Small Business

The Wrong Energy Agenda


Conservatives should rethink their solution to our energy problems. Instead of more drilling, it's time for small-scale enterprises, argues guest columnist Byron Kennard

In response to the nation's energy problems, Republican politicians are calling for extensive and rapid deployment of large-scale technological solutions: drilling in the Arctic National Wildlife Refuge; offshore oil development; construction of scores of new coal-fired and nuclear power plants; and development of clean coal technologies (coal-burning power stations equipped with carbon capture and sequestration gizmos).

To meet the rhetorical standards of an American Presidential campaign, this large-scale technology agenda has been distilled into a single mantra: "Drill more, drill now." (Does this sound to anyone else like the business plan for a dentist?)

Large-scale technologies are, by definition, centralized. What's more, their social and economic effects are centralizing. Deploying more large-scale technologies means we will become even more dependent on remote energy sources. Why do conservatives, who are philosophically committed to decentralized, small-scale approaches, opt for just the opposite when it comes to energy technology?

It's not as if there were no small-scale technological solutions already available. There are plenty, indeed, starting with dramatic increases in conservation and efficiency, both of which can pay off hugely simply because Americans are such big—and needless—wasters of energy. This calls for thrift and prudence, both old-time virtues by any standard. Plus, increased conservation and efficiency will save consumers and businesses tons of money, which ought to please conservatives.

Small-Source Energy

On top of this, hundreds of new clean and renewable-energy technologies are flooding the market, most of them small-scale. These make possible the "distributed generation" of energy; that is energy generated from small sources on-site—solar, wind, fuel cells—and used nearby, maybe even in the same building. How much more decentralized can you get?

These small-scale technologies are not being produced by tree-hugging, anti-growth fanatics, or big government regulatory zealots, or closet socialists. They are coming from entrepreneurial small businesses whose owners are every bit as likely to be Republicans as Democrats.

Republicans profess to love entrepreneurship. But entrepreneurship has much more to do with small scale enterprise than large. Big businesses are seldom entrepreneurial, and entrepreneurs are seldom found in big businesses. We can afford to fail on the small scale but not on the big scale.

The Entrepreneurial Edge

This has been true throughout history. Tinkerers working in garages created the Industrial Age, remember? Their modern day counterparts, working on computers, are creating the post-Industrial Age. In this new era, little businesses are running rings around big businesses. Entrepreneurial small firms actually produce five times as many patents per dollar as large companies and 20 times as many as universities, according to the National Small Business Association, a trade group.

Contemplating this, one would think that entrepreneur-loving conservative politicians would be in seventh heaven. But don't look for them there. Where you'll find them is in bed with big business, cozily scheming to maintain the status quo.

Big businesses are exceptionally fond of the status quo, and not just because of the manifold subsidies they enjoy. Another reason is they don't know how to get their hands on all these emerging small-scale technologies. These innovations are so numerous, so varied, and evolving so rapidly that no one can stay on top of them.

Innovative Speed

Indeed, the quickening pace of innovation puts big systems more and more at a disadvantage. No matter how quickly and how often big systems retool, something better comes along even before they finish.

Since big businesses don't yet know how to control these small-scale technologies, or—most important—how to make money off them, they are content to pat them on the head, comment on how cute they are, and observe that in 20 or 30 years, when they grow up, such technologies might indeed be an option.

This is not a healthy response.

Conservative intellectuals are enthralled by "creative destruction," the theory devised by Joseph Schumpeter, the late Harvard economist and conservative icon. Creative destruction occurs when radical innovators devise new technologies that force large, established companies to adapt or die. Schumpeter argued that creative destruction periodically renews the economy, much as forest fires periodically renew forest ecology.

The Threat to Old Industry

Creative destruction is at work right now. While solar and wind energy provide only a fraction of the world's energy today, they are the fastest growing forms of electric power. Capital investments in wind energy, solar energy, and biofuels grew 43% from 2006 to 2007. Despite the economic downturn, clean-tech market research firm Clean Edge reports a 40% increase in revenue growth for solar photovoltaics, wind, biofuels, and fuel cells in 2007, up from $55 billion in 2006 to $77.3 billion in 2007. Clearly, clean technology companies pose a threat to old industrial technologies (BusinessWeek.com, 4/2/07).

The catch is that large, established companies don't like to be forced to adapt or die, especially when they are making money peddling the same old stuff. So they resist creative destruction like the devil.

Is it any wonder then that Republican politicians shower praise on small business but favor big business' old technologies when it comes to government subsidies and incentives? "Drill more, drill now?" Destructive, yes, but not creative.

Byron Kennard is Executive Director of the Center for Small Business the Environment, a nonprofit advocacy organization located in Washington, D.C.

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