In a polity like ours, in which politically powerful interests have an enormous stake in how government allocates public resources, the line between conscientious government and political cronyism is never going to be very bright. Take the paradigm case of a major campaign contributor benefiting handsomely from a decision by an elected politician to whom he contributed big bucks. It’s always going to be next to impossible under normal circumstances to tell whether the politician decided on the policy benefiting the contributor because of his contribution or the contributor decided to contribute to the politician because of the politician’s already demonstrated propensity to make decisions that benefit the contributor. So Solyndra-like appearances of cronyism are always going to be ubiquitous in our politics. If such spectacles throw you for a loop you probably should get out more.
So what’s special about the Solyndra affair? James Surowiecki reminds us that the idea that the government should be subsidizing green energy has a perfectly respectable economic rationale:
“It’s certainly true that we don’t want government to be in the business of helping decide which big-box retailer or maker of MP3 players has the best chance of succeeding. . . . But it’s also true that there are a few industries where it makes a lot of sense for the government to complement the market . . . Renewable energy is one of them.Let’s stipulate that financing renewable energy presents a classic case of market failure that cries out for a governmental response. Does it follow, as Surowiecki seems to presume, that elected politicians ought to be in the business of subsidizing selected green enterprises that, in the nature of the case, will tend to be run by their high-rolling political supporters?
“That’s because the energy market is not like most other markets. Indeed, the economics of alternative energy are such that private investors, left to their own devices, are bound to underinvest in it, since the considerable social benefits—cleaner air, fewer greenhouse emissions—accrue to everyone, not just to direct customers.”
Not at all. If you’re determined to subsidize green energy, you can always do it by taxing the consumption of nonrenewable energy enough to make green energy economically viable. That’s a fairer way of doing it because it makes the people who consume nonrenewable energy pay for its social cost. It’s a more efficient way of doing it because it lets a market, rather than fallible and corruptible politicians pick winners and losers in the renewable energy industry. And it’s a more democratically legitimate way of doing it because it enables voters to ascertain and ratify the trade-offs effected by renewable energy subsidies without having to worry about political insiders trading favors behind closed doors. The problem, of course, is that you really have to persuade voters that you're trading off competing values and interests in the right way.
If you ask me, what’s scandalous about the Solyndra affair is that it exemplifies (along with public policy monstrosities like ethanol subsidies and automotive CAFE standards) the calculated indifference of politicians in both parties to the fairness, efficiency and democratic legitimacy of energy policy.