Spanish economist Gabriel Calzada caused the central economic planners’ heads to explode in March 2009 when he released a study showing every “green job” the Spanish government was creating with its regime of open-ended subsidies was simultaneously devouring enough resources to create 2.2 jobs in Spain’s private sector.
“Green jobs,” the professor concluded, were economic losers, destroyers of wealth and productivity. What’s worse, 70 percent of them were short-lived installation gigs, not long-term jobs at all.
Spain’s socialist government, which had presented “green jobs” as the way out of the country’s economic problems (perhaps that sounds familiar), reacted to Calzada’s study with fury. The Industrial Ministry took the incredible step of trying to make his university disavow his work. But behind the scenes, the same government officials were quietly coming to the same conclusions as Calzada.
In the United States, Calzada’s study upset the wind power lobby, environmentalists, and the Obama administration. American liberals tried to argue that Calzada had erred by doing what is obvious to everyone outside of government who uses money – he accounted for the opportunity costs of government spending.
Imagine that – an economist who doesn’t assume that you can get something for nothing.
Since then, Calzada has been proven right in nearly every metric. Spain has a serious sovereign debt crisis – not helped much by its commitment of 11 percent of Spain’s gross domestic product to subsidize renewable energy. The renewables program will cost the Spanish crown four times what it had originally budgeted.
The government is trying to wiggle out of its already-promised subsidies, which could generate legal problems or else a banking collapse. Unemployment in Spain exceeds 20 percent. Spanish industry is paying inflated prices for energy – causing greater inefficiency and more job losses.
Speaking with me this week, Calzada expressed amazement that in the wake of his own nation’s failure in this area, a few progressive members of Congress still want to drive the United States off the same cliff.
“How is it possible, having the example of Spain. … Why would you like to repeat the same story?” It’s a great question.
In reality, Calzada wasn’t nearly bearish enough on green energy welfare. His study did not explore the consequences of the artificially high electricity prices the Spanish scheme has created for industry and residential customers.
He didn’t try to measure the economic damage caused by misallocation of private investment. After all, thousands of Spaniards withdrew good investments and borrowed against home equity to install potentially worthless solar panels – what if their capital had been invested to create real jobs instead of simply chasing government subsidies?
The central planners in Spain, much like President Obama with his stimulus package, assumed that they could get something – a lot of really good jobs – for nothing. They were wrong. People who think that way are always wrong.
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