Search This Blog

Tuesday, October 18, 2011

Solyndra: Scandal or a Noble Effort that Failed?

The internet and the other media are abuzz over the collapse of a private corporation, Solyandra LLC, singled out by the Obama administration for a $535 million government loan in early September of 2009. Solyndra, a company boasting of its mission to create a new, innovative type of solar panel was hailed by the President as the future of clean energy, a center piece of his stimulus program. As recently as May of last year, Obama pronounced Solyandra a “testament to American ingenuity and dynamism,” a claim that might well be proven sadly prophetic. After burning off well over half a billion dollars in less than two years, Solyandra filed for bankruptcy in September.

The dust-up generated by the Solyandra bankruptcy has pitted hypocritical conservatives on one side against cynical Obama apologists on the other. Neither side offers anything of value; both obscure the real lessons of Solyandra.

The charges and counters of insider favors and noble job-creating effort obscure the common practices of funding private enterprises with public funds. It is a rare, unusual occasion for the typical entrepreneur to tackle a new project without first seeking public, taxpayer funding. Though unspoken, this is the modus vivendi of twenty-first century capitalism. From the federal level of Solyndra to the local level of new restaurants, shopping malls or stadiums, thousands of contractors, developers, and business start-ups approach the government with hat in hand. From tax forgiveness to out-and-out grants, from publicly funded infrastructure improvements to interest-free loans, business in the US begins with the politics of securing taxpayer-provided welfare or cost-free public services.

Disguising these practices as job creating or growth enhancing, the Democratic and Republican Parties, liberals and conservatives, national politicians and local officials energetically endorse what has euphemistically been dubbed “Public-Private Partnerships.” Typically, the projects are profit-producing endeavors with any profits going to the capitalist partner and the costs and risks absorbed by the public partner. Generally the political operatives who arrange these deals are well rewarded for their effort with generous campaign contributions or out-and-out kickbacks. In the case of investment bankers who structure bond deals to finance such projects, there are fat commissions. And for the public – which seldom has a voice in these deals—there may be carrots: vague promises of jobs or increased economic activity. Or there are sometimes sticks: threats of relocation or closure of existing businesses. In any case, Public-Private Partnerships are never democratically decided, but imposed by the elites who stand to benefit.

The supreme irony of the emergence and dominance of Public-Private Partnerships lies in their blatant violation of the axioms of free market economic theory. The very proponents of these partnerships uniformly voice the values of entrepreneurship, market rationality, and market non-intervention. By the dogmas that dominate economic thinking in the US, a new business or the expansion of an existing business should be left to the tender mercies of the free market. If private capital is not made available, then the market, in its purported rationality, shows little confidence in the proposal; it is too risky. If, on the other hand, the market allocates private capital for a new project, there is no need for public subsidies. Obviously, hypocrisy is never an obstacle to profit seeking through pillaging public resources.

In the case of Solyndra, the Administration gambled public funds and lost on a project laden with political opportunities. If Solyandra had succeeded, Obama would have touted this as an example of job creation and environmental progressivism, a feather in his cap with important elements of his electoral base. His Republican opponents, on the other hand, cheerfully endorse private sector welfare, but seized an opportunity afforded by the bankruptcy to charge Obama with political favoritism in the Solyandra affair.

But missing here is advocacy for the people. Solyandra was a decidedly bad deal.

It was a bad deal because investing public money in private enterprises is generally a bad idea. There was a time when the ferocious war between corporate monopolies and small businesses might have been influenced by government intervention. There was a time when tax breaks, favorable loans to small businesses and other modest measures of support would have given small businesses a lifeline against McDonalds and Wal-Mart. But that moment has long passed. Instead, governments and public officials chose to side with monopoly capital, seduced by the corruption, influence, and power of giant national and international corporations. Those who need help the least, get it the most.

Of course the corrosive influence of profit on government funding is not new. In the interesting 1947 movie, Boomerang, an innocent man is railroaded on murder charges. Directed by Elia Kazan, in his “red” period before he ratted out his colleagues and comrades for mainstream respectability, the movie connects the fate of the accused to the conflict between the old-guard political party and its “reform” opponents. But the movie shows that there is more at stake than one man’s life. While the “reformers” are willing to broker a man’s life to remain in power, the movie reveals that there are even more sinister motives behind their complicity: the top “reform” leaders are involved in a shady deal to sell their real estate holdings to the city for a seemingly worthy public facility. If the Boomerang story resonates today, it is because these kinds of petty corruptions have since expanded and evolved enormously into common and prevalent practice.

The perpetual military economy propelled private appropriation of public funds and resources to an entirely new, qualitatively higher level after World War II and the onset of the Cold War. The so-called military-industrial complex – a kind of socialized mechanism of anti-social economic activity for private profit – intimately linked procurement, research and development, war planning, intelligence, etc. to the private sector. Thanks to the hysteria of the Red Scare, a massive amount of public funds was uncritically and wastefully funneled into profits for corporations parasitic upon both war fears and tax-payer resources. Even without the threat of world war, the military economy expanded and evolved to include private sector mercenaries, client armies, and a giant complex of private contractors and consultants. Standing as a symbol for this evolution is that private behemoth, Halliburton, which offers the military every service from showers to food service.

Two other distinct, but related, developments – the privatization of public enterprises and services and the explosive expansion of tax-evading “non-profit” services – added to the pillage of the public coffers and the taxpayers' paychecks. Despite its free-market advocates in both major parties, privatization has produced higher costs and diminished services, while the growth of “non-profits” has stripped tax collections and government revenues. In some cities over 40% of property goes untaxed because of the granting of transparently ridiculous “non-profit” status.

Solyandra is merely one more instance of the decay and systemic crisis of the capitalism system. Solyandra exposes not an aberration, but a politically charged example of the fusion of the private capitalist economy with the functioning of the state. While some rail against corporate welfare, few today understand its deep roots in the logic of capitalism. V. I. Lenin foresaw this development over a hundred years ago and later Marxist political economists developed his insights into the theory of state-monopoly capitalism. We can trace the twentieth century evolution of the unification of the state and monopoly capitalism from the capitalist response to the Great Depression through the lessons learned from the state’s role in creating political consensus, employment and profitability in World War II. We can see its further expansion in the permanent war economy, the wholesale purchase of the two-party system by private wealth, and the guarantee of private sector profitability in all state policy. We are now experiencing its highest form in the outrageous publicly funded rescue of the most irresponsible and socially aloof corporations.

Without this understanding, we only change the flavor of the drug we are offered.

Zoltan Zigedy

No comments: