If your neighbor's kid is selling his dad's $10 bills for $5 down the street, what should you do? I mean, after verifying that Dad was supportive of little Junior giving away his money...
You would buy up as many of the $10 bills as you could, right?
The right answer, apparently, if you are an American politician or bureaucrat, is to react by selling OUR $20 bills for $5 to "be competitive" with our neighbor's seemingly asinine decision.
This is exactly the case happening in the case of solar panels today. China heavily subsidizes its industries to sell stuff for, according to experts, less than their cost. Why would they do that? First, the political chesnut and short term benefit of staying in power via jobs, regardless of how unsustainable those jobs are based on shoveling unrecoverable money out the door. Eventually the money runs out. Ask Greece.
Second, perhaps they want to drive out competition so that you can later raise prices. This is a proven loser business strategy, as every first year MBA student learns. One never recovers the money spent because it doesn't make it any harder for a competitor to ramp up to compete when the price dumper decides to raise prices. Thirdly, perhaps they think that by reducing the consumer cost to compete with alternatives, thus guaranteeing a stable sales environment, the cost will drop to breakeven or profitability over the long run. Maybe they are right. In any case, we get to take advantage of the lower cost efficiencies WITHOUT paying for them as a bystander.
Why shouldn't we buy as many of the ten dollar bills as we can? Why should we get into the business of selling $10 bills for $5 bucks? That seems to be a sucker game. China is offering to subsidize us with cheap energy! In return, we sell them Sponge Bob Square Pants! Yay, I say.
But... but... what if China, based on low wages, is actually MAKING a buck on the $5 buck sale? So what? We don't have that same option, do we? We have a high wage society. We have no choice but to sell $10 for $5 in that exact business . It's like saying "I am a lawyer that makes $300k bucks a year, but I really want to make sock bunnies. That's cool. But don't expect to make $300k per year doing it! No one wants to buy $1,000 sock bunnies. And don't you dare ask the government to subsidize your sock bunny business. They probably would today!
So let's choose NOT to sell $10 for $5 bucks. Let's choose to sell $10 bucks for $20 bucks. Labor has to be mobile. Slide rule manufacturers just can't employ the same number of people they could in 1960. Those jobs didn't disappear, they moved to areas where they could actually do something people were willing to pay for. The political appraoch would have been a bailout to support the US slide rule industry.
It's simple, really. Labor resources need to go where profits can be made on on their deployment. This grows the economy. Artificially allocating any resources to areas where no one wants to buy the product is a pure waste. It removes from the economy. A job without a willing buyer for the product or service provided by the job is welfare, pure and simple, and unsustainable.
We have led the way on worker productivity, enabled by technology... selling these $10 bills for $20 dollars. I have an acquaintance that makes Chinese $10 dollar bills into American $20 bills by networking and monitoring the Chinese solar panels to achieve highest possible energy output. Brilliant stuff!
Here is a radical idea. Let's quit competing on things we shouldn't want to win, and instead take the opportunity to stock up on the free value offered us by others less enlightened so that we can concentrate on building or doing those things we do best.