Kevin Meyer

Not another outsourcing lemming

With all the grief that Bill and Kevin give the US government about its misguided interventions in the free market (quite often deservedly), it's also important to note when the government should be more activist in order to help rebuild American manufacturing.

In today's NY Times Tom Friedman tells a disheartening story about Applied Materials. Since 2004 they set up 14 factories to manufacture the machines that make solar panels. Unfortunately,

Not a single one is in America.

Let’s see: five are in Germany, four are in China, one is in Spain, one is in India, one is in Italy, one is in Taiwan and one is even in Abu Dhabi. I suggested a new company motto for Applied Materials’s solar business: “Invented here, sold there.”

As a result,

our federal and state subsidies for installing solar systems are largely paying for the cost of importing solar panels made in China, by Chinese workers, using hi-tech manufacturing equipment invented in America.

Friedman doesn't consider Applied Materials an outsourcing lemming. As he says, in reference to the company's new research center opening in China, "Gotta go where the customers are." He lays the blame at the feet of the US government:

The reason that all these other countries are building solar-panel industries today is because most of their governments have put in place the three perquisites for growing a renewable energy industry: 1) any business or homeowner can generate solar energy; 2) if they decide to do so, the power utility has to connect them to the grid; and 3) the utility has to buy the power for a predictable period at a price that is a no-brainer good deal for the family or business putting the solar panels on their rooftop.

Unfortunately, the fragmented and stuttering solar subsidies in the US make those three requirements far from certain. And that makes it financially impractical for Applied Materials to build a factory here.

I know that many people don't think that the government has a role to play in industrial policy. But we wouldn't have today's computer industry if the government (NASA and the Air Force) in the 1960s didn't commit to buying all the semiconductors from no matter how expensive. We wouldn't have the internet if it weren't for DARPA. Hell, we wouldn't have an interstate highway system that allows for inexpensive and rapid transport of goods if it weren't for the government.

So, if it's fair to attack the government for its stupid market interventions, it's also fair to give credit when its due. Its also important to point out places where some intervention would be a good thing. Even if solar power isn't yet cost effective compared to fossil fuels, it will be eventually. And it would be good to have those jobs -- and those manufacturing skills -- here.

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