of Time magazine warning of ‘The Big Freeze’? Possibly. They didn’t seem to trust their ability to predict anymore having been proven wrong the last two times.

So they fixed upon Climate Change as the new bogie man. The beauty of this was that whether it started snowing or whether the sun started shining it was all evidence of Climate Change. It didn’t matter that your predictions weren’t worth the magazine covers they were printed on, now the unpredictability was the very problem!

I thought about ending this with a joke about the emission of hot air and the Copenhagen summit. But look again at the evidence and look again at what is being done. It’s no laughing matter.

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