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The Solyndra Scandal and the Triumph of Crony Capitalism

In American political culture, there is a chasm the size of the Grand Canyon that separates the rhetoric from the reality. When it comes to the relationship between government and business, for example, the Republicans are supposed to be the ones who always have the back of big business and the corporations, while Democrats are allegedly impervious to the entreaties of the robber barons and the big money boys because they are too busy representing the interests of the common man. But in reality, both political parties are active participants in the game of graft, bribery, and influence peddling, and that is the way it has been for a very long time. For those seeking proof of this assertion, it is necessary to look no further than the breaking scandal involving the Obama Administration and the solar energy company Solyndra.

Stimulating Corruption

Included in President Obama’s 2009 economic stimulus package was a plan to back investments in green energy sources with generous federal loan guarantees. The first company to benefit from this program was the California solar energy start-up company Solyndra. This ambitious enterprise first applied for a loan guarantee to help them secure financing for their brand new manufacturing complex during the Bush Administration, but just two weeks before Obama was sworn in as President, the Energy Department’s credit committee unanimously recommended that Solyndra’s application be turned down.

But despite their shaky finances, Solyndra had a powerful backer – Oklahoma billionaire businessman George Kaiser, who also was one of Barack Obama’s biggest and most influential supporters in the 2008 election campaign. So given this fact, we should perhaps not be surprised that the president chose to ignore the warnings of officials from the Department of Energy and the Office of Management and Budget, who even after changes in personnel following the change in administrations, continued to cast aspersions on Solyndra’s finances and future prospects. Despite this, the president not only gave a federal loan guarantee of $535 million to the fledgling company, he actually made it his first choice for such a loan under the new stimulus program, and then through administration officials pushed hard behind the scenes to make sure the deal was approved as quickly as possible.

One Energy Department official proved to quite prescient, arguing before the guarantee approval that Solyndra would run out of money by September of 2011 – which is exactly what happened. Solyndra has now suspended its operations and declared bankruptcy, as the company’s plans for expansion were undercut by China’s ability to flood the marketplace with cheap solar panels that are making it increasingly difficult for American manufacturers to compete. Many Republicans in Congress are now calling for an investigation into the Solyndra deal, to try and find out why a company that was on such shaky ground and was not in a position to compete on the world marketplace was given hundreds of millions of dollars of assistance against the recommendations of federal auditors and investigators.

Crony Capitalism on Exhibit

What we have here of course is an example of crony capitalism at its finest. This is what happens when government subverts the free market by handing out special tax breaks and subsidies to certain companies or passing laws that give those companies unfair advantages and make it difficult for other businesses to compete. In return for political favors, government rigs the game to determine who wins and who loses, and this game of “you scratch my back and I’ll scratch yours” ends up damaging the economy and costing the taxpayers billions of dollars.

Both political parties play the game of crony capitalism (who could ever forget the glory days of Halliburton during the past administration), which is why in our outrage we should not allow ourselves to be manipulated by those who want to use something like this to promote their own agenda. A great example of this is another supposed scandal that is being talked about on some websites and other outlets for mainstream conservative politics involving another California solar energy company called SunPower. According to some conservative talkers, the situation with this company is twice as worse as what happened with Solyndra because SunPower has been given a federal loan guarantee twice as large as Solyndra’s despite also being on the verge of bankruptcy.

All of this certainly does sound terrible and outrageous – which it might have been if it were actually true. But in fact, the large federal loan guarantee has been given to the global energy giant NPG, which has only contracted with SunPower to build a new solar energy-generating plant for them. Because the plant is unusually large, the federal loan guarantee was designed to assist the company in getting the huge amount of funding it needed to proceed. NPG has already sold the energy it will be producing from this new plant to California power distributors, and had done so before the loan guarantee was granted, so the chances of this project going bankrupt are essentially zero.

The government is still helping to pick winners of course; but the attempt to turn this into a political scandal that can be used by one corrupt party to attack the other one is completely dishonest, and it is an attempt to deflect our attention from the source of the true rottenness that has infected the body politic – crony capitalism.

Republicans are only opposed to solar energy because they are so completely in bed with the nuclear industry, which they would like to see get all the help that government doles out for “alternative energy.” Nuclear energy could not even survive without constant government welfare handouts and is probably the prime example of crony capitalism at work (Democrats love nuclear as well, just not as much as Republicans).

An Alternative Model

Ultimately, government cronyism only distorts the marketplace and adds the kind of inefficiencies that lead to job loss and inflation. In the case of alternative energy, the free market is now open for companies that want to enter, and if consumers are left to decide the winners and the losers, what we will be left with in the end are well-made products that give people exactly what they are looking for, which in the case of alternative energy is independence from the grid using technologies that are effective and affordable.

One company that is doing things the right way is Solutions from Science, a small but growing business from Thomson, Illinois, that caters to those who are seeking their freedom and independence by moving off-the-grid. The folks from Solutions from Science have not been helped by anyone – but they are selling outstanding products that people want to buy – including some excellent solar power systems – and as a result they are expanding and thriving.

There is little doubt that a market for alternative energy exists, which is why government involvement is neither necessary nor desirable. Letting good businesses run by good people build themselves from the ground up is the only way to create a sustainable, efficient economy, and this is exactly what is happening with companies like Solutions from Science.

Crony capitalism, on the other hand, is what leads to fiascoes like the Solyndra scandal, which in addition to costing the taxpayers hundreds of millions of dollars also led to more than 1,000 people losing their jobs.

©2011 Off the Grid News

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