A new paper in Science Advances argues that enormous changes transformed the structure of the U.S. economy in the 1970s and 1980s, making it impossible for American firms to develop new industries and markets. They specifically gutted the solar industry, depriving the technology of funding at a critical moment in its development.

Max Jerneck, the paper’s author and a researcher at the Stockholm School of Economics, says that these dynamics still exist. Unless they are also addressed, they will likely limit the effectiveness of a carbon tax or cap-and-trade program, he says.

I spoke to Jerneck about his paper and the larger fate of the industry. Our conversation has been edited for clarity and length.

Robinson Meyer: The first question that we need to get to: What is financialization? Why is it important to this period?

Max Jerneck: It’s a shift in focus from producing real, material wealth to focusing on the value of paper assets. In this case, instead of focusing on investing in long-term technological development, the main focus is on the stock price. Firms were more interested in seeing financial assets going up than actually creating new wealth for the long term.

Meyer: When did financialization begin?

Jerneck: In this story, it started within the corporation. In the late ’60s, corporations became financialized. They became managed by financial managers, who thought that they could run any kind of business just by looking at the numbers—and not by having engineers calling the shots who actually knew a lot about the technology. They worked by buying up other businesses, just as you would buy stocks in the portfolio. They would buy them up; they would hold them for a while to see if they took off; and, if not, they would just sell them again.

So financialization started within the corporations and, later on, the corporations became controlled from the outside, by Wall Street.

Meyer: So that’s what’s happening across American business at this moment. What was the solar industry like? You describe that there were two groups of people, each with a different philosophy.

Jerneck: First, in the 1960s, the space program developed photovoltaic solar panels. And then in the ’60s and early ’70s, there were a handful of entrepreneurs—most of whom had been working in the early space program—and they had this vision of bringing solar power down to Earth and creating markets for this technology. Their view was always that solar was too immature to compete with conventional power. The first markets they would focus on were off-grid markets—faraway radio stations, railroad crossings, African villages that weren’t on the grid. They wanted to build on those uses slowly, and slowly approach the bigger and bigger markets closer to the grid.

The energy-policy establishment, meanwhile, wanted to develop solar in the image of nuclear. They wanted to bring it up to scale really fast, building these huge power plants as soon as possible. Large corporations also wanted to scale [solar] up really fast, and invest massive amounts in advanced R&D and mass-production scale. For them, this technology had to pay off in a really huge ways. It had to become a mainstream technology for them to make these bets. If they were just selling solar panels to African villages, or building smaller consumer electronics, they weren’t really interested.