How About ‘None of the Above?’

By Kennedy Maize

Washington, D.C., 16 April 2012 — So clever of the White House. President Obama says his administration’s latest energy strategy — mimicking his GOP adversaries — is “all of the above.” This is the “welcome ever more trotters into the trough” approach. And most everybody who makes energy loves the free lunch. Who wouldn’t. The policy is, put more honestly, bribes for all.

Watching one of the sessions of the eternally and terminally boring New York Times energy policy online gabfest last week, I was struck by the Maoist unanimity of opinion from those who benefit from government subsidies: let a hundred subsidies bloom. If I’ve got mine, you can have yours.

Of course, the politics are clever. The White House cuts the pins out from under the Republicans who claim that the Democrats are showering their hippie friends on the green fringe with taxpayer greenbacks. Sure, respond the Democrats, we’ve given money to Solyndra. It didn’t work, but life’s a crap shoot. But we’re also going to give money to the Vogtle nuclear units, to on-and-offshore drillers, coal miners, and anyone else who gets in line (before Nov. 6, 2012).

Each visit to the public trough naturally includes pious pronouncements about the public utility of such spending. Without taxpayer dollars for [fill in the energy technology blank] civilization as we know it will end tomorrow.

Most recently, the alleged man-made warming of the climate — which must be a calamity, must it not? — has been the hook upon which to hang the energy policy bacon. But before that, it was, variously, scary Arabs, lung cancer, childhood asthma, and godless Communists. (Rep. Allen West, Florida Republican, to the contrary notwithstanding, these last have not been seen in the U.S. since the 1980s.) Today, for those not scared out of their wits by global warming, there are those ambitious, inscrutable Chinese and Indians about to eat our economic lunch. It seems there is always a boogyperson out there to justify draining of the public purse.

At the Times timewaster, much was said about the great success of Sematech as a model for the modern policy pantry raid. I was writing about the computer industry for Newsbytes News Network back in 1986 when Sematech was born. Sematech is an acronym for SEmiconductor MAnufacturing TEchnology, a consortium of 14 U.S. semiconductor makers and the government, specifically the Defense Department. It was designed to circumvent U.S. antitrust laws and allow industrial collusion. The mythology about Sematech that emerged during the NYT event was misleading.

The idea (if one can elevate it to that status) behind Sematech was fear of Japan, which was going to eat our lunch in every phase of economic life. That had to be the truth, because MIT’s Lester Thurow was telling us it was the case, over-and-over again. In the case of semiconductors, Japan was going to drive American companies out of business, gaining control of a vital military technology. The answer, hatched and nurtured in that Valhalla of conservatism the Reagan administration, was “industrial policy.” The U.S. government would emulate Japan and collaborate — and fund to the eventual tune of $1.4B — with industry to beat back the challenge from Tokyo.

Sematech was founded on faulty analysis and soon fell apart (at least the government part of it) because it was based on a bad understanding of the market. The problem wasn’t that Japan’s government was subsidizing its semiconductor industry, but that US manufacturers were crappy at their job and losing out in a world market. As a 1993 New York Times retrospective observed, “Saving the semiconductor industry actually meant saving the equipment suppliers, the small companies that make the machines that make semiconductors. They too had once dominated the world market, but by the 1980’s they were producing equipment that was far less reliable than Japanese counterparts.”

In their misplaced enthusiasm for a government solution to private-sector problems, the NYT panelists advocated applying the Sematech model to the seemingly intractable problem of batteries for electric cars. Guess what? The U.S. tried that, too. In January 1991, the Big Three U.S. auto manufacturers — GM, Ford and Chrysler — and the Electric Power Research Institute got together under the aegis of the Department of Energy for a program to overcome the limits of batteries. They would jump-start the EV market. This official conspiracy in restraint of trade was called the Advanced Battery Consortium, or ABC. Clearly it didn’t work. Otherwise we would all be driving EVs today.

In 1998, a National Academies of Sciences panel reviewed the ABC and concluded, in typical academic-bureaucratic bafflegab, “Although no technology has yet been brought to the point of fully meeting even the midterm goals, work in progress has a significant chance of meeting both the midterm and commercialization goals early in the next decade, possibly even before the year 2000.” The government-industry program collapsed not long after that assessment.

The record of government subsidies for energy technologies, and the wider approach of “industrial policy,” is dismal. But that course of action is precisely what the Obama administration, the Republican opposition, and the supplicant energy industries are advocating. A common rationalization is that widespread subsidies and government’s thumb on the industrial scale are appropriate as long as there is “a level playing field.”

The only sensible comment I heard at the New York Times session came from my old friend Branko Terzic, who is also a friend of government energy subsidies. Despite his tolerance for market meddling, Terzic has been around long enough to see what has gone on in the past. He noted that when people say they want a level playing field, what they are saying is that they want the playing field tilted dramatically in their direction so that everyone else slides off.

What’s particularly amusing about this current round of claims for the need for the “all of the above” energy policy is that occurs just as it is clear that the current and long-running energy policy — or lack thereof — is working. As the Times noted in a long article that served as a curtain-raiser for its day-long conference, the energy situation in the U.S. looks quite rosy today, better than it has since a spooked Richard Nixon, facing the first Arab oil embargo, rolled out his stupendously stupid “Project Independence.”

All of the above? None of the above seems to be working quite well, thank you.