Yves here. As readers likely recall, Thomas Herndon, Michael Ash, and Robert Pollin of the University of Massachusetts, Amherst wrote a paper, “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff,” which revealed serious methodological problems with one of the linchpin papers used to justify cutting government spending even in times of recession. Nevertheless, Reinhart and Rogoff have been trying to salvage what they can by claiming they never said the relationship between high deficit levels and their claim of serious economic damage was causal. The interview that we’ve republished includes a box that shows that, au contraire, Rogoff did in fact did push the austerity line. From a Financial Times comment of his, “No need for a panicked fiscal surge” dated July 20, 2010:
Indeed, it is folly to ignore the long-term risks of already record peace-time debt accumulation. Even where Greek-style debt crises are unlikely, the burden of debt will ultimately weigh on growth due to inevitable fiscal adjustment. … [A]n apparently benign market environment can darken quite suddenly as a country approaches its debt ceiling. Even the US is likely to face a relatively sudden fiscal adjustment at some point if it does not put its fiscal house in order.
Cross posted from Dollars & Sense
Nothing warms the heart quite like a story of the high and mighty brought low. Harvard economists Carmen Reinhart and Kenneth Rogoff were the high and mighty—prestigious academics whose influential paper on government debt and economic growth was widely cited by policymakers and commentators to justify painful austerity policies. The underdogs who brought them down were three members of the UMass-Amherst economics department: graduate student Thomas Herndon and professors Michael Ash and Robert Pollin. As Dean Baker of the Center for Economic and Policy Research (CEPR) argues, it is no accident that UMass economists were the ones to debunk Reinhart and Rogoff. The department, Baker notes, “stands largely outside the mainstream” of the economics profession and so is “more willing to challenge the received wisdom.”
Reinhart and Rogoff had claimed that countries with government-debt-to-GDP ratios of over 90% could expect dramatically lower future economic growth than other countries. But when Herndon attempted to replicate this result for a course in applied econometrics taught by Ash and Pollin, he found that he couldn’t. In fact, as the Herndon-Ash-Pollin published paper would report, there was no dramatic growth dropoff above the supposedly critical 90% threshold. The reasons behind the faulty finding? Well, there was the world’s most famous spreadsheet error—which has received extraordinary media attention mainly because it is so embarrassing, so all the more delicious given the lofty position of the authors. More importantly, however, was Reinhart and Rogoff’s questionable treatment of the data. Most of the difference between their results and Herndon-Ash-Pollin’s was due to no mere error, careless or otherwise, but to deliberate (and, in Pollin’s view, “indefensible”) decisions about how to average the data, how to divide it into different categories, and so on.
Pollin is the co-director of the Political Economy Research Institute (PERI) at UMass-Amherst and is well-known for his work on minimum-wage and living-wage laws as well as the project of building a green economy. Dollars & Sense co-editor Alejandro Reuss sat down with him to talk not only about the Reinhart-Rogoff paper and the Herndon-Ash-Pollin takedown, but also larger issues about the economic crisis and austerity: the role economists have played in abetting austerity, the reasons behind policymakers’ determination to impose austerity policies, and the diverging paths before us—the profit-led recovery promised by neoliberal economists versus a wage-led recovery pointing toward a more egalitarian social-democratic system. —Eds.
D&S: While Reinhart and Rogoff’s so-called “Excel error” got a lot of attention in the media, this was a relatively small factor in the findings they reported. What do you think are the key critiques of the view that high debt-to-GDP ratios doom growth, both in terms of the figures and interpretation?
RP: I recall one commentator said that the Excel coding error was the equivalent of a figure skater who was not doing well, but it wasn’t entirely clear until he or she fell. Even though the fall itself wasn’t the most significant thing, it dramatized the broader set of problems. I think that’s true of the Reinhart-Rogoff paper. The main things that were driving their results were, first, that they excluded data on some countries, which they have continued to defend. Second, and most importantly, was the way that they weighted data. They took each country as a separate observation, no matter how many years the country had a high public debt-to-GDP ratio. For example, New Zealand had one year, 1951, in which they had a public debt-to-GDP ratio over 90%. And in that year New Zealand had a depression. GDP growth was negative 7.6%. The UK, by contrast, had 19 years in which the debt-to-GDP ratio was over 90%, and over those 19 years GDP growth averaged 2.5% per year, which is not spectacular, but not terrible. Now, according to the way Reinhart and Rogoff weighted the data, one year in New Zealand was equally weighted with 19 years in the UK, which I find completely indefensible.
D&S: So when you correct for these problems, you end up with a modest—maybe not even statistically significant—negative relationship between the debt-to-GDP ratio and future growth. What are the main arguments about how to interpret this relationship?
RP: Reinhart and Rogoff have been making the defense that even the Herndon-Ash-Pollin results still showed public debt-to-GDP over 90% being associated with a GDP growth rate of 2.2%. Meanwhile, at less than 90% debt-to-GDP, growth is between 3 and 4%. So they’re saying, “Well, we made some mistakes but it’s still a 1% difference in growth over time, which matters a lot.” And I wouldn’t disagree with that observation.
But there are other things in here. First, is it statistically significant? One of the other things we [Herndon-Ash-Pollin] did was to create another public debt-to-GDP category, 90% to 120%, and then above 120% debt-to-GDP. For the 90–120% category there’s no difference in future growth rates [compared to the lower debt-to-GDP category]. So it’s only when you go way out, in terms of the debt ratio, that you will observe a drop-off in growth. Second, what happens when you look over time? In their data, for 2000 to 2009, the growth rate for the highest public debt-to-GDP category was actually a little bit higher than in the lower categories. So what’s clear is that there really is no strong association.
In addition, some people have then taken their findings and asked which way causality is running. Is it that when you have a recession, and you’re at lower growth, you borrow more? Well, that’s certainly part of the story. And Reinhart and Rogoff have now backpedaled on that. But to me even that is not nearly getting at the heart of the matter. The heart of the matter is that when you’re borrowing money you can use it for good things or bad things. You can be doing it in the midst of a recession. If we’re going to invest in green technologies to reduce carbon emissions, that’s good.
We also need to ask: what is the interest rate at which the government is borrowing? The U.S. government’s debt servicing today—how much we have to pay in interest as a share of government expenditures—is actually at a historic low, even though the borrowing has been at a historic high. The answer obviously is because the interest rate is so low. When you’re in an economic crisis and you want to stimulate the economy by spending more, does the central bank have the capacity to maintain a low interest rate? In the United States, the answer is yes. In the UK, the answer is yes. Germany, yes. In the rest of Europe, no. If you can borrow at 0%, go for it. If you have to borrow at 9%, that’s a completely different world. And the Reinhart-Rogoff framework doesn’t answer the question. It doesn’t even ask that question.
D&S: Looking at research touted by policymakers to justify austerity policies, which has now been debunked, do you see the researchers putting a “thumb on the scale” to get the results that they wanted? Is that something you want to address, as opposed to simply getting the data, seeing what’s driving the results, and debunking the interpretation when it is not justified?
RP: It’s clear that politicians seized on these findings without questioning whether the research was good. That’s what you’d expect them to do. Politicians are not researchers. The only research Paul Ryan cited in the 2013 Republican budget was the Reinhart-Rogoff paper. George Osborne, the Chancellor of the Exchequer in the UK—same thing. People at the European Commission—same thing. Now, speaking about Reinhardt and Rogoff themselves, I don’t know. In general, it is certainly a tendency that if someone gets a result that they like they may just not push any further. I think that may have happened in their case, without imputing any motives. All I can tell you is that they wrote a paper which does not stand up to scrutiny.
D&S: All this raises the question of why elites in Europe and in the United States have been so determined to follow this austerity course. How much do you see this as being ideologically driven—based on a view of government debt or perhaps government in general being intrinsically bad? And how much should we see this as being in the service of the interests of the dominant class in society? Or should we think of those two things as meshing together?
RP: I think they mesh together. I think part of it comes from our profession, from the world of economics. It’s been basically 30 years of pushing neoliberalism. It has become the dominant economic agenda and certainly hegemonic within the profession. When the crisis hit, countries did introduce stimulus policies and one of the criticisms [from economists] was that this is really crude and we don’t really know much about multiplier effects and so forth. That’s true, and the reason that we have only this crude understanding of how to undertake countercyclical policies is because the mainstream of the profession didn’t research this. It was not a question. They spent a generation proving that we didn’t need to do these policies—that a market solution is the best. So that’s the economics profession and it does filter into the political debates.
But then, beyond that, is the agenda of getting rid of the welfare state and I think a lot of politicians want that to happen. They don’t want to have a big public sector. Either they believe that a big public sector is inefficient and that the private sector does things more efficiently, or, whether they believe that or not, they want lower taxes on wealthy people (and wealthy people want lower taxes because that lets them get wealthier). They don’t want constraints on their ability to enrich themselves, and they certainly don’t want a strong and self-confident working class. They don’t want people to have the security of health insurance or pension insurance (i.e., Medicare and Social Security in this country). That’s the model of welfare-state capitalism that emerged during the Great Depression and was solidified during the next generation, and these people want to roll it back. The austerity agenda has given them a launching pad to achieve this. I have no idea whether Reinhardt and Rogoff believe this or not, but their research enabled people like Paul Ryan to have the legitimacy of eminent Harvard economists saying we’re killing ourselves and we’re killing economic growth by borrowing so much money.
D&S: Policymakers in the United States, Europe, and elsewhere, to a great extent, have just tried to “double down” on neoliberal policies. But with the structural problems of neoliberalism, keeping the same structure looks in effect like a way of keeping the same crisis. What do you see as the possible ways out of the impasse, both desirable and undesirable?
RP: I think there are fundamentally only two approaches—basically profit-led models versus wage-led models. In the Financial Times today [June 10], the well-known columnist Gavyn Davies is saying that the reason the stock market is going up—and it’s going up very handsomely—is fundamentally because the current model of capitalism is able to proceed by squeezing workers even harder. The wage share, which had been relatively stable for generations, is going down and the profit share is going up.
Now is that sustainable? Presumably you’re going to have a problem of demand at a certain point because if workers don’t have enough in their pockets, how are they going to buy the product? One answer is we can export to rising Asian markets and so forth. But the Asian countries themselves are depending on the exact same model. The alternative, which I think makes more sense logically and is also more humane, is to have a more equal distribution of income—a social democratic model of capitalism in which you do have a strong welfare state that acts as a stabilizer to aggregate demand and also enables workers to buy the products that they make. And that’s true for China and for the United States.
We have to add into that the issue of environmental sustainability. At the same time that we’re building a new growth model it has to be a model in which carbon emissions go down per unit of GDP. I don’t think it’s that hard to do technically. Whether it happens is another matter.
[The 20th-century Polish macroeconomist Michal] Kalecki, of course, recognized this a long time ago, saying you can have a model of capitalism based on repressing workers. (He noted that it’s helpful, if you’re going to do that, to have a repressive fascist government—not that he was advocating doing that, of course.) After a while, and this was in the Financial Times today, workers are going to see that they’re not getting any benefit from a recovery, and it’s going to create all kinds of political results, and we don’t know what they’re going to be. But people are going to be pissed off.
D&S: That brings us to a central question, which Kalecki raised, that a social problem may be solved technically and intellectually, but still face barriers of economic and political power. That applies not only to full employment, the issue he was addressing, but also to environmental sustainability and other issues. Can our most serious problems be resolved within the context of capitalism, or do they require a new kind of economy and society, whatever we may call it?
RP: The challenge that Kalecki introduced points to some version of shared egalitarian capitalism, such as a Nordic model. Whether that model works and how long it works is an open question, and it varies for different countries.
Certainly, when we think about environmental infrastructure investments, collective solutions are workable. We know from Europe that initiatives, which are collectively owned and collectively decided, for building renewable energy systems really do work. In large part, this is because it is the community saying, “We don’t mind having wind turbines if it’s done right within our community and we have a stake in it.” If some big corporation were to come and say, “We’re wiping out 18 blocks here to put up some turbines and we have a right to do it because we own the property”—it doesn’t work. We have public utilities and that works just fine in this country.
Expanding the role of the public sector in my view is totally consistent with what’s going to happen in the future. So that starts transcending the primacy of corporate capitalism. But we can’t get there in ten years. No matter how much anybody wants it, that’s not going to happen. We have a problem of mass unemployment and we have an environmental crisis with climate change, and if we’re not going to transcend capitalism in ten years we have to also figure out ways to address the concerns now within the existing political framework. That’s not fun. When I deal with mainstream politics in Washington, it’s very frustrating, but that’s the world we live in.
I think that if we press the limits of the existing system, that helps me to understand how to move forward into something different than the existing structure. My professor Robert Heilbroner, a great professor who had a beautiful way of expressing things, talked about what he called “slightly imaginary Sweden.” So it’s not the real Sweden but this notion of some kind of egalitarian capitalism. As you press the limits of that model, you can intelligently ask what’s wrong with it. If we’re pushing the limits and something is holding us back, let’s solve that problem. I think that’s a good way forward.
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If you can borrow at 0%, go for it. If you have to borrow at 9%, that’s a completely different world. Robert Pollin
A monetary sovereign has no need to borrow at all! Professor Bill Mitchell calls such borrowing “corporate welfare.” Moreover, sovereign borrowing creates a class of rentiers who benefit from deflation because deflation increases the real yield of sovereign debt but not the default risk since there can be no default risk with sovereign debt.
And it’s arguable that sovereign borrowing does not even forestall price inflation because:
1) The interest paid adds to aggregate demand.
2) The sovereign debt is a risk-free asset that banks can leverage.
3) The central bank often creates new fiat to purchase sovereign debt via Open Market Purchases.
I’ll add this:
4) Even if the central bank does not outright buy sovereign debt, I see no reason why it wouldn’t lend new reserves to a bank against any sovereign debt the bank held. So essentially, sovereign debt is just another form of fiat but one that pays interest as others have said.
The wage share, which had been relatively stable for generations, is going down and the profit share is going up. Robert Pollin
That’s because jobs have been automated away with the workers’ own stolen purchasing power via government subsidized credit creation.
If private money was created as Equity instead of Liabilities, the workers would automatically share in profit increases.
But instead of promoting an “equitable society”, the government subsidizes debt creation with deposit insurance and a fiat lender of last resort and punishes “sharing” with the capital gains tax on common stock.
This sounds good, but as per usual with academic economists, the criminality that lies at the core of kleptocracy is ignored. Kleptocracy as practised by the rich and elites depends upon control of both government and the economy. Failure to recognize this leads academic economists invariably to propose nice sounding policy solutions that don’t have a snowball’s chance in hell of coming to pass.
When Pollin says, “We have a problem of mass unemployment and we have an environmental crisis with climate change, and if we’re not going to transcend capitalism in ten years we have to also figure out ways to address the concerns now within the existing political framework,” he repeats this error. The same political framework he wishes to work within is the same one which created these problems and is vested in their continuance. The result is that any who follow this path will end up wasting their time and energy. As I have pointed out many times with a Establishment liberal like Krugman, at some point we have to question the good faith of those who provide us with critiques of the system and then rather than moving beyond it ask us to return to it and trust in it. It is the reformer’s fallacy. A thoroughly corrupt can not be reformed. From the kleptocrat’s viewpoint, reform is just another form of distraction, just another way to send the rubes off chasing their tail, a way not to enact real change but to avoid it.
Also within light of our recent discussions, we don’t have 10 years to waste in futile efforts to tweak the corporate state and give it a good solid illusory nudge. The problems of overpopulation, resource depletion, and environmental damage are not going to wait on us and another decade of kleptocratic looting and political kabuki. What Pollin is advocating is pernicious but standard for academic economists. He wants us to pursue the mirage of reform with ten years we don’t have.
Hugh, I think you are right about this but wrong to criticize Pollin, who does not say anything in support of the corporatist ‘growth’ model, which is of course completely idiotic as a social goal, and really nothing more or less than a cover story to justify continued looting.
What we clearly need is very high taxes on the ultra rich to discourage continued looting (why bother if you only keep 5 – 10% of the loot), and we also need something we have never had in America, a means of funneling government spending into projects worth doing. What we have instead is one part boondoggling and one part corporatist graft, and it doesn’t ultimately turn out well if this is what happens to the money.
All in all, technocratic criticism of toadying intellectuals is pretty much a waste of time. Rogoff and Rogain (or whatever her name is) are simply shills for the neoliberal fantasy, and whether they are deliberately fudging data or unable to do simple computer operations competently really doesn’t matter IMHO.
Ripoff and Richtoadie – but what’s in a name? The academics are broadly useless, but surely we expect too much of argument and don’t know how little we should expect. Few academics are capable of critical expression – the way we are taught to write is essentially supplication and even people like Fred Soddy used third person speak to disguise polemic.
Imagine being in front of a class of first years with a stack of 101 texts (say economics, HRM, strategy, marketing and management and organizational behaviour – throw in gender studies). You offer to teach 100 students familiarity with these for three years in return for £9K a year each. You know this textbook stuff is rubbish and highly biased. How do you make the ‘moral’ decision to teach it? The most common I heard was our students were too stupid for real teaching. All I ever managed was a bit of subversion. In my specialist subject we write research in code (organization theory).
Recent research by Ivor Crewe and Anthony King points out that government blunders involve lack of deliberation (failing to consult those who might know), non-existent Parliamentary procedures, the absence of pilot schemes, dummy runs and evaluations, failure to consult with implementation bodies; accountability because of high turn-over rates of ministers and civil service staff and instability of policy design teams; want of judicious restraint manifested in setting unrealistic targets and a culture of haste and determination to deliver. Well done to these old walruses – they have repeated a couple of chapters of a standard strategy ‘how not to’ text. Hugh’s kleptocracy is not mentioned at all.
We are so wrong in our economics and our personal immersion in it because we can’t imagine how we would exist in reasonable equality with others, or even how we would get kids to go to school (and universities’ extended child minding) without threats, let alone questioning any need for this form of education at all and what it really does. The questions of a modern economy and modern education are currently lost even though we know the answer is a more collectivist, scientific (stripped of that value-free nonsense we used to keep the instruments of torture off us) society looking for secure lives and balanced ecology.
Yes, it’s all about toadying up to maintain personal superiority over the threatening herd. I mean WTF will these people do if they are actually compelled to work?
‘The agenda of getting rid of the welfare state … enabled people like Paul Ryan to have the legitimacy of eminent Harvard economists saying we’re killing ourselves and we’re killing economic growth by borrowing so much money.’
Pollin leaves a misleading impression that Reinhart and Rogoff themselves had an agenda of ‘getting rid of the welfare state.’
Both the Reinhart-Rogoff paper, and the Herndon-Ash-Pollin paper correcting it, were concerned solely with the technical question of the correlation between debt and growth. Both found a negative correlation, although Herndon-Ash-Pollin had to establish a higher threshold value (debt at 120% vs. 90% of GDP) to derive statistical significance from the negative correlation.
Neither paper ventures into the realm of policy prescriptions, which would have been quite outside their scope.
As a politician, Paul Ryan sees the welfare state as a source of structural deficits which will inexorably drive up debt, and uses the negative correlation between debt and growth to argue that the welfare must be reined in.
That’s Ryan’s conclusion, not Reinhart/Rogoff’s.
Pollin makes his political leanings quite clear in this interview. That’s his privilege, of course. But his preferred policy prescriptions, such as reducing carbon emissions, are unmentioned in his Herndon-Ash-Pollin paper. So are Reinhart-Rogoff’s, although Pollin insinuates otherwise.
Mildly sleazy, I would say.
‘The agenda of getting rid of the welfare state … enabled people like Paul Ryan to have the legitimacy of eminent Harvard economists saying we’re killing ourselves and we’re killing economic growth by borrowing so much money.’
Robert Pollin leaves a misleading impression that Reinhart and Rogoff themselves had an agenda of ‘getting rid of the welfare state.’ Both the Reinhart-Rogoff paper, and the Herndon-Ash-Pollin paper correcting it, were concerned solely with the technical question of the correlation between debt and growth.
Both papers found a negative correlation, although Herndon-Ash-Pollin had to establish a higher threshold value (debt at 120% vs. 90% of GDP) to derive statistical significance from the negative correlation.
On the other hand, neither paper ventures into the realm of policy prescriptions, which would have been quite outside their scope.
Paul Ryan sees the welfare state as a source of structural deficits which will inexorably drive up debt, and uses the negative correlation between debt and growth to argue that the welfare must be reined in.
This is Ryan’s conclusion, not Reinhart/Rogoff’s.
Robert Pollin makes his political leanings quite clear in this interview. That’s his privilege, of course. But his preferred policy prescriptions, such as reducing carbon emissions, are unmentioned in his Herndon-Ash-Pollin paper. So are Reinhart-Rogoff’s, although Pollin insinuates otherwise.
Seems mildly sleazy, don’t it?
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Im sort of tired of people trying to advocate for ‘capitalism with a human face’ type deals like the half fantasy Nordic model.
The Nordic model has been eaten away by Neoliberals in its home country for for over a decade. Theres no point to a model that can be undermined by domestic capitalist elites. An farther reaching and more radical alternative to modern capitalism is needed (not necessarily an uncapitalist alternative per se though), rather than a bandaid on the modern system like the Nordic model is. The nordic model is basically just a slightly advanced form of Welfarism, which has historically proven to be an inefficient alternative to neoliberal capitalism, seeing as how easy it is to completely dismantle even an advanced welfarist system.
A “more radical alternative to modern capitalism is needed..” sounds great, but it’s a bit vague. A better ploy is to look at SPECIFIC ASPECTS of the free market / capitalist system and think long and hard about whether something else isn’t better. For example, it’s plain as a pikestaff that European type government run healthcare systems and hospitals are more efficient than the US largely private system. The facts and figures bear that out.
Also I devote a lot of time and money to advocating a system under which on the government / central bank creates money (rather than private banks). It’s called full reserve banking. That system makes TBTF subsidies unnecessary, plus it make sudden bank failures impossible. Have a look at Laurence Kotlikoff’s publications for the details, or see here:
http://www.positivemoney.org.uk/wp-content/uploads/2010/11/NEF-Southampton-Positive-Money-ICB-Submission.pdf
Sounds good so far to me.
Yes, money is the biggest problem. Private banking with its Federal Reserve backstop is simply an engine of speculation rather than enterprise. Eliminate this and attack corporate monopolies and government corporatism, and you might have a good start, although the problem of inherited property and wage slavery remains, particularly if nothing is done to prevent off shoring and inhibit international technology transfers, which created ‘foreign competition’ in the first place.
The whole existing system is so rotten that fixing it means pretty much replacing it, but replacing it with what is the whole question. People who think that Barney Fumble and Nancy Preposterous (and even Liz Warren) can be trusted to make business decisions should probably not be trusted with a vote, except for the fact that how they cast it makes no difference whatsoever.
” If we’re going to invest in green technologies to reduce carbon emissions, that’s good.”
With how many millions, billions? wasted on green boondoggles like Solyndra? Or solar panel makers, now bankrupt?
What is needed is more entrepreneurs offering more peaceful, productive, positve rate of return jobs to workers.
But too much gov’t is crowding such folk out. And anti-capitalist dreamers fail to agree on any workable alternatives (socialism? Ha! An alternate elitist kleptocracy).
Please, Sir, look up the definition of “Socialism” before you call it elitist. Do not confuse democratic socialism with autocratic communism.
Socialism:
https://en.wikipedia.org/wiki/Democratic_socialism
Not enough government in the service of people who do actual work has for the last several decades allowed wealth to accumulate in the hands of people who play games with money. They’re the reason “entrepreneurs” are being crowded (or bought, or starved) out.
Earthwalkers. That is the political movement I want to join. Detroit is bankrupt, how poetic. Now let’s finish the job and eliminate cars from the planet. Recycle the mountains of cars we now have. Do not manufacture any new steel. Shut down gas stations. Commute electronically. Turn high-rise office buildings into apartments. Do permaculture everywhere there is an open lot. Grow 50% of the produce we eat, and then 100%. Do good busses, delivery vehicles, trains. Build alternative renewable energy sources locally, energy co-ops. Learn to conserve. Learn to walk. Demand that the government provide full employment by creating 20 million low productivity jobs of high social value with a livable wage. Demand single payer health care. Ring fence the banksters and the chicken hawks. Etc.
Replacing autos with horses would create tremendous employment opportunities. Talk about your shovel ready projects!
Indeed what to do. My dog loves walks and I don’t want him to become an unnecessary carbon-footprint. We walk in permaculture kept up by volunteers. How did we get to an economics that relies on unemployment and planet burning? One might write ‘needs more work’ on this plan – but it is the plan we should be able to put effort into.
Profits, profits, profits. There was an article about a local bank. I guess it was some tragedy that profits fell by I don’t know, maybe .5%? They must always go up. Don’t worry though– they made some adjustments, moving everyone to a 401K. Plus, there was good news! Along with a reduction in unemployment locally, credit card debt was up.
“With how many millions, billions? wasted on green boondoggles like Solyndra? Or solar panel makers, now bankrupt?”
Solyndra was only a boondoggle to political opponents of renewable energy. The failures of Solyndra and Evergreen Solar were caused by failed bets on how long it would take silicon ingot manufacturers to increase production to meet heavy demand. Solyndra, makers of thin-film photovoltaic modules which do not use silicon ingots, were unconstrained by silicon ingot shortages. Similarly, Evergreen Solar developed a “string ribbon” technology which freed them from the silicon ingot shortages. But silicon ingot fabrication facilities were brought online faster than anticipated, China massively increased production, and prices for PV modules plummeted. Solyndra and Evergreen Solar were unable to repay their loans due to rapidly changing market conditions. (Full disclosure: I lost every cent of my small investment in Evergreen Solar.)
Department of Energy loan guarantees in Solyndra were a very small percentage of their total loan portfolio. Viewed as venture capitalists, DoE was highly successful with their investments in the energy sector.
Pointing to isolated failures, which are easily understandable to anyone who takes the time to look, paints a very distorted picture of government’s ability to help grow the green energy sector of our economy.
oops — I intended to address this to Tom’s comment at 12:06 pm
What utter nonsense. No wonder the economics ‘profession’ is without credibility, a shipload of monkeys has more common sense.
Call me when central banks can print $20/barrel crude oil and when governments are able to decree it into existence. Call me when someone has better use for what’s left of our precious capital besides burning it up to show off!
100+ years of growth-y success has caused our crisis. Any more of it will be the end of us all.
All of these economists should be struck down at once whenever they utter the word ‘growth’. They are like Jesuits uttering the word ‘sin’ before they apply the hot iron to the subject’s eyeballs.
Good grief! We are emptying out one relatively small planet with a manic frenzy, when we are done we are going to be in serious trouble.
The problem of the capitaist model in the United States is the ethos with which the majority of the population has been indoctrinated, and that is of unequal power, among states (2 senators for California as well for Wyomiing with a population 1/30th of Calfornia) and among people, the rich (looked up to) and the rest, of looting and grabbing whatever one can lay one’s hands on frfom the earth, of subservience to flag every day in school. With the Constitution virtually impossible to change, media and wealth concentration and dissembling, it is hard to see if this system can ever change. The day of pitch-forks is gone as is evident even in Egypt.
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