Mr. Obama's Fundamental Misunderstanding of the American Economy

In a column on the Daily Beast, writer Michael Lind provides an interesting analysis of the flawed assumptions behind Barack Obama’s “Green Economy” prescription for the U.S.

Just as Candidate Obama envisioned an Iowa planted wall-to-wall in Whole Foods arugula, President Obama dreams of an America full of solar panel technicians, wind turbine mechanics, and CFC bulb-breakage cleanup specialists.

Obama’s Midwest Blunder

President Barack Obama’s poll numbers are slipping, and nowhere have they slipped more dramatically than in the Midwest, where his favorable ratings are now below 50 percent.

It’s hard to blame people in the Midwest, the heartland of American manufacturing, for having their doubts. It is increasingly apparent that the president and the Ivy League professors and Wall Street financiers who advise him, confronted with the greatest crisis to confront global industrial capitalism since the Great Depression, don’t understand how manufacturing works or how important it is to long-term American wealth and power.

Evidence for this depressing conclusion can be found in Obama’s July 14 speech in Warren, Mich., … [which] makes clear that the productive economy—manufacturing, agriculture, and resource extraction, along with the vast service-sector infrastructure they support—is something that this administration neither understands nor particularly cares about, unless it can be dressed up in feel-good “green” camouflage.

Mr. Lind continues:

There you have it—the future of American manufacturing, according to the president, is not making machine tools, automobiles, aerospace, and consumer electronics, but rather making “windmills and wind turbines and solar panels and biofuel plants and energy-efficient light bulbs.” Never mind that the market for these is minor and mostly created by government mandates on utilities and government subsidies. Wind and solar combined amount to a mere 1 percent of U.S. electricity usage, and the Obama administration doesn’t think they can provide more than 20 percent by 2020, even with massive subsidies.[*] Never mind, moreover, that we can import cheap wind turbines and solar panels from Europe and China. (The Obama administration, which opposed “Buy American” provisions in the stimulus bill, also opposes “green tariffs” on imports.)

Never mind. The green-collar jobs of the future, it seems, are in the government-subsidized boutique industry of windmills and solar panels, and also in low-productivity make-work jobs weatherizing existing and new buildings, no doubt with ample federal subsidies, as well. Let China and Japan and India and Germany lead the world in advanced manufacturing. We’ll equip American workers with caulking guns. [emphasis added]

Then Lind takes on Mr. Obama’s emphasis on the importance of an educated work force in global competitiveness:

Although he is a lawyer and community activist by background, Obama is now the leader of the greatest industrial nation in the world, and there is no excuse for him to promote misleading nonsense like this. It is absurd to say that “a skilled American work force” by itself played more than a supporting part in the success of U.S. industrial capitalism in the last two centuries. In the post-Lincoln era, the newly created land grant colleges were important—but far less important than high tariffs, which protected American infant industries from foreign competition, and the massive federal subsidies of the railroads, in the form of land grants. During the post-New Deal era, the GI Bill, though significant, was far less important than massive federal infrastructure developments like the TVA, the development of aerospace and computer technology by Defense Department procurement and R&D policies, the high level of consumer demand created by unionized labor, and the lack of serious European and Asian industrial competition between World War II and the 1970s.

I take exception to Lind’s conclusion, but he is right in identifying Obama’s assertion as nonsense. Tariffs and government “investment” and research aren’t the engines of a healthy, booming economy; unfettered, entrepreneurial, consumer-driven capitalism is.

* 20% of electricity generation by 2020?! Even if we were to say that gains in efficiency (and dramatically more expensive electric rates due to Cap and Trade) offset the growth in population, growing from <1% to 20% in just over ten years would require 30+% compounded annual growth rate, if we started right now. I will state categorically that that is impossible. If I’m proven wrong on that point, I will kiss Al Gore’s rather fleshy hindquarters on the corner of Canal Street and St. Charles Avenue (New Orleans) at high noon, and give him thirty minutes to draw a crowd.