# News DoE Picking winners and losers; here we go again

Tags:
1. Jun 29, 2012

### ThinkToday

http://www.foxnews.com/politics/201...-loan-to-file-for-bankruptcy/?test=latestnews

$400 million dollar loan guarantee from the Obama administration for yet anothor solar panel maker. Anyone else think the government doesn't make a very good entrepreneur. They had 180 full time employees.... that's 2.2 Million per job..... hmmm, just give me the money please. IMO, the government does a good job kickstarting technology. e.g. look at the things that came out of the space program. Seed money for startups shouldn't be the role of the government. IMO, that's what private venture capital is for, and they will probably watch their money better than the government watches our money. 2. Jun 29, 2012 ### azdavesoul How many billions were lost by our current government in solar and other private companies? I feel that grants for basic research may be appropriate but with our ballooning debt the federal government should be more responsible with our money. http://www.businessweek.com/news/2012-06-28/abound-solar-to-close-as-early-as-today-greentech-media-says Abound Solar Inc., a U.S. solar manufacturer that was awarded a$400 million U.S. loan guarantee, will suspend operations and file for bankruptcy because its panels were too expensive to compete.

3. Jun 29, 2012

### daveb

Do you have any idea of the costs for a startup? It pays for more than just salaries. It also pays for equipment, overhead, etc. In a high tech startup, the costs for the equipment are quite steep. In the company I work for (a high tech startup), the cost for the raw materials alone is almost 3 million per unit (it's a combination MRI/teletherapy device)

4. Jun 29, 2012

### ThinkToday

No doubt about it. However, this wasn't to fund development of some new technology. It's just starting a business. That's what venture capital and banks are for. If you can't convince venture capital it's a good bet/investment, why is the government getting involved? Look at SpaceX, they are private and have government contracts to do real work. If memory services me, I think they get some NASA support for monitoring, etc., but it's otherwise private funds at risk and not tax dollars.

5. Jun 29, 2012

### Dickfore

> Implying that the costs of a company are solely due to employee's wages.

6. Jun 29, 2012

### ThinkToday

No. Implying the cost per job created isn't worth it. i.e. not a cost efficient job creator. e.g. may as well give each person \$2.2M and let them retire.

7. Jun 29, 2012

### Dickfore

But, in capitalistic societies, companies are not open to "create jobs". Companies are created to make profit by selling goods and services. The inputs in creating goods and services are Physical Capital (factories, machines, desks, computers, etc.), Raw Material (quarz, silicon), and Human Capital (physical and mental labor, the technical know-how of your employees).

As you can see, employees are one of the three main categories in the inputs that go into creating the good. The owner of the company treats their wages as costs of production when figuring out the price/quantity of goods produced. If the company works with net profit, it means that the salaries are already paid for by the employer, and then he/she earns the difference as a compensation for their entrepreneurial effort.

One of the costliest inputs is the Physical Capital. What is different than the other inputs, it is a fixed cost, i.e. you must make the factory, regardless of how many units of the good you produce. One usually borrows funds from investors to start-up a company. Then, one pays of the funds borrow plus an interest over a longer period of time. This also enters in the price of the goods sold. Thus, the investors, who lent the money to the company, will eventually get their investments repaid, plus some interest for the service they had provided.

So, in the long run, you had made a factory for solar panels which creates profit every year, the investors got their initial investment, plus some interest for their services, and many people got an opportunity to sell their labor for wages, a situation that would not have been possible, had it not been for the factory.

8. Jun 29, 2012

### edward

The Chinese duplicated American thin film solar panel technology and the Chinese government had started manufacturing them while Americans were still trying to find investors.

http://www.reepedia.com/archives/tag/solar [Broken]

Why is it that the far right seems to be thrilled that another enterprise has failed. What if we all did that? Do you want Obama to fail so badly that it is OK even if it takes the entire country down?

In the meantime the big boys on Wall Street who could have invested their money in American
Solar are either shorting solar or looking for new hedging oportunities.

http://www.dailyfinance.com/2012/04/17/betting-against-marriage-wedding-present-hedge-divorce/

Last edited by a moderator: May 6, 2017
9. Jun 29, 2012

### mheslep

10. Jun 29, 2012

### ThinkToday

I don't disagree with your analysis. But, the company went under and US tax dollars with it. My beef is with the use of US tax dollars to plow into a business that, if sound, should have been able to get going without them.

11. Jun 29, 2012

### ThinkToday

Very true. However, they weren't investing hundreds of millions in some cutting edge technology development. It's manufacturing solar panels. So why did the US government feel the need to step in to fund it with our tax dollars? Did the banks and venture capital folks not see the prospects...... or perhaps they did...... lol

12. Jun 29, 2012

### ThinkToday

That's way over the top. First, the free market system is at the heart of conservatives. When the government gets involved and starts picking winners (those that get cheap easy government money - our tax dollars) and losers (those that have to depend on selling their ideas, marketing strategy, technology to bankers and venture capital folks) it interferes with the survival of the fittest mentality behind capitalism. Companies fail all the time in that environment, and that's nothing new. http://www.fastcompany.com/1841038/the-startup-failure-boom-and-what-to-do-when-it-happens-to-you

Far from your assertion. Conservatives don't like companies to fail, but they make no bones about when the government gets involved in private enterprise and it fails. It is kind of an “I told you so”. Government involvement in something like fusion research is necessary, IMO, because the risk of failure is so high no venture investor would touch it. Things like that, yes, the government has a roll.

13. Jun 29, 2012

### Dickfore

The problem is that some enterprises do not show net (accounting) profit over the period of several years, provided that the enterpreneur borrows money from a private financial institution at the current situation of the economy.

By this, I mean that the current interest rate for borrowing is sufficiently high, and the price of substitute goods (in this case, electricity generated by fossil fuels or nuclear reactions) is sufficiently low that it is unfavorable for any enterpreneur to go to the private market for opening a business with renewable energy.

Here comes the view of the current government. Spurred by non-market derived motives, they might decide that it would be preferrable to develop renewable energy industry for the long-run welfare of the society. It is a gamble, but so is every other enterprise. Since they are currently in power, it is ultimately their decision and they take the gamble. They rely on the assumption that in the future, the relative cost of fossil fuel energy compared to the renewable energy would be much higher than it is today, so that the business would start being profitable. Furthermore, since it was a pioneer in the field, it would exert some kind of market power on the world market, and the U.S. would be a world leader in the field (similar to Boeing in the aeroplane manufacturing business).

Furthermore, the dwvelopment of this industry will exert a possitive externality on the problem of reduction of greenhouse gases.

Under such a speculative cost-benefit analysis, the government decides to enter as a no-interest financeer for the private enterprise (in the lack of private financial institutions willing to invest at the current market conditions), by essentially giving a subsidy.

Notice that distributing the money of the investment between the populace would not count towards the chunk known as government spending in the GDP, since it is a form of an in-kind transfer. In the way we described above, however, it would count as a public investment. And any investment, no matter if public or private, would ultimately accelerate the long-term growth of the economy.

14. Jun 29, 2012

### ParticleGrl

This isn't the DoE picking winners and losers- its the DoE giving out business loans. Its not government taking control of business. As the expression is usually used 'picking winners' is just direct subsidy of an enterprise- enough to keep it afloat regardless of economic conditions.

If the government wants to encourage development of green energy it can directly subsidize the industry, or create these sorts of loan programs- which is the more free market approach?

Now, maybe you think the government shouldn't be encouraging the development of green energy- but thats a different conversation.

15. Jun 29, 2012

### BobG

Nothing new under the Sun? (pun intended)

One could say our solar energy subsidies work no better than our nuclear energy subsidies. (After 50 Years, Nuclear Power is Still Not Viable without Subsidies, New Report Finds).

So, yeah, it is a "here we go again" situation that's no different than the things we've been doing for at least 50 years.

On the other hand, we do need to eventually solve our energy problem before the oil starts running out.

16. Jun 29, 2012

### rootX

I have yet to read the article carefully. Few concerns just looking at it:
1) Economic analysis is coming from Environmental group.
2) They don't seem to compare nuclear to other energy sources
3) "Carbon price" is kind of full of BS
All this makes me really weary to give any serious consideration to this article.

17. Jun 29, 2012

### Dickfore

From the article you had linked:
I wonder, since they add up the subsidies from all the stages, if there is some other use of these cycles beyond energy production? Did they account for this added benefit as well?

Also, please explain how nuclear energy is renewable.

18. Jun 29, 2012

### OmCheeto

I would tell you why I agree with you 100%, but that would be redundant.

I do find these conversations interesting, as the opposing team seems to be totally insane. And yet, they seem to imply that we are insane.

I had a discussion with my boss a while back, trying to determine the origin of our differences, and we discovered that we had totally different thought processes. He thinks in terms of black and white, and I think in terms of infinite shades of gray.

His process of thinking was very efficient I decided, for certain things. But I don't think in the global scenario, that it makes any sense, whatsoever.

Last edited by a moderator: May 6, 2017
19. Jun 29, 2012

### chiro

I'm not sure about the relativity of the money with respect to the industry and business itself (including start-up capital requirements and so forth), but one thing is certain: most people waste things they don't value.

Four hundred million dollars seems like a lot and when you give people that much (or even 70 million), it just encourages the situations synonymous with waste and devaluation of initial capital.

Lots of successful businesses are run mostly on thin margins and often to the sacrifice of the owners and operators where they are working below minimum wage since they are working all the time but pulling in just enough for ends to meet.

The thing about the government though is that they don't work like a business where they have to compete for customers: governments always get money no matter what. If it doesn't come from the taxpayer, they will just borrow it.

As a result of the above, it's not in the least bit surprising that they waste money: they don't have an incentive to stop wasting money because they know they can and as a result don't really value the income that they get, wherever it comes from.

Governments should stay out of things like this for at least the above reason, because they are just in a world of their own when it comes to knowing the value of resources and money unlike the new businessperson who is working seven days a week with no "benefits, company car, maternity or paternity leave, sick leave, long-term service leave or gauranteed pension", they don't have a clue what its like to have to effeciently make use of the minimum or near minimum to run their business and survive.

Again though, it's not that surprising.

20. Jun 29, 2012

### ParticleGrl

Granting your argument for the time being, you're laying out a case that the government is bad at certain calculations/activities. Although, I would argue that the reason businesses appear to be efficient is that inefficient businesses die- not that business men are magical planners. Its survivor bias.

However- you've failed to point out that there are areas where the government has an edge over private enterprise. The public sector is much better at sustained research investment, and is capable of planning on a much larger scale than any business (consider- central planning IS important- firms are essentially islands of central planning in the other-wise chaotic market). As innovator, the government actually has a pretty decent track record.

Its important to keep in mind that the government funded the research that became the internet, and when they realized what they had, the public sector turned the internet over the private sector. How much income do you think the government would make if instead of turning over public sector research, they insisted on raking in a return?

Know someone interested in this topic? Share this thread via Reddit, Google+, Twitter, or Facebook