The Empty Cities Of China

Those of us who believe that the free market typically make better planning decisions than governmental agencies — that motivated investors and entrepreneurs, who are looking out for their own money and returns, are likely to be more capable judges of economic realities than bureaucrats — need look no farther than China for confirmation of those beliefs.

China has been making massive investments in its infrastructure, raising entire cities from nothingness.  These huge investments, and the jobs they have produced, have helped to account for China’s impressive gains in its gross domestic product.  But, as the BBC reports, China’s central planners have made lots of bad decisions.  As a result, the country is dotted with vacant apartment buildings, shopping malls, and cities — even a deserted theme park — that are standing vacant and gathering dust.  The failed relics of China’s central economic decision-making include Chenggong, a planned city populated with apartment buildings, public art, and empty suburbs, but no people, and the New South China Mall in Dongguang, a sprawling shopping mall that has spaces for 1,500 stores, all but a few of which are unoccupied.

We often hear commentators citing China’s economic growth statistics and urging America to follow China’s lead.  China’s development has been extraordinary — but we also need to remember that those remarkable growth statistics have been produced, in part, by investments in ghost cities and empty apartment blocks that created construction jobs and not much else.  Vacant stores and buildings are not going to produce income streams and long-term economic prosperity.  In America, these would be viewed as utterly failed investments.

Proponents of big government always assume that government, presumably armed with reams of statistics and perfect information and unfettered by the profit motive that propels capitalists, will make nothing but good decisions in allocating resources and planning for the future.  As China’s experience shows — and as the Obama Administration’s failed Solyndra investment also reflects — that clearly is not the case.  China’s political system may allow its government to fritter away billions on ghost towns and crumbling theme parks without consequences.  How do you think Americans would react if their tax dollars were wasted in similar ways, in the interests of achieving a better short-term GDP?

A Costly Solar Flame-Out (V)

The latest development in the infuriating Solyndra saga is that the Labor Department has approved “Trade Adjustment Assistance” for the 1,100 ex-employees of Solyndra.

The TAA program provides aid to workers who supposedly lost their jobs due to the trade practices of foreign countries. The available assistance includes job retraining, job search allowances, health benefits, and up to 130 weeks — that is, more than 2 years — of “income support.”  Under the TAA program, the average recipient gets about $13,000 in assistance.  In short, the Labor Department decision means that taxpayers will potentially foot the bill for about $14.3 million in TAA expenses, in addition to the $535 million in loan guarantees that was lost when Solyndra went bankrupt.

In short, the Labor Department is saying that Solyndra’s failure was due to Chinese trade practices, and not to the fact that Solyndra was poorly managed and couldn’t produce a competitively priced product even with massive federal assistance.  The decision therefore provides some political cover for the disastrously misguided loan guarantees — if Solyndra’s failure is blamed on Chinese trade practices, it makes the Obama Administration’s decision to provide the guarantees in the first place seem more defensible.

Solyndra continues to be the governmental “investment” that keeps on taking.

A Costly Solar Flame-Out (IV)

The Solyndra story — a tale of a company that got more than half a billion in federal loan guarantees as a showcase for green energy jobs, then plunged into bankruptcy — continues to unfold.

Today there will be hearing before the House Energy and Commerce Committee, at which certain Solyndra executives have said they will exercise their Fifth Amendment right to avoid self-incrimination.  In the meantime, Solyndra employees have told the Washington Post that, after the company got the federal support, executives started spending recklessly and exhausted funds, in part, on totally unneeded goods and technology.  No one should be surprised by that result, of course.  When people, or companies, are flush with cash, they are likely to liberalize their spending habits.  Ask any drunken sailor out on the town after getting paid.

The Solyndra hearings are a good test of whether Republicans and Democrats can find some kind of reasonable common ground on a significant issue.  Every American, regardless of their political views, should want to get to the bottom of a situation that likely will cost taxpayers half a billion dollars.  Those tax dollars weren’t stamped Republican or Democrat.  If our government was duped by Solyndra executives, or if federal funds were committed recklessly to serve a partisan political agenda, we should get to the bottom of it so it doesn’t happen again.

A Costly Solar Flame-Out (III)

In recent years — where important legislation always seems to be prepared at the eleventh hour, after closed door meetings with only selected congressional leaders — it has been easy to forget that one of Congress’ more important powers is the power to investigate, obtain documents, and take testimony.  Much of the drama in the Watergate story, for example, came during the long, drawn-out congressional hearings into that scandal, as witness after witness drew the ring of scandal closer and closer around President Nixon.

The story of Solyndra — the solar power company that recently went into bankruptcy after receiving more than $500 million in government loan guarantees and then became the subject of an FBI investigation — may reignite interest in congressional hearings.  ABC News is reporting that the House Energy and Commerce Committee, which will hold hearings on the Solyndra story tomorrow, has obtained emails that indicate that the White House was carefully monitoring the Energy Department’s consideration of loan guarantees to Solyndra, at the same time that government analysts were expressing serious concerns about the risks involved.

The Solyndra story is no Watergate, of course, but congressional oversight and investigation powers aren’t reserved only for scandals capable of bringing down a President.  Congress should determine whether federal officials disregarded clear risks and awarded more than half a billion dollars to a private company just to advance a political agenda — or, even worse, to help a political contributor who invested in a struggling business — and, if so, Congress should take steps to ensure that those officials are appropriately punished and such recklessness does not happen again in the future. Such actions would be a good sign that Congress may actually get back to doing its job and exercising its powers, rather than simply, and endlessly, fundraising and grandstanding.

A Costly Solar Flame-Out (II)

It was bad enough that Solyndra, a solar energy company, abruptly closed its doors recently, after receiving hundreds of millions of dollars in federal loan guarantees as part of a federal government effort to promote “green jobs.” Today, the news got worse.

The media is reporting that the FBI agents, working in conjunction with the Department of Energy Inspector General’s office,  served search warrants on Solyndra and fanned out to scour buildings on the Solyndra campus, looking for . . . something.  In addition, Congress is investigating what happened, and two Democratic Representatives, Henry Waxman and Diane DeGette, have disclosed that less than two months ago they met with Solyndra’s CEO, who assured them the company was in strong financial position and in no danger of failing.  They urge the Republican chairman of the House Energy and Commerce Committee, which is conducting the investigation, to also look into why the CEO did not disclose the perilous condition of Solyndra.

I’m glad that Republicans and Democrats alike are interested in getting to the bottom of the Solyndra story, because investigating the loss of hundreds of millions of dollars in federal funds is not a partisan issue, but rather is a straightforward “good government” issue.  Every Member of Congress should want to know how this happened, and then use that information to assess whether the Department of Energy program, with its risky practice of providing substantial financial support directly to specific companies, should be continued — or should be ended in order to protect against misuse of tax dollars.

A Costly Solar Flame-Out

Federal stimulus efforts to encourage “green energy” businesses took a shot to the chops today when Solyndra, a California solar energy company, declared that it will file for bankruptcy protection.

Solyndra had received $535 million in federal loan guarantees and was one of 40 concerns that was supported by a Department of Energy program designed to encourage green energy projects.  Today, however, the company suspended its manufacturing operations and laid off more than 1,000 workers.

It is not clear how much money the federal government will lose as a result of its support of Solyndra, and some no doubt will argue that such losses, whatever they may be, are simply a necessary cost of trying to develop “green energy” alternatives in the United States.  For others, however, Solyndra’s failure is a sobering lesson that even significant federal support doesn’t mean much if a company cannot hold its own in the rough and tumble world of the global economy.  In this instance, Solyndra apparently couldn’t compete with foreign manufacturers who sold comparable products at cheaper prices.  This story also raises more fundamental questions:  why should the federal government be supporting certain companies and industries at all, and when they do who is deciding whether the investment of our tax dollars has a prayer of earning a meaningful return?