by Jonathan Rothwell and Mark Muro, Brookings Institution, in a repost
Several pundits and writers have recently suggested that the green economy is small and unlikely to be a major source of job growth anytime in the near future. So, the argument goes, it’s not a worthy investment.
As evidence for the first claim, some critics of green policies have cited the job growth figures from our recent “Sizing the Clean Economy” report while arguing that the bankruptcy of Solyndra, a solar photovoltaic manufacturer, illustrates both the failures of green policies and the weakness of the industry. We have discussed why we don’t interpret the Solyndra case, as one of over 120 solar PV manufacturers in the United States, to mean the industry is not worthy of public support.
But here’s another angle: In assessing the “green job” or “cleantech” debate this fall, we see intriguing analogies with the IT sector, which was also once a small nascent industry with somewhat obscure origins in the Defense Department. IT production is credited by many economists with causing the tremendous economic boom of the 1990s.
To develop the analogy a bit more, let’s look at IT’s role in the 1990s boom in more detail.
From 1992 until 2001, the U.S. economy created 23 million more jobs than it destroyed and enjoyed low unemployment. Economists consider the IT sector to be responsible for much of this because it was the source of productivity gains, especially in the late 1990s. And yet, “direct job” creation in the sector was not terribly overwhelming compared to national gains, and certainly not immune to closures and layoffs.
According to data from Moody’s Analytics, the IT-producing industries added 2 million jobs from 1992 to 2000, and computer and electronics manufacturing, one of Silicon Valley’s most distinctive industries, contributed just 113,000. At the same time, failures were prevalent. Even in some of its strongest recent years, like 1994 and 1998, when over 3,000 new establishments were opening each year, nearly the same number of establishments closed. Even in fast-growing service sector industries related to IT (like “other information services”), hundreds of establishments were closing every year in the most expansive period.
The aggregate green economy, which includes jobs in the public sector and waste management, is just under half the size of the IT producing industry, but measured by jobs, “cleantech” is similar in size today as the computer manufacturing industry (162,000) and roughly half the size of the semiconductor industry (370,000). As it happens, many solar producers are classified in the IT-sector as semi-conductor manufactures; smart-grid technologies are also heavily IT-based. It’s therefore not unimaginable that, with a few strong years of growth and innovation, cleantech could be large enough to fuel considerable increases in aggregate economic growth.
To extend the analogy further, investment in IT-producing sectors was famously fueled by venture capital. Since 2000, those investors are increasingly shifting their portfolios into cleantech with billions of investment now flowing annually to these companies.
The final lesson from the IT boom is that being a producer matters. Economists have found that U.S. productivity gains of the late 1990s were almost exclusively linked to states that produced IT goods and services and other manufactured goods, but were not found in states that were mere IT-users. Meanwhile, international research suggests that IT-producer countries like the United States, Finland, and Ireland experienced the strongest economic growth during the 1990s. It follows that the U.S. risks losing out on tremendous gains if decides not to invest heavily in cleantech and relies on imports. Such a position would also delay the development of urgently needed technologies.
In our report on green jobs, we called the green economy “modest in size,” and pointed to the very small but rapidly growing cleantech sector as a source of promise, provided we get the right policies in place. We may still be years away from a clean-energy boom, but it could certainly happen, especially with the right mix of policies and investments, as seen in the federal Energy Department’s ARPA-E program. Clean, abundant, and cheap energy, combined with efficiency-enhancing technologies, could unleash yet unimagined scientific breakthrough in technologies that need energy and would save consumers and businesses from the considerable environmental and health costs related to the use of fossil fuel energy. We certainly don’t think that the adoption of these policies would create millions of jobs in within the year or two of passage, but it would help the economy now, and set us on a course for much greater prosperity in the future.
Jonathan Rothwell is a Senior Research Analyst at the Brookings Metropolitan Policy Program and Mark Muro is Policy Director of the Brookings Institution Metropolitan Policy Program.
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This article is right on target. In particular, ultra-cheap, high efficiency, mass produced photovoltaics have the potential to be a “disruptive” technology, that will transform the way we generate and use electricity much as the personal computer transformed “data processing” and the cell phone transformed telecommuniations.
I would add that the famous “IT boom of the 1990s” actually got rolling in the early 1980s with the introduction of the IBM PC and the Apple Macintosh — in addition to having, of course, what the authors refer to as “obscure origins in the Defense Department”, which would be a little thing called “the Internet”.
Of course, we didn’t have the multi-trillion dollar fossil fuel industry using all of its wealth and power to crush the IT boom.
There is one analogy you wont see when comparing Green Tech to Info Tech: Info Tech did not need any government subsidies to get it rolling.
[JR: That is just wrong. The government funded the Internet and virtually every computer scientist who created the information revolution. The Telecom Act unleashed the industry in a way that has never happened for energy.]
The reason is simple. IT spending provided results and profitable results at that. It would seem that the results are not worth spending money when it comes to Green Tech.
Yes the government needed IT and so it spent a significant amount of money on it. As did private industry. People saw an opportunity for a return on their investment. It was a hell of a lot cheaper to use a wordprocessor over typewriter. It was also far easier to find information in a database than it was a room full of filling cabinets. Mix in the ease of communication and information sharing of the internet and you have a real chance to make some money.
People were willing to risk theirs to make some money.
But it seems that the same cannot be said about Green Tech. You dont see the DoD spending much dough on it. Nor is there much private sector interest other than getting free money from the Gov. There is some tepid interest here and there to be sure, but nothing like the promise of riches that IT promised.
@jmcboots That is utter nonsense. The microelectronics industry leaned on DOD and NASA contracts for 30 years. Those customers were essentially willing to pay any price to buy the products they wanted. Those captive contracts propped up Silicon Valley and allowed them the stability and time to drive down costs. As a result, the inexpensive devices became available to everyday people and the consumer market boomed.
That experience has led many Silicon Valley business people to dive into green technology development.
jmcboots, with all due respect your comment shows great ignorance about the IT revolution. I know, because I worked in the field — in the trenches, actually — from the early 1980s on.
All aspects of the IT revolution, from the development of integrated circuits in the 60s to the development of the Internet (originally DARPAnet) by the Department of Defense, to the development of programming languages and database technology, to the scaling up of personal computer manufacturing which drastically reduced costs (the original IBM PC cost over $7000 in today’s dollars, which made it a damned expensive “typewriter”) — ALL of it benefited heavily from “big government” investment.
Likewise, when you say “you don’t see DOD spending much dough” on clean technology, you are again displaying great ignorance of what’s going on with green tech today.
In reality, the DOD is one of the biggest investors in green technology, particularly photovoltaics, which for example are being deployed in Afghanistan to provide electricity to remote US bases, eliminating the costly and dangerous job of trucking in diesel fuel for generators.
Basically, you don’t really know what you are talking about with regard to IT or green tech. You are just regurgitating canned talking points.
As I wrote previously, the big difference between IT and green tech is that in the 1980s and 1990s we didn’t have fossil fuel corporations spending millions of dollars on anti-IT propaganda and bribing politicians — and spoon-feeding bogus talking points to blog commenters — to crush the competition.
How can you say this? When the climate we lives in falls into a dark abyss within 20 years- who is going to pull us out? The banks, oil companies, health insurance and pharmaceuticals, all who have opposed any kind of action on GHG and reform?
Oh… and the Telecom Act of 1996…
That was deregulation.
Not more big government.
“Big Government” is such a subjective moniker as to be useless to any sort of serious conversation. If you want government out of your life, move to Somalia. Otherwise, either join the conversation concerning how government can be more EFFECTIVE or just stay out of the conversation.
The fact that we throw AT LEAST $10B per year in subsidies to the oil companies shows how INEFFECTIVE some government programs can be. Why do we subsidize them? Well, aside from the obvious political favors these subsidies represent, aren’t they supposed to lower the price of fuel in this country? Well, they’re failing on an epic scale to accomplish that aim. Besides, oil is a global commodity and it’s price cannot be influenced by oil company profits. It’s price DOES heavily influence oil company profits however, and oil company profits heavily influence politicians to give them subsidies.
You say, “It was also far easier to find information in a database than it was a room full of filling cabinets.” Well, why don’t you tell me what’s easier, then:
1. Explore for oil in unforgiving and/or hostile territory and sink a few exploratory wells. Then, if you happen to strike a viable reservoir, rent a drilling platform for $100K or so PER DAY, drill down, and hope your well data is accurate. Then, you have to find a way (tanker or pipeline) to ship it to a refinery somehow and then spend energy / release pollution to turn the crude into petrochemicals. THEN, you have to distribute the fuel to gas stations where people stick your product into a machine that throws away 80% of the energy in that fuel ON A GOOD DAY while releasing deadly pollution the entire time.
OR
2. Buy a solar array and stick it on your house. Charge up an electric car with the energy from the array and buy 100% clean energy from your utility for any power you need that the array can’t provide.
Notice I didn’t go into how to make an oil rig or train a petroleum geologist, so if you want to bring up the supply chain for PV panels, I’ll be happy to go into how complicated the supply chain for ANY dirty energy equipment really is. Regardless, the simplicity of clean, sustainable energy will eventually win out just as soon as all those direct and indirect “Big Govnerment” market distortions stop tipping market decisions unfairly in dirty energy’s favor.
Sault,
I said big government, not no government. But we’ll put that aside and cut straight to the chase. If it is so much easier and cost effective to dump our reliance on oil, why does it require subsidies?
I have no problem with federal funding of green tech research. I do have a problem with 1/2 Billion dollar give-aways to private industry. But both of those thoughts are neither here nor there. The article was about why there is no Green Boom like there was a Tech Boom.
And I still stand by my assertion that there is no Green Tech boom because it is not profitable… yet.
Maybe, and hopefully, one day it will be. When we have exciting new battery tech and new solar tech, etc.
The core ideas of the internet were born in 1962. It did not flourish for another 30 years though. Any attempt to force a Green Boom now is only going to backfire and give the technology a bad name.
With climate change- when the nasty stuff hits the far right anti government in the face- who will be there?
You are digging your own epitaph. You want to ‘Big Government’ yet your policies invite a collapse of the free enterprise system.
If you began to make serious reforms NOW- the amount of Government interference would be less. Your resistance to change and reform all but guarantees more government in the future.
jmcboots wrote: “I do have a problem with 1/2 Billion dollar give-aways to private industry.”
In that case your assertions are as misdirected as they are ill-informed, since “big government give-aways” to the fossil fuel industry, both cumulative and ongoing, dwarf subsidies for renewable energy technologies by orders of magnitude.
(in response to the article title)
The Germans certainly think so. They are moving with all due speed to leave dirty energy behind.
Also, consider what happens to the US economy if we don’t have cheap alternatives to peak oil. The US economy was better off with an IT sector than without, and the US economy will be better off with cheap renewables than without. In the first case, it added wealth, in the second case, it will prevent the loss of wealth. Same difference.
But renewables are NOT cheap!
Old dirty tech is still more efficient than green tech.
THAT is the core problem. And no amount of subsidies, changes that. Your only changing and hiding how its being paid for.
Yes, your right of course, I always figured that Germans didn’t understand technology or economics. Also, US Gov investment in advanced batteries and solar cells is just another myth, everyone knows the early satellites ran on kerosene.
“But renewables are NOT cheap!
Old dirty tech is still more efficient than green tech.”
Where in the world did you get this bit of male cow excrement? If you can’t find a source for this accusation, then you’re just a troll.
How is “old dirty tech” like an SUV more efficient than an electric car? Maybe you’re confusing energy efficiency with “cost efficiency”. Well, what about the 30k premature deaths and 5M lost work days PER YEAR that are caused by fossil fuel power plants?
http://www.scientificamerican.com/article.cfm?id=the-human-cost-of-energy
How much does all that cost? How many solar panels could we install if we didn’t have all those unnecessary deaths and healthcare costs?
1) Subsidies to the fossil fuel industry are at the 20% level when the direct tax credits and the indirect subsidy of cheap access to federally owned resources are combined.
2) Renewable energy costs are reducing rapidly (in part due to these subsidies… This is an important role of government!) and will be at parity in with fossil fuels in order 5 years even without any subsidies.
3) The time to invest is before a field gets big.. not after. So the smart money is flocking to renewables because it is very likely to provide a massive return on investment over time
4) The true costs of fossil fuels are actually very very high… if you include the health and climate costs that *somone*, *sometime* has to pay for. And THAT is the core problem. And no amount of pushing the costs on to others, changes that. Your only changing and hiding how its being paid for.
In the next boom, Green jobs be what IT was in the 90s. The quicker we move beyond fossil fuels a boom will evolve.
When the whole rotten structure collapses- this kind of revolution will begin
15-20 years off, at least.
Alas, the Germans are actually embracing ‘dirty energy’, but claiming that they will use the cleanest technologies and anyway are going to offset the additional CO2 produced.
I’m rather dubious of so-called offset schemes.
Somehow, ‘green’ and ‘clean energy’ doesn’t really do justice to this revolution. What we are engaged upon is the decarbonization of our planet. That is a phase shift that hopes to ameliorate over 200 years of carbonization and destruction.
The IT revolution can be seen as a preliminary and very useful, instrumental step in this phase change but on its own has neither the power nor the elemental breadth to save the life of the planet.
Comparing the development of IT and clean energy is obviously useful in terms of speeding up green development but it seems to trivialize decarbonization by measuring its success purely in terms of economics and jobs, however needed they might be.
Surely the significance of decarbonization transcends economics and should have its own unique measures that highlight that significance, ME
I like the term ‘cleantech’.
Let’s note another thing that promoted the tech job creation in the 90s:
- government picking the winner
- government dictating the computer investments for public and private through regulation
For decades, a Congressional mandate prohibited the government funded internet competing in the market place – commercial use of the Internet was prohibited by law by those conservatives who didn’t want government picking the winner. And lots of corporations offered competing solution, from the software/hardware of IBM, Microsoft, Novell, to the services of MCI and Sprint and others, with lots of competing protocols. Congress had mandated buying commercial off the shelf standard network software other than the Internet, with Internet acceptable only of no COTS existed. In 1990, some vendors were filing protests with the procurement offices that the Internet was being bought over COTS OSI networking.
Congress picked the winner, the government Internet, over the industry developed network standard, even though the Internet Protocol was known to not have the ability to handle the future growth. Nerds know everyone needs to switch to IPv6, something known 25 years ago, before IPv6 existed, but not a problem in OSI which was designed for the future.
The government picked the winner that was only a short term solution.
Also in the early 90s, the known problems of Y2K were addressed by the Federal government. All government systems had to be certified by vendors as conforming to Y2K standards – not just computer systems, but all systems were required by government dictate to be certified as Y2K ready.
But then, all government contractors were required by government dictate to certify all their systems were Y2K ready.
Then, all corporations who file electronically with any part of the government were required to certify they were Y2K ready.
Then the SEC required all corporations to files SEC disclosures stating their Y2K status as financially material to investors.
It was the Y2K mandate that came from the government that forced millions of computer systems to be replaced by new hardware and software that was designed to be Y2K ready. Y2K became the deadline for investment in new money saving computer system upgrades.
If the Congress mandated all Federal buildings or building housing Federal offices, or providing services to the Federal government, meet energy efficiency standards, and picked LEEDs or EnergyStar, as the standard, even if a flawed standard, and ordered progress be made by 2015, 2020, 2030, the investment would be forced on all industry.
Just as Y2K ready was mandated to prevent failures of the government systems to operate properly and safely, the Federal government could mandate energy saving for national energy security and to save taxpayers money from a spike in oil prices from war.
The Federal government operates in about 10% of the commercial real estate, so lots of real estate would need to be upgraded, and most energy efficiency investments done first recover costs in 5-7 years without tax benefits – weather proofing and insulation, ground source heat pumps, cogen electric and HVAC, solar HVAC, solar hot water, better windows…the list goes on.