By Martin Tuchman on May 11, 2009
In her blog, “Princeton Comment,” Barbara Figge Fox covered Paul Krugman’s April 18 presentation at Princeton University. She reported that the Nobel Prize winner in economics said, “Technology creates demand for new stuff … if you can get dramatic, technological change … regardless of how badly we screw up, we will recover if we do have radical technologies that spur lots of investment. Extremely cost-competitive green technologies … would be perfect right now.”
Krugman is on the mark. Typically, countries extricate themselves out of severe economic slumps by increasing their exports. This is not going to be the case this time.
As Krugman indicates, “We can’t all export our way out of it unless we can find a planet to sell to.” Nor is there much support for ramping up consumerism. Everyone seems to agree that Americans need to spend less and save more. If we are going to spur wide demand for products, they will need to be necessities, not luxuries.
Getting the economy out of the doldrums has historically taken an extraordinary occurrence. In the case of the Great Depression, it was to a large extent World War II. It takes something special in order to get people to part with their hard-earned money in difficult times. Early on, the automobile was such a driver. After a war, a pent-up demand drives the economy. People want things. They are willing to build them and pay for them over time. The homebuilder and the automaker get paid up front. It is the banks and other financial institutions that provide the “upfront” cash to pay these products. Then, the consumers promise to repay the debt over time.
To accomplish the above, people who are acquiring products must have jobs. That’s really what is meant by “confidence” in the economy. In this regard, government grants to state and local governments for shovel-ready projects under the economic stimulus program is the right medicine for our ailing economy.
Currently, aside from the lack of confidence, there is a lack of interest on the part of the consumer and on the part of business, and lethargy on the part of government. There are only so many iPods people will purchase and only so many songs they will download.
Products are needed that can be made by workers working in this country and consumed in this or other nations, e.g. solar panels, solar systems, turbines that generate electricity through wind power, hybrid electric vehicles as well as all-electric vehicles.
Nowadays, very few people argue against alternative energy — only the cost, effectiveness and efficiency are discussed. What we need is a “Put a Man on the Moon”-like green technology initiative that embraces a series of well-thought-out energy grants, investment tax credits, accelerated depreciation; sensible “energy sell-back” legislation could provide a great deal of employment and is the way to go. Surely, a country that dreamed up the “securitization” model and complex hedges against floating rate changes can come up with a plan to put Americans to work producing electricity.
The nice thing about such an initiative is that it would accomplish several things simultaneously. It would provide work for unemployed Americans and manufacture a real product vs. just having a plan of simply throwing money at something and calling it “stimulus,” and it very well may be a product we can export to other nations.
It is one thing for politicians to declare themselves for alternative energy while chastising automakers, utilities and our own citizens for being insensitive to the environment; it’s another thing to lead by example. It is time to mandate that the postal service use hybrid vehicles. Not just a token amount in a “test area,” but a sweeping declaration that this is what should be ordered across the board.
Since utilities are regulated by various government agencies, a mandate can impose that all their vehicles be hybrids. The same approach should be taken with regard to every branch of government. It is only then that the American people will get behind the program and purchase hybrids themselves.
The same is true for the alternative energy scenario. Why is the government attempting to encourage its citizens to acquire solar paneled roofs when we don’t see them on government buildings? The message has to be there for all to see.
There also has to be a different mandate when it comes to selling back electricity to the “grid.” There are some regulations in place that discourage the production of surplus electricity over and above that which is currently used by the addressee. This means there is no incentive for anyone to build a larger facility so as to earn credits.
By setting an example, combined with funding alternative energy as a method for job creation, this nation will be more prosperous, less dependent on foreign energy and experience a greater sense of homeland security. The Obama administration should provide bold leadership on this issue, which could be transformational for our nation.