EDITORIAL: SoloPower's struggles provide economic development lesson: Agenda 2013 [The Oregonian, Portland, Ore.]
(Oregonian (Portland, OR) Via Acquire Media NewsEdge) Feb. 18--It's too soon to know whether the sun will set on the U.S. solar industry, despite the struggles of myriad companies including Portland-area employers SoloPower and SolarWorld. But it's not too soon to learn some valuable lessons from the zealous pursuit of the green industry.
The economic principles are simple. The market, not government, picks winners and losers. Emerging industries are riskier than established ones. And it's harder to succeed in a shrinking economy than in one that's growing.
So, why did government officials rush to invest in emerging green industries amid one of the worst U.S. recessions
Starting in 2009, green companies found an ideal political climate as they sought to expand. Concern about global warming was mounting and Democrats controlled the White House after eight years of oil-friendly energy policies under President George W. Bush. Meanwhile, the financial and housing collapse devastated the U.S. economy and put policy-makers in a mood to embrace the "next big thing."
So governments at all levels hugged solar companies. And for a brief period the U.S. solar industry bloomed. Then it wilted. Solyndra, which received a federal loan for a California plant, filed for bankruptcy. SolarWorld, which received state and local tax incentives for a factory in Hillsboro, began bleeding jobs. SoloPower struggled to fulfill its promises in Portland, as detailed by The Oregonian's Molly Young.
To be sure, government should encourage economic development. Sometimes, that requires incentives -- including tax breaks. But incentives must be widely available and awarded based on potential for success, not based on non-economic policy agendas. Otherwise, the government is using taxpayer money to speculate.
"I don't know that there's a good way to pick winners," said Tim Duy, a University of Oregon economist and director of the Oregon Economic Forum.
Oregon is a natural for green-technology companies. It has existing companies in related industries and a culture attractive to employees. But emerging industries are risky, no matter what product the companies offer. Everyone should have learned that lesson a decade ago when the dot-com bubble burst. The Internet survived, as likely will the solar industry, but many companies died along the way.
The best incentives are available to businesses in a wide array of industries. For example, Oregon's successful Strategic Investment Program exempts a portion of investments in plants and equipment from taxes. While the program is best known for helping make Washington County a semiconductor-manufacturing hub, it is available to "traded sector" companies. That broad definition applies to most manufacturers.
We are hesitant to second-guess efforts to encourage economic development. Some investments inevitably will fail. And even when companies succeed, said Rep. Tobias Read, D-Beaverton, "You never know, even in retrospect, whether your policy decision was the deciding factor."
But when using taxpayer money, the state needs to place its bets based on likelihood of success -- not the popularity of an industry.
(c)2013 The Oregonian (Portland, Ore.)
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