I’ve mentioned it before around here. I don’t know that any story illustrates the reality that we don’t know how to create prosperity better than this one about trying to create a solar industry in Spain:
Armed with generous incentives from the Spanish government to jump-start a national solar energy industry, the city set out to replace its failing coal economy by attracting solar companies, with a campaign slogan: “The Sun Moves Us.”
Soon, Puertollano, home to the Museum of the Mining Industry, had two enormous solar power plants, factories making solar panels and silicon wafers, and clean energy research institutes. Half the solar power installed globally in 2008 was installed in Spain.
Farmers sold land for solar plants. Boutiques opened. And people from all over the world, seeing business opportunities, moved to the city, which had suffered from 20 percent unemployment and a population exodus.
But as low-quality, poorly designed solar plants sprang up on Spain’s plateaus, Spanish officials came to realize that they would have to subsidize many of them indefinitely, and that the industry they had created might never produce efficient green energy on its own.
The NYT’s spin on this, that lessons have been learned, seems to ignore something. There were opportunity costs. The money squandered on a solar industry that didn’t happen might have been used on something that would have.
I’m skeptical that anything has been learned. The urge for central planning we will always have with us.
My own view is that we’d be better off removing the subsidies from things we don’t want than we would by subsidizing more stuff we may never get. Unfortunately, rent-seeking is the new entrepeneurship.