Today’s New York Times carries “Struggling to Stoke Economic Growth in Greece”, an article about how the heroic economists and politicians in Greece intend to restore economic growth. It turns out that the politicians’ answer was green energy:
“A few months after Greece was seized by its debt crisis, Prime Minister George A. Papandreou had a grand idea to revive growth: sun-drenched islands would be dotted with solar panels and wind turbines to transform the country into a ‘green economy,’ attracting badly needed investments and creating hundreds of thousands of new jobs.”
As Greece would presumably be importing all of the technology from China and Germany, it is unclear why this guy thought there would be any competitive advantage for Greece over other sunny portions of the globe.
Is it time to short a country when the politicians begin talking about how they’re going to revitalize the local economy through green energy?
[The article did make me wonder how Greece digs its way out. Given the risk of Greece being ejected from the Eurozone and a subsequent currency devaluation, anyone with money on deposit in a Greek bank should probably be thinking about moving it to France or Germany. An investor thinking about setting up a new business in Greece would have to worry about civil unrest (will a riot destroy my new enterprise?), dramatic tax hikes (the politicians can’t resist spending and nobody will lend to them anymore, so they will eventually have to establish new taxes; how can one be sure that they won’t fall heavily on the new enterprise?), and a shortage of skilled labor (as the smart young people emigrate to the more successful EU countries). Of the bigshots negotiating the latest Greek bailouts, I wonder how many of them would be willing to invest their personal funds in a new Greek business. If the answer is “none”, how do they expect the country to recover?]
As this wind map of Europe shows, Greece has two problems: there isn’t as much wind as other places in Europe (ironically oil rich North Sea countries also have an abundance of wind), and from the geography, there is a huge distribution problem. Furthermore, Greece does not have a lot of flat surfaces for large scale photovoltaic sources.
Like a lot of politcally driven green projects, this seems like another ruse to distract from the fundamental issues.
You may have heard of a recent study of green jobs in Spain: for each job created, two (2.2 really) other jobs were lost. Bloomberg reference:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a2PHwqAs7BS0
Green jobs are an example of Bastiat’s “broken window parable” where the green jobs are the glazier replacing the window, while the 2.2 lost jobs are the unnoticed uses that the window owner could have for the money spent replacing the window.
More simply put, if green jobs made economic sense (if they produced more value than what they consume), they would not need government support, subsidies, government and regulators putting obstacles (or directly attacking) their “non green” competitors…
[As for the big shots, their “investment re: Greece” is probably a massive short sale of every institution still holding greek debt.]
Cheers,
JCS
The green energy idea is like when the government announces that it will not be seizing private assets and bank accounts to pay its debts. You can bet any country whose leader makes an announcement like that is making it because his country is about to go under. (and private property will be seized)
As for how to dig Greece out, it’s important to take the medicine now so that business can expect stability and see prospects for growth. Whatever they have to do, they should do it now and not linger for years with bailouts and threats of default while promising everyone that it will work out. Uncertainty and paralysis for years followed by pain is worse than just getting it over with.
But that would mean telling pensioners and public employees their benefits are getting cut, so Greece has a dark future.
Victor Davis Hanson has an interesting take on the crisis in Greece. http://victorhanson.com/articles/hanson061611B.html
Cargo cult economics… “We used all the latest buzzwords, we built everything to look like a movie set, why isn’t the economy recovering?”
Windmills and solar panels?!
Why don’t they just plan on being taken up in the Rapture?
When politicians talk about green energy, run. When businesses talk about using green approaches themselves, invest.
There is a huge variety of green energy improvements available to businesses, and a growing market of firms offering them. The mean ROI continues to be under 4 years.
These are changes to process or procedure that have low costs and substantially reduce net energy consumption and related costs. Examples include revised office lighting systems, telecommuting, teleconferencing, shipping and warehousing optimization, etc. They all share the characteristic of reducing the cost of delivering product, often through a variety of savings, not just energy use reduction. Sometimes the saving is elimination of a different cost. For example, the solar powered sensor systems along highways save money by eliminating the construction for power lines along the highway. PV panels plus batteries are less expensive than digging ditches and installing conduit.
The politicians have little interest in thousands of small changes that increase the profits of businesses. These don’t generate publicity or votes. They shift around jobs, but the net effect is usually a reduction in jobs. That’s part of why they save so much money. (It does help politically that often the jobs eliminated are in oil producing countries.)
About as much sense and likely effectiveness as the Cash-for-Clunkers and Install-New-Windows stimulus plans. On the other hand, Ike’s Interstate Highway System DID help the economy…
More on the Greek financial crisis in the NY Times Room for Discussion
The statement about shorting green-obsessed countries applies almost everywhere now. To cities and states, of course, but also to almost every government that talks about a significant change in its business base for which there is little or no progress. Biotech, tech, nano, raising per-capita income, lowering income diversity (sorry, “inequality”), and the rest.
Almost without fail, talking substitutes for action (and proof of results), so shorting would be the right strategy.
Words are cheap, actions dear.
In principal Greece has a lot of advantages on their side. Unfortunatly they have not seen them and/or they have been robbed from their “Elites”. I guess if you think our bueraucracy is hell you should visit Greek and try or even start a business. I guess you’ll see you better have very deep and black colored Pockets. For you will not just pay something officially.
Corruption is but one of the biggest problems in Greece. Without a change here all money and plans are more or lessed deemed to fall but in the case of politicial supporters (remember the “deep pockets”?)
Even if there is not much “plain” land this is not especially bad for panels they do not need such large plain space. And if you ever have visited Greece you know this is a dry country, and they still suffers from actions they themselves took as they have been the “world power”. Anyway now the hills are often without vegetation and moulded. They could have started a few hundred years ago with recultivating but that definitly would be hard. And since 2002 they found an easier way and now one can see where they are stuck….
When politicians talk about green energy, run. When businesses talk about using green approaches themselves, invest.
Philip,
I don’t If I am going to regret for saying the following:
I know a lot of fellow Greeks would be offended by this statement, but the problem is indeed the society. Until they change, they can say whatever they want about the politicians, of whom some are corrupted, it’s so obvious! The truth is for the past 30 decades, nobody did anything to prevent this.
Did the know? I will bet they do? Everybody knew. This is basic logic. I borrow, you expect your money back? What I am going to do steal them?
The banks didn’t even invest back in their own country, at least of what I heard off and I understand, they just lended the money elsewhere.
No productivity = problem , no need for math.
And right now, I don’t even know who is resisting to what? Is the society resisting to change itself so that they get back to productivity? Are they resisiting to unfair measures? Is it what happened pre-organized so that Greece would go bankrupt or in-debt-for-the next decades? They did cook up all the numbers so for the past 15 years everything seemed OK.
p.s. Greece is a rich country, I know it will recover, and hopefully soon but I know society has to change. But those who can invest, for example a significant number of rick Greek-Americans, should invest and let the excuses out, like that it’s impossible to invest because of the political system etc, because Greeks are hard working people, and they can get out of this crisis if they are given the chance. Invest in people, not the political system. People have the power to change the political system, when it’s right, although the did vote the same poeple the have been voting for the past 30 years.
I think governments trying to get more of their nation’s children into science may have to be added as a sign of the “economically damned.”
“The folks at Scientific American have launched “1,000 Scientists in 1,000 Days” — a program to bring together scientists, teachers and students to improve America’s “dismal” showing among wealthy countries (27th out of 29) in graduating college students with degrees in science or engineering. I’m sure they mean well — but, at least as it applies to the field of chemistry, “1,000 Unemployed Scientists Living With Their Parents at Age 35 While Working at the Gap” would be a better name.” – Josh Bloom, ex-Wyeth employee
http://www.nypost.com/p/news/opinion/opedcolumnists/america_vanishing_science_jobs_V3TzWwPRZsmTh1sGmtVr8L?