Opinion Start-ups,not bailouts

The US must invest more in risk-taking entrepreneurs

February 24, 2009 01:00 AM IST First published on: Feb 24, 2009 at 01:00 AM IST

Reading the news that General Motors and Chrysler are now lining up for another $20 billion or so in government aid on top of the billions theyve already received or requested leaves me with the sick feeling that we are subsidising the losers and for only one reason: because they claim that their funerals would cost more than keeping them on life support. Sorry,friends,but this is not the American way. Bailing out the losers is not how we got rich as a country,and it is not how well get out of this crisis. GM has become a giant wealth-destruction machine possibly the biggest in history and it is time that it and Chrysler were put into bankruptcy so they can truly start over under new management with new labour agreements and new visions. When it comes to helping companies,precious public money should focus on start-ups,not bailouts.

If we are going to be spending billions of taxpayer dollars,it cant only be on office-decorating bankers,over-leveraged home speculators and auto executives who year after year spent more energy resisting changes and lobbying Washington than leading change and beating Toyota. Ive been traveling all across the country on a book tour,and every evening I return to my hotel with my pockets full of business cards from inventors in clean energy. Our country is still bursting with innovators looking for capital. So,lets make sure all the losers clamouring for help dont drown out the potential winners who could lift us out of this. Some of our best companies,such as Intel,were started in recessions,when necessity makes innovators even more inventive and risk-takers even more daring.

Yes,we have to shore up the banking system,which underpins everything; and finding a fair way to prevent hardworking people,who played by the rules,from losing their homes to foreclosure is both right and essential for stability. But beyond that,lets think,talk and plan in more aspirational ways. Were down,but were not out. As we invest taxpayer money,lets do it with an eye to starting a new generation of biotech,info-tech,nanotech and clean-tech companies,with real innovators,real 21st-century jobs and potentially real profits for taxpayers. Our motto should be,Start-ups,not bailouts: nurture the next Google,dont nurse the old GMs.

To be fair,the stimulus package that the Obama team and the Democrats in Congress recently passed with virtually no Republican help goes some way towards doing just that. Hats off for that. Now lets do more.

The renewable-energy business wind,solar and solar-thermal was almost dead in this country. Most new projects stopped last fall because they depended for their financing on selling their renewable energy tax credits to Wall Street firms. As those Wall Street firms went bust or suffered steep losses,they had no need for tax credits because they had no profits to offset. The stimulus package created a mechanism for renewable energy innovators to bypass Wall Street and monetise their tax credits directly through the US Treasury,for any project that starts between now and the end of 2010.

These jobs will be in engineering,constructing and operating huge solar systems and wind farms and manufacturing new photovoltaics. Together they will drive innovation in all these areas and move wind and solar technology down the cost-volume learning curve so they can compete against fossil fuels and become export industries at the ChinIndia price, that is the price at which they can scale in China and India.

That is how taxpayer money should be used to stimulate: limited financing,for a limited time,targeted on an industry bristling with new technology start-ups that,with a little push from Uncle Sam,wont just survive this crisis but help us thrive when it is over. We need,and the world needs,an America that is thriving not just surviving.