Free Markets, Free People
If you don’t believe me, look at the California experience to this point. If there’s any state in the union more amenable to and focused on providing green jobs, it has to be the Golden State. Governor Jerry Brown pledged to create 500,000 of them by the end of the decade.
But as often the case when the central planners make their pledges, they are woefully ignorant of what the market wants. And so rarely does what they envision ever come to fruition. Green jobs in CA is a good example.
Remember Van Jones? Well, when Jones left the Obama cabinet as his “Green Jobs Czar” he landed in California and has been what the NY Times calls an “Oakland activist” apparently pushing for the creation of green jobs. And it’s not like California hasn’t tried. It has simply failed.
A study released in July by the non-partisan Brookings Institution found clean-technology jobs accounted for just 2 percent of employment nationwide and only slightly more — 2.2 percent — in Silicon Valley. Rather than adding jobs, the study found, the sector actually lost 492 positions from 2003 to 2010 in the South Bay, where the unemployment rate in June was 10.5 percent.
Federal and state efforts to stimulate creation of green jobs have largely failed, government records show. Two years after it was awarded $186 million in federal stimulus money to weatherize drafty homes, California has spent only a little over half that sum and has so far created the equivalent of just 538 full-time jobs in the last quarter, according to the State Department of Community Services and Development.
So a “stimulus” program that spent over $93 million dollars to create 538 jobs. Why so little in terms of takers? Well it seems the market wasn’t interested.
The weatherization program was initially delayed for seven months while the federal Department of Labor determined prevailing wage standards for the industry. Even after that issue was resolved, the program never really caught on as homeowners balked at the upfront costs.
“Companies and public policy officials really overestimated how much consumers care about energy efficiency,” said Sheeraz Haji, chief executive of the Cleantech Group, a market research firm. “People care about their wallet and the comfort of their home, but it’s not a sexy thing.”
You don’t say … the government didn’t have a clue at what the market potential of their boondoggle actually had, so they ended up spending $172,862 for each job. And you wonder where the money goes?
Job training programs intended for the clean economy have also failed to generate big numbers. The Economic Development Department in California reports that $59 million in state, federal and private money dedicated to green jobs training and apprenticeship has led to only 719 job placements — the equivalent of an $82,000 subsidy for each one.
“The demand’s just not there to take this to scale,” said Fred Lucero, project manager atRichmond BUILD, which teaches students the basics of carpentry and electrical work in addition to specifically “green” trades like solar installation.
Richmond BUILD has found jobs for 159 of the 221 students who have entered its clean-energy program — but only 35 graduates are employed with solar and energy efficiency companies, with the balance doing more traditional building trades work. Mr. Lucero said he considered each placement a success because his primary mission was to steer residents of the city’s most violent neighborhoods away from a life of crime.
You see you can fund all the job training centers in the world and run umpthy-thousands through it. But if there is no market for the jobs, you end up spending a whole lot of money for nothing. Again, ignorance of the market and its demands means expensive mistakes. Of course Mr. Lucero thinks the program is a success – he got to spend free money, was employed and it didn’t cost him squat. It cost you.
At Asian Neighborhood Design, a 38-year old nonprofit in the South of Market neighborhood of San Francisco, training programs for green construction jobs have remained small because the number of available jobs is small. The group accepted just 16 of 200 applicants for the most recent 14-week cycle, making it harder to get into than the University of California. The group’s training director, Jamie Brewster, said he was able to find jobs for 10 trainees within two weeks of their completing the program.
Mr. Brewster said huge job losses in construction had made it nearly impossible to place large numbers of young people in the trades. Because green construction is a large component of the green economy, the moribund housing market and associated weakness in all types of building are clearly important factors in explaining the weak creation of green jobs.
Market timing is pretty important too, isn’t it? If you introduce a product into a market in the middle of a market downturn, chances are slim you are going to be successful. While it may all look good on paper and sound good in the conference room, the “buy” decision is still made in the market place, and in this case it is obvious that the market has no room for these workers. Something which should have been, well, obvious. In fact, there is precious little market for traditional construction jobs in a “moribund housing market”. Yet there they are spending money we don’t have on job skills that are simply not in demand.
Finally there’s this bit of word salad to feast upon:
Advocates and entrepreneurs also blame Washington for the slow growth. Mr. Jones cited the failure of so-called cap and trade legislation, which would have cut carbon pollution and increased the cost of using fossil fuel, making alternative energy more competitive. Congressional Republicans have staunchly opposed cap-and-trade.
Mr. Haji of the Cleantech Group agrees. “Having a market mechanism that helps drive these new technologies would have made a significant difference,” he said. “Without that, the industry muddles along.”
You have to admire someone who tries to cloak central planning jargon in “market speak”. Imposing a tax on thin air to drive, from above, a behavior government wants is not a “market mechanism”. And beside, California passed it’s own version of this “market mechanism” with AB 32 in 2006. How’s that working out?
This is how:
A SolFocus spokeswoman, Nancy Hartsoch, said the company was willing to pay a premium for the highly-skilled physicists, chemists and mechanical engineers who will work at the campus on Zanker Road, although the solar panels themselves will continue being made in China. Mayor Reed said he continued to hope that San Jose would attract manufacturing and assembly jobs, but Ms. Hartsoch said that was unlikely because “taxes and labor rates” were too high to merit investment in a factory in Northern California.
Irony … central planning fails in CA while jobs end up in increasingly capitalistic China. Again, ignorance of the market causes disappointing results. Somehow I feel this came as a surprise to Mayor Reed … after he’d spent whatever of your money he’d committed to this project.
A little reminder:
We are currently in the middle of a war against carbon based energy being waged by the current administration to do precisely what Obama promised as a candidate. Raise energy prices. The method is irrelevant to him. No “cap and trade”? Fine. He’ll find other ways. And that’s exactly what is happening as we speak.
For instance, via the EPA. Background – apparently the EPA released its new proposed “Cross-state Rule” on July 7th – a couple of weeks ago – after previously sending it around for comment. The rule is scheduled to go into effect on January 1st of 2012. It is 1,323 pages long. It seems they threw a new requirement into the mix that was not in the original proposed rule and that none of the energy generating owners knew was coming. It would require many to shut down. The Electric Reliability Coalition of Texas picks it up from there:
ERCOT’s May11 report to the Public Utility Commission on the impact of the proposed environmental regulations did not address the impact of SO2 restrictions on coal plants in ERCOT because these restrictions on Texas were not included as part of the EPA’s earlier rule proposal. We have not had time to fully analyze the entire 1,323-page Cross-State Rule released July 7 or to communicate with the generation owners regarding what their intentions will be. However, initial implications are that the SO2 requirements for Texas added at the last stage of the rule development will have a significant impact on coal generation, which provided 40 percent of the electricity consumed in ERCOT in 2010.
Our concern is that the timing of the new requirements – effective Jan. 1, 2012 – is unreasonable because it does not allow enough time to implement operational responses to ensure reliability. We fear that many of the coal plants in ERCOT will be forced to limit or shut down operations in order to maintain compliance with the new rule, possibly leading to inadequate operating reserve margins with insufficient time to reliably retrofit existing generation or build new, replacement generation.
So the EPA pushes out a new reg with drastic limits on SO2 that were not in the original draft of the regulation. If left unchanged it will, per ERCOT, cause many coal-fired plants to shut down or limit their generation. And with 40% of electricity generated by coal in Texas, that will be a significant loss of generating power. Texas will then have to buy what it can’t generate itself and consumer prices will do precisely what candidate Obama hoped – and planned- for them to do. Now think of this and its effect across the country.
Right in the middle of a recession (he’s not the only one trying his best to shut down coal).
Of course that isn’t the only facet of the war on carbon based energy being waged by this administration. Oil and gas also have seen what has now become to be called a “permatorium” on offshore drilling enforced by the administration. Using the Deepwater Horizon blowout as its excuse, the administration has slowed permitting to a crawl and is dragging its feet as slowly as possible to, one suspects, fulfill Obama’s desire.
Study after study have shown that opening the process back up to at least the speed in which it was previous to the accident could create hundreds of thousands of jobs and billions in revenue. A real step toward jumpstarting the economy. Just yesterday another study made that very point:
Faster permitting of offshore oil and gas projects could create nearly 230,000 new jobs in 2012 and boost the economy by $44 billion, including a surge in tax revenue, according to an industry-funded study released Thursday.
The report by IHS CERA said job growth would extend beyond the Gulf Coast states, boosting employment indirectly as far away as California, New York, Florida, Illinois and Georgia.
The study, funded by the Gulf Economic Survival Team, a group of largely Louisiana-based energy and business interests, looks at data on the pace of permitting by the Bureau of Ocean Energy Management Regulation and Enforcement through April 30.
That’s six months after the end of a federal moratorium on offshore drilling, which the government imposed after last year’s Deepwater Horizon accident killed 11 workers and triggered a 5 million-barrel oil spill.
Permit approvals take 95 percent longer now than before the spill, the study says.
You can read the study for yourself here [pdf]. But that last number is telling. There’s no reason for it. The industry has stepped up and raised the bar significantly on safety. The numbers quoted in the study projecting jobs and revenue are for 2012. What administration concerned with jobs wouldn’t leap at such low hanging fruit? This one. Compared to historical trends, pending exploration plans are up by nearly 90%, approvals are down by 85% ,and the approval process has slowed from an average of 36 to 131 days.
And there’s no reason for it.
Meanwhile, what we have is tough to get to market. Take West Texas Intermediate (WTI) oil.
As for WTI, inadequate pipeline infrastructure makes it difficult to get the stuff out of North America — and that depresses its price, especially when demand is also weak. Its problems could also get worse before they get better. Output from North America is growing faster than expected. Canadian producers, for example, recently said output will grow from 2.7 million barrels a day to 3.4 million by 2014 and North Dakota production is surging. Meanwhile efforts to build new pipelines are mired in political controversy.
And they’ll remain mired in political controversy as long as this administration is in power. Slowly, but surely, a nation with huge energy resources is being strangled by a government and President who want to intentionally raise energy prices. Inadequate pipeline infrastructure means less product makes it to market. Less product in the market place means higher prices for what does make it there. Who pays? Consumers.
However, proposals and applications to build pipelines, submitted in 2008, still await action:
In September 2008 TransCanada applied to build a new pipeline — the Keystone XL — to bring diluted bitumen from the oil-rich tar sands of Alberta to thirsty American refineries on the Gulf Coast. It is hardly a radical proposal. Canadian crude has been flowing to the U.S. for decades. Another Canadian company — Enbridge — operates the Clipper pipeline across the Canadian border to Chicago. In July 2010 TransCanada began operating its Keystone pipeline from Alberta to Cushing, Oklahoma, which is a major storage and pricing depot…TransCanada estimates that building the pipeline will mean more than $20 billion — $13 billion from TransCanada itself — in investment and 13,000 new American jobs in construction and related manufacturing. The company also expects more than 118,000 "spin-off" jobs during the two years of construction. TransCanada says it has signed building contracts with four major U.S. unions. It projects that construction will generate $600 million in new state and local tax revenue and that over its life the pipeline will generate another $5.2 billion in property taxes. The Energy Policy Research Foundation in Washington estimates that by linking to the XL, oil producers in North Dakota’s Bakken region will enjoy efficiency gains of between $36.5 million and $146 million annually. Lower transport costs will mean savings for Gulf Coast refiners of $473 million annually if the pipeline meets conservative expectations of shipping 400,000 barrels per day.
Jobs and revenue (in addition to those previously cited in the study), there for the taking, and this administration sits and waits.
And of course, the newest controversy to hit the energy community as to be used as an excuse not to act has to do with hydraulic fracturing, or “fracking”. This is a 64 year old technology that has been used in the US on over a million wells. Suddenly, after news of massive new findings of natural gas in shale formations, it is a problem. And, of course, once it can be officially designated as a problem area, it must be investigated and regulated by the federal government. Complaints of ground water contamination have derailed the exploitation of these energy assets while the politicians argue, dither and delay. With those delays, again, go thousands upon thousands of potential jobs for Americans.
Name a reason for the sorry shape our economy is in and the government’s apparent refusal to aggressively move to help the energy industry create hundreds of thousands of jobs? Review that video again. It’s not long, but it plainly gives you the reason.
Is that what your government is there to do?
As China’s middle class expands and as its business and manufacturing sector continue to grow, it is driving the price of commodities higher because of increased aggregate demand for relatively scarce commodities:
While China’s GDP is only 9.4% of the global economy, and its population is 19% of the world population…
- Cement demand represents 53.2% of global demand
- Iron ore = 47.7%
- Coal = 46.9%
- Pigs = 46.4%
- Steel = 45.4%
- Lead = 44.6%
- Zinc = 41.3%
- Aluminum = 40.6%
- Copper = 38.9%
- Eggs = 37.2%
- Nickel = 36.3%
Some of that demand is relatively stable, like food consumption. The world’s largest country has a middle class that can afford meat for the first time…..
Obviously this means that competition for these commodities will push prices higher and higher. It is these sorts of numbers that cause me to doubt seriously those who claim inflation is not a threat. Certainly the price for commodities is going to go up based on nothing more than China’s demand. And if it costs more for those commodities, that means costs for products based on them are going to rise as well – everywhere. Add in the money supply woes (i.e. literally dumping trillions in dollars into the economy to no real effect) and debt problems and you have a mix of reasons why, while it may not be evident just yet, inflation seems to be a certainty in our near future.
UPDATE: More on food commodities. Interesting article. Much that is produced in China in terms of grain is going toward feeding livestock. So that puts even more pressure on costs for grain, etc.
China was until recently self-sufficient in soybeans, for example. But now they are producing the same amount as they always have (15 million metric tons) but importing 3 times that to keep up. Corn, wheat and rice are headed in the same direction:
Xiaoping said that most of the land in China that can be farmed profitably is already under cultivation and that available land is actually shrinking in the face of development. In addition, yields are beginning to plateau, he said, with little expectation of major gains.
He said he expects China to increasingly import corn to keep up with demand resulting in part from dietary changes and its use in producing biofuels.
That means upward pressure on prices for everyone.