Commonwealth Commonsense

Lost Investments

My question for conservatives is this: Do you want the government deeply involved in the economy and picking winners and losers, or do you want to create a lot of jobs—paying $300 a month?

That is a question that arises out of this story of Evergreen Solar and its industry. The company took $43 million from the taxpayers of Massachusetts to develop a new solar technology. It created jobs in the Bay State, virtually all of which, three years later, are moving to China.

But now the company is closing its main American factory, laying off the 800 workers by the end of March and shifting production to a joint venture with a Chinese company in central China. Evergreen cited the much higher government support available in China.

,,,Although solar energy still accounts for only a tiny fraction of American power production, declining prices and concerns about global warming give solar power a prominent place in United States plans for a clean energy future — even if critics say the federal government is still not doing enough to foster its adoption.

Beyond the issues of trade and jobs, solar power experts see broader implications. They say that after many years of relying on unstable governments in the Middle East for oil, the United States now looks likely to rely on China to tap energy from the sun.

Evergreen, in announcing its move to China, was unusually candid about its motives. Michael El-Hillow, the chief executive, said in a statement that his company had decided to close the Massachusetts factory in response to plunging prices for solar panels. World prices have fallen as much as two-thirds in the last three years — including a drop of 10 percent during last year’s fourth quarter alone.

Chinese manufacturers, Mr. El-Hillow said in the statement, have been able to push prices down sharply because they receive considerable help from the Chinese government and state-owned banks, and because manufacturing costs are generally lower in China.

“While the United States and other Western industrial economies are beneficiaries of rapidly declining installation costs of solar energy, we expect the United States will continue to be at a disadvantage from a manufacturing standpoint,” he said.

Apparently Massachusetts didn’t strike much of a bargain when negotiating the investment. The jobs were good but temporary. I suspect Gov. Bob McDonnell of Virginia, as probably did his predecessors Tim Kaine and Mark Warner, is giving away the farm in his attempt to lure businesses to the Commonwealth.

To American business the bottom line is the bottom line. We expect individual citizens to have a responsibility to this country and to make sacrifices but allow businesses to operate under a different set of rules: get as much as you can as fast as you can. Individual profit over national prosperity.

To be fair, however, when solar power becomes cheaper that fossil fuels, Americans will install it. The Wal-Mart generation seems to evaluate products based on price alone. And there’s not much we can do to stop it. Americans are not going to “buy American” if that means spending more, Nor can middle class Americans afford that patriotic luxury. So if Evergreen Solar stayed in Massachusetts and continued to grow jobs at $5,400 a month, it’s not likely solar power would become a viable business for the company when the Chinese can make it as well and much cheaper.

No amount of giveaways to businesses will reverse this economic axiom: cheaper sells better.

So it’s foolish for governments to invest in businesses in the vague, and as we saw with Evergreen, ephemeral attempt to create manufacturing jobs unless Americans are willing to work for $300 a month.

Better that governments invest in the businesses that can’t easily exported: the knowledge businesses. Education is the one investment that government, which is to say all of us collectively, should make to create jobs here. We need to develop the intellectual capital that can be exported to help other countries who may likely be more efficient, which is to say cheaper, than we can here.

Otherwise, more states and the federal government will be like Massachusetts, once the bloom is off the rose, hat in hand asking for its money back.

Michael McCarthy, a spokesman for Evergreen, said the company had already met 80 percent of the grant’s job creation target by employing up to 800 factory workers since 2008 and should owe little money to the state. Evergreen also retains about 100 research and administrative jobs in Massachusetts.

The company also received about $22 million in tax credits, and it will discuss those with Massachusetts, he said.

Good luck with that.

High-Tech Workers Shun 3rd World Countries—Like the U.S.!

The potential arc of this economic downturn should be sobering for Americans.  We are increasing viewed as akin to a third-world country, or at least a developing country.  To wit:

[W]ould-be immigrants from India and China are finding new career opportunities at home as those economies grow relatively quickly while the U.S. economy sags and its political climate appears less welcoming.

Vivek Wadhwa, a visiting scholar at the University of California at Berkeley who has studied H-1B visas, said that trend has been compounded by what he sees as rising anti-immigrant sentiment in the U.S. "The best and the brightest who would normally come here are saying, 'Why do we need to go to a country where we are not welcome, where our quality of life would be less [emphasis added], and we would be at the bottom of the social ladder?'" Mr. Wadhwa said.

The gist of this story is that the H-1B visas that are required for highly skilled people to be hired by American companies are down sharply.  Historically, all the allotted visas were snapped up, sometimes in a matter of hours after they are offered by the U.S. government.  The reason, for the most part, is that the tanking economy  has simply lessened the number of jobs for which these potential employees are needed, mainly in the high-tech industry.

But within the story, there are other dynamics that offer a glimpse of where we’re headed as a country.  We like to think of ourselves as the birthplace of great ideas and especially technological innovation.  Maybe not.

While the number of visa holders is small compared with the U.S. work force, their contribution is huge, employers say. For example, last year 35% of Microsoft's patent applications in the U.S. came from new inventions by visa and green-card holders [emphasis added], according to company general counsel Brad Smith.

Google Inc. also says that the H-1B program allowed it to tap top talent that was crucial to its development. India native Krishna Bharat, for example, joined the firm in 1999 through the H-1B program, and went on to earn several patents while at Google. He was credited by the company as being the key developer of its Google News service. Today, he holds the title of distinguished research scientist.

Many politicians like to make the argument that the U.S. has the best and brightest and our systems are the envy of the world.  Lately, you hear especially Republicans making the claim (which is patently false) that we have the greatest medical system in the world.  Maybe if you want to get a tummy-tuck, but our health outcomes are mediocre compared to other countries.  Granted much of that may be due to our poor diet.  But we aren’t the best at everything.

The falloff in H-1B visa applications is also attributed to the anti-immigrant prejudice we are perceived as embracing.  Moreover, American companies, who must prove they can’t find Americans workers with the skills they need before being granted an H-1B visa, don’t cotton to having their motives questioned.

[I]mmigration lawyers say some would-be employers are put off by a crackdown on fraud. U.S. Citizenship and Immigration Services, which administers the H-1B program, has been dispatching inspectors on surprise company visits to verify that H-1B employees are performing the jobs on the terms specified. The fraud-detection unit in coming months is expected to inspect up to 20,000 companies with H-1Bs and other temporary worker visas.

"It's an invasive procedure that is both stressful for the employer and the foreign national employee," said Milwaukee lawyer Jerome Grzeca, whose employment-visa business is down 40% since last year.

Politicians, of course, like to claim that these foreigners are taking jobs away from Americans.  Well, be careful what you wish for.  Soon, they may be taking the best jobs, keeping them for themselves in country, and exporting other jobs to Americans, whose crashing economy has forced them to work for less.

If people, especially those who are driving invention and tech progress, don’t want to come here, in part because they feel their “quality of life would be less,” what does that say about our future?

Will the dynamic that we’ve had for the past decades, indeed centuries, change?  Will India and China begin to outsource their work to Americans who are adjusting to lower wages and investments?  Will we become the new Indians and Chinese – skilled but more cost-efficient because of our lowered standard of living?

Afghanistan Trade-Offs

Not all trade-offs are logical, and certainly this one can be argued.

In particular, one of the most compelling arguments against more troops rests on this stunning trade-off: For the cost of a single additional soldier stationed in Afghanistan for one year, we could build roughly 20 schools there.

Could be naive. But,

…Greg Mortenson, author of “Three Cups of Tea,” has now built 39 schools in Afghanistan and 92 in Pakistan — and not one has been burned down or closed. The aid organization CARE has 295 schools educating 50,000 girls in Afghanistan, and not a single one has been closed or burned by the Taliban. The Afghan Institute of Learning, another aid group, has 32 schools in Afghanistan and Pakistan, with none closed by the Taliban (although local communities have temporarily suspended three for security reasons).

Before you conclude that education is not the answer, consider one group that does.

When I travel in Pakistan, I see evidence that one group — Islamic extremists — believes in the transformative power of education. They pay for madrassas that provide free schooling and often free meals for students. They then offer scholarships for the best pupils to study abroad in Wahhabi madrassas before returning to become leaders of their communities. What I don’t see on my trips is similar numbers of American-backed schools. It breaks my heart that we don’t invest in schools as much as medieval, misogynist extremists.

It might not be a panacea, but we need to ensure we are making an investment in educating Afghans and Pakistanis.