Tuesday, October 14, 2008

Innovate or die? Not in this socialist country.

There's a lot of talk about how the government shouldn't prop up the renewable energy industry, and we should let the free market rule on renewables and sustainability. The thought being that "when we need it, the market will demand innovation, and then products in the renewable energy field will appear to meet that demand." This article in the Houston Chronicle says that because of the economic crisis and the temporary dropping of crude oil prices, investment in renewable energy will be squeezed pretty soon.

Here's my response to allowing the "invisible hand" of the market determine the investment in renewable energy: it's all bunk. The people who make this argument are pretending that we live in a perfect, capitalistic, free-market system. But the last time I checked, we've partly socialized the auto, airline, banking and insurance industries recently. Let's take the auto industry. The theory goes in capitalism that you innovate or die. In the case of the car companies, there's no threat of dying--because they know the government will bail them out. So there's less incentive to innovate. As a result, Toyota (the biggest innovator) is leading the world in sales, and GM is denying bankruptcy rumors. (The same argument could be made for the airline industry.)

There's no doubt in my mind that American engineers and auto workers could make the most innovative cars in the world--if only given the opportunity. Under the conditions of the past decade, they haven't been given that chance. The companies have been resistant to innovation, even lobbying against it (in the form of fuel efficiency standards and emissions), and now--sadly--they're paying the price. (Of course, the credit crunch is compounding the situation exponentially.)

So what are we to do? Since we've already partly socialized the auto companies (thus not allowing them to die), we should set standards that force them to innovate. They've got the smart, skilled people who can do it.

Like Bill Clinton says in Greasy Rider: if we lead the world in renewable energy and sustainable innovation, our country could experience the greatest economic expansion since World War II. What are we waiting for?