Free Markets, Free People

Another example of why government picking winners and losers normally ends with #FAIL

The other day this sort of slipped under the media radar:

First Solar Inc. will lay off 2,000 workers and close its factory in Germany following a collapse in solar panel prices that has erased the industry’s profits and forced some smaller companies into bankruptcy.

America’s biggest solar manufacturer said the layoffs amount to 30 percent of its global workforce.

B..b..but why!?  Green shoots, alternative energy, clean energy, what the frack?!

This is the future, the government says so!  How did it all go so wrong?  How in the world could solar panel prices “collapse”?

An influx of Chinese competitors has led to a rapid buildup in supply. At the same time governments in Europe, the biggest market for solar power, are reducing generous subsidy programs that had fueled demand. From March to December last year, solar panel prices dropped 50 percent, said Aaron Chew, an analyst with the Maxim Group.

Oh.

That damn “supply and demand” thingy again, right?

So let me get this straight … cheap foreign product (subsidized by the Chinese government) flooded the market created by government subsidized demand, driving up supply while lowering the price. Meanwhile the false demand that had been supported by “generous [government] subsidy programs” ended (thus ending the “demand”).  Consequently there is no demand for the current over supply and no one is buying the stuff?

Wow … who could have seen that coming?

And the current producer can’t make a profit and thus has to lay off people?

Oh.

You know, when you’ve seen the same thing over and over and over again (see Einstein’s definition of insanity), sometimes you just have to resort to sarcasm.

By the way for the terminally slow – news flash – that supply and demand thingy also seems to work in the petroleum market as well. 

Go figure.

~McQ

Twitter: @McQandO

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23 Responses to Another example of why government picking winners and losers normally ends with #FAIL

  • Or, somewhat shorter, distorted markets eventually return to their equilibrium…but only after considerable damage is done.

    • @Ragspierre To be fair, technology moves very fast these days. In 2008 First Solar had a cost advantage due to the process…4 years later *POOF* no more advantage.

  • I blame speculators… Someone has pumped up the market by making big bets on the future and now lots of little guys lose their jobs because the evil speculators who have shuffled paper around but never taken delivery of, or produced, the product. What this needs is a committee to investigate just who pumped up this bubble and where the profits went.

    • @DocD They went to pay for dinners for the Nice President. Send in your $3.00 and you’ll have a chance to hob nob with the people who normally wouldn’t piss on you to put you out if you were on fire.

      • @looker And, see…this shows how much nicer I am. I WOULD piss on them if they were on fire. How’s that for open-minded…??? (‘Course, there are a number of other conditions where I’d piss on them, too.)

  • For the terminally blocked: Too bad Solar First is not in a position to manipulate supply/demand in that market—as is China—and like other players do in the petroleum market. Supply and demand is a ‘natural law’ of economics—not just capitalism. But like life itself, it can be manipulated for the benefit of one party, if they have the knowledge and the clout—just like cloning sheep. But like manipulation of the basic principles of biology and physics, it requires a certain amount of trial and error to learn how to acquire the necessary knowledge and skill—the same is true of economic manipulation. Such laws are not god-given and immutable for time immemorial.

    When this strategy loses its benefit, then one can allow it to return to balance—as noted by Ragspierre. But, at the same time, they could continue to defy this basic rule of economics for as long as they want, theoretically—or suspend it operation whenever they want. That’s the point we’ve reached, or are reaching, in modern multi-national marketing economy—or at the micro level, in relation to the economy of a nation, like the United States. (I hate to use the term Capitalism, because, like I say, the concept of Supply/Demand transcends specific economic systems—but most Americans associate this concept with Capitalism, and feel it’s the American system.)

    • @tadcf Me no habla Erbian. You do realize “immemorial” refers only to the past, right?

    • @tadcf But, at the same time, they could continue to defy this basic rule of economics for as long as they want, theoretically—or suspend it operation whenever they want.
      —————————————————————————————–
      No. You can’t. And, I argue, the longer you distort markets, the more energy is stored in them. Like fault lines. Eventually, they WILL return to a resting state…or equilibrium. Please support your “other players manipulate supply/demand” BS. Even an entity as enormous as the United States government cannot do that in any significant way. See Petroleum, Stategic Reserve

      • @Ragspierre And don’t forget his little economic gem of a few days ago…
        ———————————————————————————————————————————–
        When a government doesn’t have enough revenue to fund huge projects—like the interstate highway project of the 50′s—then the population and the nation in general suffers from world status regression.
        ———————————————————————————————————————————–
        Government distortion of the laws of economics is good except when it is bad. Very skilled in Erb-Zen-Do is this one.

        • @DocD “…world status regression…” Yes, yes… Fond memories. That one goes in the scrapbook. Fer shore. Hey, originality counts even in BS.

        • @Ragspierre And ironically he is advocating the US government do what the Chinese government does, while then condemning the Chinese for doing what he wants the US to do. But don’t worry, it is “scientific”.

    • @tadcf “But like manipulation of the basic principles of … physics, …. Such laws are not god-given and immutable” Oh boy I think you need to get yourself on to the Nobel committee because if you have proof one way or the other that the laws of physics are not fundamental to this universe then you’re a certified genius.

    • @tadcf “Too bad Solar First is not in a position to manipulate supply/demand in that market” Idiocy condensed, this is. Solar First obtains significant subsidies from the US government and that *isn’t* manipulating supply and demand? Really?? Bueller? Bueller??

    • @tadcf Eureka! you’re one of Erb’s more gullible students, aren’t you.

    • @tadcf In order to manipulate the market, there has to BE a market. They can’t CREATE a demand amongst consumers for a product, though it is possible, as has been demonstrated by politician buying solar companies and automobile manufacturers to cause the GOVERNMENT to create a demand either by mandating consumers purchase something….(hrmmmmm…..sounds familiar) or by government featherbedded buying to create the market. When the REAL market works, the government doesn’t need to mandate it, or create bullshit projects to buy up all the product to support the industry. And THAT’S why this ain’t makin it Spanky, because there’s NO MARKET for what they’re selling at the price they’re trying to sell it. People don’t want it, because it’s not economical when they have to pay for it themselves, JUST LIKE OVERPRICED ELECTRIC CARS.
      ====================================================================
      But you go on expounding on ‘laws’ and ‘economic rules’ that you clearly don’t comprehend, it’s good for a chuckle of a Friday morning.

    • @tadcf “Too bad Solar First is not in a position to manipulate supply/demand in that market-”
      You forgot the word “anymore” after the word “market”.

    • @tadcf In 2008 First Solar had a 50% cost advantage over the type of panels China makes. Now they have no cost advantage. While some of this is due to subsidy, most of it is due to competition and the lowering of costs as companies invest in massive polysilica plants.

      Think Betamax vs. VHS. Since everyone is on the government tit, a lot of this is good old fashioned competition, and since prices have come down 70% in just a few years, I’d suggest that actually this is good news for the solar supporters who say that initial subsidy would kick start economies of scale. They may have been right.

      Sure, America and Germany lose out, but did you really expect a complicated elecontric product could be made in America cheaper than in China?

      This is why I am against loan guarantees, etc. for American industry. Not only does it open the door to corruption, but eventually they all move to Asian anyways.

      At least with subsidies to the homeowner there is less chance for corruption as they choose the vendor they prefer.

  • The Congressional Budget Office has just released three very telling infographics which, unintentionally, spell out a pretty dreary picture of US government finances. At the very bottom corner is a most disingenuous statement that says ”Net Interest not included.”  In other words, they didn’t bother to include the $454,393,280,417.03 (nearly half a trillion dollars) that the US government spent on interest last year. To put this number in perspective, the US paid more in interest last year than the entire GDP of Saudi Arabia, or the combined GDPs of the smallest 82 economies in the world.

  • This happens to many large volume products that are made in China and it doesn’t necessarily require subsidies to happen. Its actually very capitalist / market based. New product comes out, with exciting sales potential. Chinese investors build factory. Next door neighbor sees factory is very busy, opens own factory. Plant manager at that factory leaves and sets up his own factory. Party big wig sees all these factories open and opens one of his own. This continues and margins collapse until they go out of business.

    This cycle occurred with Laserdisc players, DVD players, etc. etc. Sometimes the crazy low China price is simply due to intense over-investment and brutal competition for market share.

    With Solar, the problem is the demand is subsidized, which means when the tap is turned off, volume will tumble, and its a sexy investment. I read a bout a Chinese solar panel company that got 1 billion in capital from Wall Street investors without even having a production line or product to show. When that happens, its like pets.com and you are bound to have a serious shake out.

    • Oh, and the Chinese government subsidies only add fuel to the frenzy – I don’t want to downplay this.

  • What really happened is that the poor Chinese taxpayers triply bailed us out. . First, they sold us artificially cheap solar panels that they had to pay to subsidize, . Second, that caused the Solar and Solyndra programs to close thus saving us many billions in subsidies, . Thirdly, they purchased more of our increasingly worthless treasury bills. Poor Chinese workers!