Economic bubbles have been a reoccurring economic cycle in the world throughout the history of capitalism. Recent economic bubbles that the world has experienced include dot-com/telecom, real estate, stocks, and biotech bubbles. They date back to the 1880’s when the first railroad tracks were laid down in the United States. The goal was to connect the United States through economic integration and development, which created a boom in the development of canals, turnpikes, railroads, and telephone lines. Many of these projects were funded by the government, and now green technology projects are funded by them as well. Globally, governments are beginning to promote green technologies through loans and subsidies. The rapid growth the world has seen in green technology could be the start of the next big economic bubble.
An example of a “green-tech” company that has seen high growth and popularity in the past year is the electric car maker Tesla. The company is using popularity and interest in its electric cars to create a micro bubble in its stock. Currently the car company is trading at about $170 per share, while it has only reported positive earnings in one quarter throughout its tenure as a public company. How could a company be trading at such a high stock price, but report negative earnings consistently? Because investors speculate and believe there is potential for high growth in the future.
It is not just the United States that is experiencing a boom in green technology. Both the German and Chinese governments have offered subsidies to expand solar panel production. These countries experienced the boom of solar panels, but also the bust of the bubble. Companies saw great opportunities in this area through government subsidies, which increased supply, followed by a price downfall and bankruptcies. Currently, China is able to export green products cheaply to other countries because of subsidies and low labor costs, making green technology companies around the world uncompetitive. The companies of the United States need to differentiate themselves through innovative technologies and business models.
The boom in green technology that the world has felt could have important influences on the global economy and environment. As more countries begin to use green technology, the world will be reducing emissions and improving the environment. Also, as new technology and businesses are formed, job openings and growth in the economy could occur. Could the boom in green technology experience be a bust, as many other booms in the past? Yes, countries such as China and Germany have already experienced the bust portion of this economic cycle, and it is very possible for the United States to follow the in the same footsteps. The United States has already seen an oil boom with the introduction of hydraulic fracking.
The economic cycles of bubbles booming and busting have been experienced by economies around the world. Investors have felt excitement in the dot-com boom, but have also felt the bust of the housing market, which sent the economy into a rapid recession. As green tech companies begin to gain popularity, they could become the next big bubble or the next big bust. There are signs of a green tech bubble throughout the global economy, including individual companies such as Tesla, solar panels in China and Germany, and hydraulic fracking in the United States.