American Elephants

China’s Renewables Industry Is Collapsing. by The Elephant's Child


China has gone in for “renewable energy” in a big way.  Their solar panel industry has gone from nothing to becoming the world’s largest producer in only five years. But the industry has now crashed with with negative profit margins, idle factories and soaring levels of debt.

Suntech, a solar panel manufacturer, has been a national champion which became the world’s largest, filed for bankruptcy in March after it defaulted on payment of $541 million of bonds. The Chinese government is scrambling to clean up the mess by offering tax breaks to all solar companies who acquire or merge with their competitors.

LDK Solar, another leading Chinese producer, was forced to turn to provincial and local government for protection from its creditors. LDK was the brainchild of the local Communist Party Secretary, and received millions of dollars in state subsidies, cheap financing, land and electricity in 2005. The local government is pumping in money to keep it from sinking, but the company has already shed 20,000 of its 30,000 employees and its shares are 98% below their peak.

China’s solar panel sector remains massively overbuilt. Demand for solar panels has been shrinking as governments in the West learn that it was the subsidies that made solar energy attractive.

Wind power is little different. Sinovel — one of the world’s largest wind turbine manufactures — was earning hundreds of millions of dollars in profits in 2010, to millions of dollars of losses that grow by the day. Revenues are a fifth of what they were in 2010. In 2012, 17% of all windmills lay idle, the power they produce too expensive to connect to the grid. In some regions, 50% of all windmills remain unconnected to the grid.

China’s green sector crash is a textbook example of a command and control economy, where “experts” substitute their ideas for the complex supply and demand decisions of a free market. The Chinese state gave Chinese manufacturers near-monopoly powers and almost free money. The Bank of China, one of the largest state-owned commercial banks, says that 21% of its solar loans are in or near default. The average debt ratio is 75.8%.

To save face, China’s central planners have switched from subsidizing suppliers to subsidizing demand by demanding that power producers meet green targets in the domestic market. China can, of course force consumers to buy solar energy, but that doesn’t really solve anything. Chinese power customers would just pay the price in more expensive and less reliable power.

Canada Ranks Lower than Latvia In A Survey of Energy Sustainability? by The Elephant's Child

About those national rankings: A new World Economic Forum (WEF) survey on the world’s “best sustainable energy systems” places energy self-sufficient Canada below Latvia, Costa Rica, Columbia and Romania.  Huh?

The Geneva-based think tank’s latest survey of countries with the most “sustainable energy systems” put Norway as the country with the best energy system in the world. You always have to watch out when they start throwing that “sustainability” word around. It is an ever-so fashionable word, always to be thrown in to any paper deemed to be truly “serious.” And Geneva is always to be considered “serious.”

Canada, our neighbor to the north, producer of one of the world’s largest amounts of crude oil, natural gas, wind, nuclear and hydroelectricity, suddenly finds itself ranked below Latvia, which is almost entirely dependent on Russia for its fossil fuel supply. It had, however, “diversified” enough to warrant a ranking four places above self-sufficient Canada.

“The WEF,” the Financial Post says, “arrived at its befuddling conclusion after ranking countries on economic growth, environmental sustainability and energy security performance, and ‘analysing the complex trade-offs and dependencies that affect country efforts.'”

This report is absurd, of course, but governments and non-governmental organizations (NGOs) have fallen into a pattern of using words that are fashionable but essentially meaningless to show that they are “with it,” to be taken seriously. Call them navy blue pin-striped words, or Rolex words. And “sustainable” is one of the worst. Sustainable means it will last over time, and we clearly have no idea. Tomorrow is unknown.

“Diversity” is more popular in academia than in the energy business, but a way of sneaking in a bunch of unaffordable “alternate energy”systems, beloved by environmentalists, yet only exist with ongoing governmental subsidies. In either case, it is nonsense. In academia it is supposed to be desirable to have students of varying races and ethnicities, but undesirable to have diversity in their thought or politics. All will conform.

Other words that fall into the same general category are “fairness,” (who decides?), “equality,” (how?) “tolerance,”( regarding what?). The words become more meaningless as they are used to excess, and no thought is dedicated to what they really mean in the context where they are used.

Silly report. Canada ranked a paltry 14th, and the United States, soon to become the world’s number one energy producer ranked a distant 37th out of 124 countries.

So Why is Everybody So Angry? by The Elephant's Child


There is an apocryphal story about Dwight Eisenhower that someone quoted the other day that has stuck in my mind. Supposedly, when he was president of Columbia University, some new building on campus required sidewalks, but there were two warring camps who wanted the sidewalks placed differently. Eisenhower said they should table the decision for a year, and see where the students walked. The decision of the many would indicate the proper placement.

May not be true, but it’s an excellent example of the wisdom of the free market. And of the current battles in Congress. There are a lot of people out there who are angry with Congress because they are fighting so much and not peacefully getting anything done. Those people are wrong, and they should be extremely grateful that Congress isn’t getting much done.

All of the current battles in Congress — ObamaCare, the Budget, the Economy, Spending, the IRS, Defense, the Agreement on Iran, Foreign Policy, the National Debt and so many more issues — divide on the basis of a command and control economy on the left side, and a free-market economy on the right side.

The Left, and the Progressive movement, believe in a government run by wise experts who will manage everything far more efficiently.  With a free market — you can never tell what people might do. There is no certainty, no order, not enough regulation. People might drink Big Gulp sugary drinks and contribute to a national obesity problem. People might not save energy with energy-saving CFL ‘twisty” bulbs. If everyone is limited to flow-restricted shower heads, then we might save water as a nation. Experts can always come up with wonderful ideas for improving the country and its people.

The Right: Conservatives, Tea Party, Libertarians and Republicans, all just want government to leave them alone, and stop interfering with the economy. They don’t believe that there are any “experts” who have better ideas for controlling everybody and everything. They believe that the Left’s urge to control everything is responsible for the economic downturn and the recession that just drags on forever. Overregulation, over-taxation and uncertainty have done serious damage to business, and produced a “recovery” that is 7.3 million jobs below the average for all recoveries. They believe that people cannot be fixed with just the right rules and regulations, and life requires a certain level of plain old stoical resignation.

That’s a huge division between the two sides, and affects everything in politics and government.

However: this simple straightforward division is thoroughly screwed-up with politics, lies and obfuscation. Barack Obama is notably the first black president of the United States, which has been extremely meaningful to black Americans. Most Americans, including those who did not vote for him, wished him well. Black Americans were deeply invested in his success. As the first, they wanted him to be outstanding. And it is somewhat natural that they would take criticism as a form of racism. MSNBC, the hate channel, has left any semblance of journalism in the dust while it devotes full time to the idea that all would be well if the racist Republicans would just stop criticizing Obama.

The people I know who criticize President Obama are not criticizing the color of his skin, but the actions of his administration. The recovery should have long been over, and the administration is at fault. The administration cannot seem to stop or even lower spending, waste and crony-capitalism. ObamaCare was a disastrous mistake and is going to harm most Americans.

Fifty-five percent of Americans say they want to go back to the health care system that was in place before the current health care system. Only 34 percent like ObamaCare. Fifty-seven percent of Americans told the Reason-Rupe Poll that the Obama administration is not the most transparent administration in history, and 52 percent disagree with the president’s views about the proper size and power of the government. Fifty-four percent of those surveyed feel that government is generally a “burdensome part of society that impedes the ability of people to improve their lives.” Ouch.

Nearly ¾ of Americans, 73 percent, believe members of Congress do not understand health care or how health care laws impact Americans. And just 25 percent think members of Congress understand the consequences of the health care laws they pass.

No one is yet operating under their new ObamaCare insurance, which kicks in on January 1st, so they haven’t really experienced it yet — only experienced the bills that they will be facing.  It’s going to be interesting.

There Won’t Be a Shortage of Doctors, But You won’t Have Access to Them! by The Elephant's Child

“No there won’t be a doctor shortage,” wrote Ezekiel Emanuel MD and Scott Gottlieb MD in the New York Times the other day.

ObamaCare will weather that change just fine. How? Nurses and other paramedic personnel can substitute for physicians and new technology is making remote monitoring of patients easier than ever before.

That’s more in the ‘put on a happy face’ department. Scott Gottlieb is a fellow at AEI, and wrote more accurately under the headline “Obamacare won’t create a shortage of doctors. That doesn’t mean you’ll have access to them.” He says: “While there is unlikely to be a doctor “shortage” for the reasons we argue in the New York Times, that doesn’t mean that the Obamacare plans will enable broad access to these providers. The Obamacare plans are a throwback to the old HMO model that was soundly rejected in the 1990s in favor of PPO style health plans.” He adds:

I found one Obamacare health plan that offers access to only seven pediatricians for a county with 260,000 children.

John Goodman at the National Center for Policy Analysis, however suggests that there are two features of ObamaCare that will substantially increase the demand, while nothing in the law increases supply. When people take steps to increase their access in response to growing waiting times, the success of some will increase the rationing problems for everyone else.

We don’t know how many people will end up insured under ObamaCare, but the administration’s goal was adding 30 million people. When they acquire insurance, economic studies suggest that they will double their use of the health care system.

The health reform law says that health insurance must cover the tests and procedures recommended by the U.S. Preventive Services Task Force. (?) Scholars at Duke University have calculated that arranging for and counseling patients about all those screenings would require 1,773 hours of the average primary care physicians’ time each year, or 7.4 hours per working day. That’s searching for problems and talking about the search. If the screenings turn up something, that’s more hours.

In a normal market, when demand exceeds supply, the price rises until it reaches a market clearing level. But under ObamaCare, Americans do not primarily pay for care with their own money — they pay with time. When demand exceeds supply, doctors have a lot of flexibility about who they see, and they tend to see those patients who pay the highest fee. The patients who pay below-market prices will wait the longest. That includes the elderly and people with subsidized insurance in the ObamaCare exchanges.

Dr. Goodman predicts that concierge medicine will grow rapidly, those who can afford it will have a concierge physician, and we will quickly evolve into a two-tiered health care system with those who can afford it getting more care and better care. The more vulnerable populations may have less access to care than they had before ObamaCare became law. Nice going, Obama.

How to Think About Health Care. They’re Talking About the Wrong Things. by The Elephant's Child


The late Milton Friedman had a way of clarifying the subject. Contrary to “conventional wisdom — health insurance does not make health care more affordable. Perhaps you have noticed.

In his masterpiece Free to Choose, Milton Friedman wrote of four ways to spend money.

  • Category I — You spend your money on something for yourself. Here you are very careful, because it is your money, and the good or service you are buying is for you.
  • Category II — You spend your money on something for someone else. Here you have the same incentive as in Category I to economize, but since you are buying something for someone else, you are not quite as meticulous when it comes to the purchase meeting the needs or values of the recipient.
  • Category III — You spend someone else’s money on something for yourself. Here you are not concerned about how much you spend, because it is not your money. But because you are spending on yourself, you make sure you are getting what you want.
  • Category IVYou spend someone else’s money on something for yet another person or persons (This is what we ask our legislative representatives to do every day.) Here you are the least incentivized to economize, or to buy something that meets the needs or values of the recipient.

Third party payers operate under Friedman’s Category IV — think Medicare and Medicaid. When the government buys goods or services for other people with other peoples’ money, special interest pleading, politics and cronyism run the game. And “leakage” of money through “waste fraud and abuse” is a given.

Private insurance companies are also spending other people’s money — the premiums paid into a risk pool — on medical services for other people. When they negotiate compensation schedules with providers and facilities, they don’t have to bargain hard enough to reach the best price possible. They just have to reach a price that is good enough — one that allows them to charge premiums that compete well with rival insurance companies. They pass on the difference between what they could have negotiated and what they actually negotiated to the customers who pay the premiums.

People who negotiate direct payment from providers get better deals than the insurance companies get. When health care providers give discounts for direct payment they don’t lose money on the process, or they wouldn’t do it. To keep from losing the direct-pay patient  they need to keep their prices acceptable to those paying the bill.

The foregoing is from an article by Dr. Jeffrey A. Singer. It should give you glimmerings of how health care insurance could be better done. Health savings accounts, where tried, have been both extremely popular and extremely effective.

Here’s another example of how medicine can be more affordable and more effective. Competition improves everything. And that goes for insurance too. With stiff competition, insurers will bargain harder to get good prices. When insurance policies have to compete on a national basis, and policies are sold across state lines, costs will come down significantly.  There are hundreds of good ideas from Republicans. Keeping costs down doesn’t have to be slashing payments to doctors and hospitals, increasing deductibles to astronomical levels — that’s a command and control theme, where the left is always stuck. They just can’t give up control.

A small company called 23andMe offers a genetic-testing kit. It consists of a tube into which the customer spits and returns to the company. The actual test is conducted at a lab that is regulated by another agency. The FDA has chosen to go after 23andMe aggressively for marketing a “medical device” even though the only “device” is a plastic tube, and the client cannot cannot undertake further action on the test result without  consulting a health care provider. This kind of device is part of the new economy, favoring the free flow of information. It is completely at odds with the old paternalistic model, in which regulators and the medical establishment control what patients may learn.

Liberals place great faith in the perfectibility of politics. They believe that the next law or the next regulation will make up for imperfect human nature. Freedom, to be sure, is frightening. There is no telling what values free people will hold, or even what they might do. That’s why they are so frightened by the Tea Party. They must be controlled.

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