Arizona’s corporate-welfare lobbies, including the subsidy-sucking solar industry, were not satisfied with the $30 million-a-year Commerce Authority slush fund and the tax credits in the so-called “Jobs Bill.” So they will be back at the trough in 2012, trying to divert even more money that could otherwise be used to cut taxes for families and small businesses here in Arizona.
The Goldwater Institute‘s Byron Schlomach suggests why that’s not a good idea, citing the example of Tucson’s Solon Corp (which might be called the “Solyndra on the Santa Cruz”):
Arizona Republic columnist Bob Robb has a great column on the “subsidy game,” in which he explains that Rick Perry’s Texas Enterprise Fund was not it was cracked up to be. By Robb’s accounting, Gov. Jan Brewer and the Legislature are already throwing up to $185 million a year into industrial-policy subsidies:
According to the logic of the industrial policy being pursued by Brewer and Republican legislators, Arizona’s economy will be built on:
* Companies that have to be bribed to be here.
* Pursuing a larger slice of a shrinking manufacturing pie.
* An industry, solar, that would be a sliver of its inconsequential self without massive government subsidies at all levels.
That doesn’t sound like a very good bet.
The table at this link helps to put America’s solar power subsidies in the broader context of energy subsidies:
Finally, the Economist (“Economics focus,” 1 October 2011) has recently re-examined the case for industrial planning, based on the publication on some new studies. But the magazine is not sanguine about the potential for getting industrial policies right:
None of these studies addresses a deeper problem with the way industrial policy tends to develop over time. Earlier efforts have tended to degenerate into rent-seeking, lobbying and cosy deals between incumbent firms and bureaucrats, stifling innovation and the process of creative destruction. Indeed, Mr Rodrik is well aware of these problems when he lays out his principles for “sensible industrial policy”, arguing for instance that governments should avoid open-ended incentives that in time entrench incumbents and raise consumer prices. Like patents, he reckons, industrial policies should eventually expire. Similarly, he thinks that what matters is not whether governments can pick winners—they cannot—but whether they have the good sense to let losers fall by the wayside.
The problem, of course, is that this rarely happens. In effect, Mr Rodrik and others are arguing that industrial policy requires disinterested, benevolent policymakers who can do it well. Unfortunately, they do not yet have a recipe for how such policymakers can be created. Policy is made by real people with political and personal motivations. What they come up with is unlikely to be as well designed as the ones in the models.
Although many of Arizona’s policymakers are doing their best to be disinterested and benevolent–in the face of heavy lobbying from heavily interested rent-seeking industry groups–we would be fools if we believed that Arizona’s government will collectively become disinterested and benevolent, this side of Paradise. If we add “close to omniscient” to the list of desired characteristics (because the task is for government to somehow correctly pick the winners and losers in an evolving economy), the inescapable conclusion is that good industrial policy in Arizona is probably impossible.