Yesterday, former President Bill Clinton lamented that the green industry needs more money. A $1.4 trillion industry (2008) needs more money? That’s almost 6% of the global economy; larger than most major sectors, including construction, utilities, retail sales, wholesale trade, information, mining, agriculture, and transportation. In fact, it’s bigger than agriculture, utilities and education and arts and entertainment–combined! And that doesn’t account for the overlap.
Total investment in just renewable energy (a subsector of the green industry) was $211 billion in 2010 (see also, here at page 35). To give you a sense of size, the entire US pharmaceutical industry R&D budget for new medicines and vaccines in the same period was $67.4 billion. For every $1 a US company spends trying to cure cancer, Parkinsons, Alzheimer’s, heart disease, and diabetes, the world spends $3.10 inventing, manufacturing and selling panda-shit burners, solar panels, corn-based gasoline and wind farms.
Not enough money is not the problem in the green industry. For one thing, you cannot sell something for $3 when it costs $6 to make and expect to continue for long. Talk about unsustainable. Natural economic failure, the lack of a real threat, bad science and politicians trying to pick winners is the problem in the green industry. Moreover, less than half of Americans believe that Global Warming™ is caused by man, if at all.
But this reflex response is not limited to the green industry. Liberals have the same reaction when it comes to spending money on education. But there is no evidence that simply increasing the budget will improve results. Even the uber liberal Center for American Progress, in their exhaustive, district by district review of educational spending, had to admit that “without clear controls on how additional school dollars are spent, more education spending will not automatically improve student outcomes.” Not a ringing endorsement for more spending.
Indeed, increasing investment in a company, an industry or even a school can have unintended consequences. When a budget is tightened, management has to make harder choices. If you run a business and have an unlimited budget, you will never need to decide whether it’s better to send your account manager, Mark to Denver or your business development lead, Kim to San Diego. You can send them both.
But when spending is limited, choices have to be made. An effective manager (with accurate information) is one who can make the right choice and put every dollar spent to the most productive use. If you think this is all theoretical, it’s not. No well run company will invest in a start up until it is big enough to know what to do with the money. In addition, a company with a tightened belt will comb its expenses reports, accounts payable and accounts receivable and ferret out fraud, waste and abuse. All of these factors will increase the productivity of every dollar invested. In other words, more money doesn’t buy better results. Just ask the Philadelphia Eagles.