Here's what happens when government directs private investment 

In Spain, large, unsustainable subsidies for "green" power caused Spanish investors to pour billions into large solar farms. Even on a small scale, ordinary Spaniards mortgaged their homes to buy solar panels, so that they could sell their electricity into the grid at artificially high government-backed prices. Now that the subsidies' unsustainability has been exposed, the Spanish government has pulled the plug, causing a massive asset bubble to burst.

The British are acting now to avoid a similar fate, nipping their wasteful renewable energy programs in the bud:

Cornwall, the poorest county in England, said five months ago it expected a “gold rush” of $1.6 billion in solar energy investments. Now, the U.K. government may get in the way.

The central government said this month it’s considering cutting incentives and reducing the size of projects, concerned that the above-market rates it promised through April 2012 may lead to too many solar farms.

This is an excellent example of how government central planning misdirects private investment and creates asset bubbles. We saw this here with the huge homeownership push and indirect subsidies of the late 1990s and 2000s. It is something to bear in mind whenever you hear President Obama talk about government "investments" in what he pretends to know are the "jobs of the 21st Century." He is talking about stoking demand where it does not exist by giving people money to do things that make no economic sense. He is talking about wasting public money and diverting private investment away from sustainable enterprises that meet market demand and will create long-term jobs.

About The Author

David Freddoso

David Freddoso came to the Washington Examiner in June 2009, after serving for nearly two years as a Capitol Hill-based staff reporter for National Review Online. Before writing his New York Times bestselling book, The Case Against Barack Obama, he spent three years assisting Robert Novak, the legendary Washington... more
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