Although I’m fundamentally a capitalist, and a strong believer in the power of free markets to allocate capital effectively, I’m not an absolute market libertarian. So whilst I’m convinced that an economy based on competition and creative destruction is far more able to generate productivity growth and technological advance than one that’s centrally planned, I do recognise that there are certain areas of industry that are often neglected or even avoided by the private sector.
Companies are bound by their shareholders to seek a profit, and so they are less inclined to invest in areas of ambitious scientific research where returns are neither immediate nor guaranteed, or in blue sky projects where the route to profit is not even apparent. It is in these areas, where the private sector is unwilling or unable to invest, that a government can in a way that’s beneficial to the long term success of an economy.
Although there have no doubt been many failures, there are numerous examples of government-led research projects that have changed society for the better, e.g.
- The Internet (US Government – DARPA)
- Moon Landings (US Government – Apollo Program)
- Radar (British Air Ministry in World War 2)
- GPS (US Government – Department of Defense)
It’s because of this, that I’m optimistic that if (when?) Barack Obama becomes President he is going to support a government-led, apollo-like, energy project to rapidly accelerate the world’s transition to renewable fuels, whilst turbo charging the economy and weaning us off our dependancy for cheap credit at the same time. And I’m optimistic that it could succeed.
According to Time Magazine:
He wants to launch an “Apollo project” to build a new alternative-energy economy. His rationale for doing so includes some hard truths about the current economic mess: “The engine of economic growth for the past 20 years is not going to be there for the next 20. That was consumer spending. Basically, we turbocharged this economy based on cheap credit.” But the days of easy credit are over, Obama said, “because there is too much deleveraging taking place, too much debt.” A new economic turbocharger is going to have to be found, and “there is no better potential driver that pervades all aspects of our economy than a new energy economy … That’s going to be my No. 1 priority when I get into office.”
If Obama really does make it his number one priority when he gets into office, and he has the electoral mandate behind him, then that political will could make a huge impact.
The New Apollo Program from the Apollo Alliance
The idea for a new Apollo program to build a new energy economy has been around since the Apollo Alliance was founded in 2004. According to their website, the program calls for investing $500 billion over 10 years on steps to:
- Generate clean power (25% from renewable sources by 2025)
- Improve energy conservation and efficiency
- Cut energy bills
- Improve US technological and industrial capabilities
- Create 5 million green-collar jobs
These are pretty ambitious targets, particularly as they want to cut energy bills at the same time as raising the amount of power from renewable sources, but so was putting a man on the moon!
So how much is $50 billion a year?
10 Years, $500 Billion, 5 Million Jobs
The program would generate and invest $500 billion over 10 years. An annual investment of about $50 billion a year, the Alliance notes, is a smaller share of the gross domestic product than what was spent on the Apollo space program, about one-third of current spending in Iraq, and roughly half of what was just lent by the federal government to insurance giant AIG.
Could it be that by backing this project, Obama has the answers to see us out of the financial crisis and solve global warming simultaneously? If we can put a man on the moon, we can certainly hope so.
– Time.com: Why Barack Obama is Winning
– Apollo Alliance: The New Apollo Program