Here’s how markets work. From Toyota:
It said today it will not release its proposed mass-market mini e-car, the eQ. The reason: there’s no demand for it, not while battery technology is failing to provide comparable range to a tank of petrol. The natural gas boom in the US has seen prices of the fuel plummet, in turn reducing the cost of electricity generated by burning it. The Japanese car maker said today it will release 21 hybrid gas-electric models in its line-up by 2015.
“The current capabilities of electric vehicles do not meet society’s needs, whether it may be the distance the cars can run, or the costs, or how it takes a long time to charge,” said, Uchiyamada, who spearheaded Toyota’s development of the Prius hybrid in the 1990s.
Here’s the market not working because of government intrusion (and ownership):
Nearly two years after the introduction of the path-breaking plug-in hybrid, GM is still losing as much as $49,000 on each Volt it builds, according to estimates provided to Reuters by industry analysts and manufacturing experts.
Cheap Volt lease offers meant to drive more customers to Chevy showrooms this summer may have pushed that loss even higher. There are some Americans paying just $5,050 to drive around for two years in a vehicle that cost as much as $89,000 to produce.
It currently costs GM “at least” $75,000 to build the Volt, including development costs, Munro said. That’s nearly twice the base price of the Volt before a $7,500 federal tax credit provided as part ofPresident Barack Obama‘s green energy policy.
A pity these things have to be continually pointed out. But, of course, it won’t stop those who want government to decide what we should be driving instead of consumers and think subsidies will foster that desired behavior.
Two non-partisan government agencies — the Congressional Budget Office in Washington, D.C. and Parliament’s Select Transport Committee — conclude that during the next decade at least, the giveaways will have little impact on sales of plug-in hybrid and all-electric vehicles, or on gasoline consumption and greenhouse-gas emissions. Their main beneficiaries: affluent purchasers who’d buy the vehicles anyway.
“… during the next decade at least …?” Love that caveat, don’t you? They never work if it is something consumers don’t want. See current example for proof. In the case of the market, it’s moved on … and much faster than government can react. As usual, government has backed a loser.
The frenzy over shale gas deep under Ohio and other states has the makings of a different kind of rush on the nation’s highways. Businesses, cities, metropolitan transit systems and even school districts across the nation are edging toward a switch from diesel and gasoline to natural gas. Converting cars and light trucks to use either gasoline or natural gas is expensive. And heavy trucks designed specifically for natural gas also cost more than conventional diesels. But at current prices, engines that can run on natural gas cut fuel bills in half or better.
And GM has the Volt. You have to laugh at the fact that the central planners invariably always get it wrong.
You’d have think we’d have learned that by now, wouldn’t you?
Did most of you know about this?
The U.S. Energy Information Administration’s (EIA) June energy report says that energy-related carbon dioxide fell to 5,473 million metric tons (MMT) in 2011.
That’s down from a high of 6,020 MMT in 2007, and only a little above 1995′s level of 5,314 MMT.
Better yet, emissions in the first quarter of 2012 fell at an even faster rate — down 7.5% from the first quarter of 2011 and 8.5% from the same time in 2010. If the rest of 2012 follows its first-quarter trend, we may see total energy-related carbon dioxide emissions drop to early-1990s levels.
Wow. Victory for the enviro crowd, yes? Regulation has succeeded, right? The government has turned the tide?
Nope. In fact it has nothing to do with the enviro crowd, government or regulation.
Two dirty words: Hydraulic fracking. Two more for good measure: Natural gas. And the dirtiest word of all: Markets.
Those three have combined, via a price point that has stimulated demand and made the conversion of coal plants economical to drive down emissions as they produce electricity more cheaply and efficiently. This trend began in 2007 and is now having a real effect:
Increasingly, power plants are turning to natural gas because it has become abundant, and therefore cheap. And though technology is improving our ability to reduce emissions from coal usage, natural gas is still a much cleaner source.
Natural gas, given the extensive finds and the exploitation, is much cheaper than coal now. In fact:
Indeed, natural gas has just passed an important milestone. As noted by John Hanger, energy expert and former secretary of the Pennsylvania Department of Environmental Protection: "As of April, gas tied coal at 32% of the electric power generation market, nearly ending coal’s 100-year reign on top of electricity markets."
That’s how it works in markets, or is supposed too. The fact that emissions are down is an actual side benefit of the process. And it is a process that has managed to work despite government and environmental groups like the Sierra Club’s interference or attempted interference in the process (the Sierra Club has declared war on natural gas and fracking after accepting millions in previous years from the natural gas industry).
It is a part of the creative destruction of the capitalist process. Coal will still have its uses, but just as it was replaced as a primary fuel for heating homes last century, it is now being replaced as a primary fuel for generating electricity for the same reason – there is a cheaper and more efficient fuel (which also happens to have fewer emissions) that is easier to produce and deliver than coal.
At some point coal producers will either have to reinvent themselves or find something else to do. And on the other side, opportunities will expand within the natural gas industry as more and more demand builds.
But shhhhh. Don’t want anyone knowing this all happened because of markets. Why that would hurt the argument that it requires government intrusion, regulation and the pressure of environmental groups to make things like this happen.
Can’t have that.
Ed Morrissey sums up the “new” GM:
Americans sunk tens of billions of dollars into General Motors in 2008 and 2009, money which they won’t see any time soon, if at all. The Obama administration strongarmed senior creditors in an unprecedented politically-engineered bankruptcy to get taxpayers to eat the costs of old pension obligations and boost the UAW. All of this was done in the name of making GM a stronger company so that they could eventually pay back the bailout and make better decisions in the future. [emphasis mine]
Remember the other day when I talked about corporate cultures and how it was important to change them when a company is going down the tubes because of their present one? And how bankruptcy – real bankruptcy – has a tendency to help make that corporate culture change a reality.
Yeah, well that didn’t happen at GM with predictable results:
Attention U.S. taxpayers: You now own a piece of a French car company that is drowning in red ink.
That’s right. In a move little noticed outside of the business pages, General Motors last week bought more than $400 million in shares of PSA Peugeot Citroen – a 7 percent stake in the company. …
Peugeot can undoubtedly use the cash. Last year, Peugeot’s auto making division lost $123 million. And on March 1 – just a day after the deal with GM was announced – Moody’s downgraded Peugeot’s credit rating to junk status with a negative outlook, citing “severe deterioration” of its finances.
In other words, General Motors essentially just dumped more than $400 million of taxpayer assets on junk bonds.
An analysis by auto industry consultants IHS said it is “somewhat baffling that GM is willing to get involved in an alliance that it frankly does not need for size or complexity, while still avoiding any public plan to rationalise its European production, cut costs, or deal with labour rates.”
Well, the investment in Solyndra was “somewhat baffling” to most analysts, but it didn’t stop the Department of Energy from guaranteeing it, did it?
GM needs a 7% stake in Peugeot like it needs the Chevy Volt. Don’t forget, it loses money every year in Europe. And now it owns 7% of another car company posting huge losses.
It hasn’t yet been able to pay the tax payers back for the “investment” they were forced to make in the company although they have found the time to pay bonuses to employees and executives, some of whose accomplishments apparently include this decision.
Trying to justify the unjustifiable with a pep-rally like political speech to the UAW, Obama points to what he contends are the favorable results of his decision to intrude into the auto market and rearrange the bankruptcy process to favor his cronies.
I know our bet was a good one because I had seen it pay off firsthand. But here’s the thing. You don’t have to take my word for it. Ask the Chrysler workers near Kokomo — (applause) — who were brought on to make sure the newest high-tech transmissions and fuel-efficient engines are made in America. Or ask the GM workers in Spring Hill, Tennessee, whose jobs were saved from being sent abroad. (Applause.) Ask the Ford workers in Kansas City coming on to make the F-150 — America’s best-selling truck, a more fuel-efficient truck. (Applause.) And you ask all the suppliers who are expanding and hiring, and the communities that rely on them, if America’s investment in you was a good bet. They’ll tell you the right answer.
Of course Chrysler is now owned by a foreign auto company, courtesy of the Obama administration, Ford took no federal money and, had normal bankruptcy proceeded, taxpayers wouldn’t be out $80 billion dollars (still unpaid despite claims to the contrary) and a leaner, more competitive GM would be in existence. Those suppliers would still be supplying and after the shakeout a more viable corporation would have come into existence.
Speaking of those GM workers in Spring Hill, TN, Kaus lays out another reality that the president doesn’t present:
Toyota and Honda are coming back online after the tsunami and Southeast Asia floods crippled production. VW is building roomy American-style cars in Tennessee using $14.50/hour non-union workers instead of $28/hour UAW workers. Hyundai is expanding rapidly. Competition is going to be vicious–it’s widely believed there’s still overcapacity in the industry. A new oil price spike could crimp sales of high-profit trucks. Will GM still be making money in 5 years? Or, I should say, will GM still be making money building cars in the U.S. (as opposed to importing them from China) in 5 years? I’m skeptical. I don’t think deficient corporate cultures change that easily. Normally we rely on the market to simply kill them off.
The two points to be made here are important. One, GM’s current “success” is a result of huge infusion of taxpayer money. Its problem was/is its corporate culture and its unions. Neither problem have been addressed or fixed. Instead, like Solyndra, they’ve simply been given an extension via the taxpayer that will eventually run out. Secondly, as competing auto companies using non-union labor continue to locate in right to work states and pay a competitive wage (but not the high end union wage), they will continue to take market share from GM, who is still stuck with that toxic corporate culture and grasping unions.
But, of course, Obama won’t care because he’ll be out of office. This is the usual short term vote buying, just on a grander scale than we’ve ever seen it before. Crony capitalism at its worst.
Long term viability?
Who cares? Certainly not President Obama.
At Powerline, John Hinderaker points to an article by Janet Daley in the Daily Telegraph and ponders the question she asks – “why has the collapse of Communism had so little impact on political discourse in the West?”
[I]n spite of the official agreement that there is no other way to organise the economic life of a free society than the present one (with a few tweaks), there are an awful lot of people implicitly behaving as if there were. Several political armies seem to be running on the assumption that there is still a viable contest between capitalism and Something Else.
If this were just the hard Left within a few trade unions and a fringe collection of Socialist Workers’ Party headbangers, it would not much matter. But the truth is that a good proportion of the population harbours a vague notion that there exists a whole other way of doing things that is inherently more benign and “fair” – in which nobody is hurt or disadvantaged – available for the choosing, if only politicians had the will or the generosity to embrace it.
Why do they believe this? Because the lesson that should have been absorbed at the tumultuous end of the last century never found its way into popular thinking – or even into the canon of educated political debate. …
he fall of the Berlin Wall and the collapse of communism which followed it are hugely important to any proper understanding of the present world and of the contemporary political economy. Why is it that they have failed to be addressed with anything like their appropriate awesome significance, let alone found their place in the sixth-form curriculum?
The failure of communism should have been, after all, not just a turning point in geo-political power – the ending of the Cold War and the break-up of the Warsaw Pact – but in modern thinking about the state and its relationship to the economy, about collectivism vs individualism, and about public vs private power. Where was the discussion, the trenchant analysis, or the fundamental debate about how and why the collectivist solutions failed, which should have been so pervasive that it would have percolated down from the educated classes to the bright 18-year-olds? Fascism is so thoroughly (and, of course, rightly) repudiated that even the use of the word as a casual slur is considered slanderous, while communism, which enslaved more people for longer (and also committed mass murder), is regarded with almost sentimental condescension. …
[I]n our everyday politics, we still seem to be unable to make up our minds about the moral superiority of the free market. We are still ambivalent about the value of competition, which remains a dirty word when applied, for example, to health care. We continue to long for some utopian formula that will rule out the possibility of inequalities of wealth, or even of social advantages such as intelligence and personal confidence.
The idea that no system – not even a totalitarian one – could ensure such a total eradication of “unfairness” without eliminating the distinguishing traits of individual human beings was one of the lessons learnt by the Soviet experiment. The attempt to abolish unfairness based on class was replaced by corruption and a new hierarchy based on party status.
If the European intellectual elite had not been so compromised by its own broad acceptance of collectivist beliefs, maybe we would have had a genuine, far-reaching re-appraisal of the entire ideological framework. [Emphasis mine].
We could spend a week discussing any of those highlighted passages, but the question remains – why? In fact, if you think about it, the collapse of communism was all but shrugged off by the left. It wasn’t, as it seemed, of any consequence to their ideology. In fact, for the most part, other than a few “good riddance” quotes, it was business as usual for the left, pushing many of the same ideological principles that underpinned communism as if they were not a reason for that horrific system’s collapse.
As Daley says, its failure should have been a turning point in geo-political power and thinking about the state and its relationship to the economy. But instead there was silence while left leaning governments both here and in Europe doubled down on state intrusion into the economies of their respective states.
The key is to be found in the last emphasized sentence. Unfortunately, there has been a sea-change in much of our thinking which has indeed seen a “broad acceptance” of “collectivist beliefs”. If ObamaCare leaped to your mind immediately, what actually makes the point is Medicare Part D. That’s the “broad acceptance” necessary – compromise of principle on the right – to carry this sort of an agenda forward.
Sure ObamaCare was passed without a single GOP vote, but it was set up by many past GOP compromises. The problem is the right has allowed the left to define both the playing field and the principles of play. It has also framed what little discussion that goes on. It has decided on envy as its vehicle and class warfare as its methodology. And the right has meekly accepted those parameters. Watch the current crop of GOP candidates spend much of their time apologizing for their success instead of celebrating it and tell me the propaganda war hasn’t gone to the left.
And on the left? Why has the result of communism’s collapse been essentially ignored? For two reasons. John Hideraker’s take on the left for one:
I think a very partial answer to the question Ms. Daley poses is that leftism has never been based on idealism. It has always been based, for the most part, on hate and envy. So when Communism was conclusively proved to be a failure, leftists (including not only leftists in politics, but more important, leftists in the media and in academia) didn’t change their minds or admit their mistake. For in their eyes, while there may have been disappointment, there was no mistake. Their resentments and hatreds remained. They merely sought other vehicles, other terminologies, other tactics to bring down the West and the free enterprise system and democratic institutions that define it. Yesterday’s socialists are today’s progressives. They barely missed a beat.
I think there is a lot of truth to that analysis, although I’d quibble somewhat on the dismissal of idealism. I’ve always said the left never viewed communism as a systemic failure but more of a failure based on the fact that the wrong people were executing the idea poorly. There’s never really been an acknowledgement on the left that communism itself was “wrong”, “bad” or even totalitarian. Just that some of those who got into power under that system were (if they’ll admit even that).
And it is hard to look at the left of today, view their ideology and conclude they’ve learned a thing by its collapse. While they’ve certainly learned that it is unwise to use certain words or phrases when pushing their agenda (you won’t see “proletariat” or “bourgeoisie” tossed around by today’s lefty, but “middle class” and “[pick your favorite class to denigrate] elite” work along with “Big this” and “Big that”.
The truth in Daley’s point is to be found in reviewing how we’ve gotten to where we are today since the collapse of the Berlin Wall. We’re much less free economically and politically. The left continues to define the debate and the right continues to accept the framing. How can you have a real discussion about the failures of communism specifically and collectivism in general when you continue to allow the collectivists to frame the discussion? Naturally they’re going to pretend that nothing untoward happened with the demise of the USSR and Warsaw pact. Why would they?
I mean think of the irony – over 20 years after its collapse, the principles of socialism and its offspring communism continue to touted as “the answer” while the system that sharply defined the West until then and made it more successful by orders of magnitude – capitalism (or a reasonable facsimile thereof) – is under constant and sustained assault.
Talk about a world upside down.
As I mentioned in an earlier post, it is frightening to read the words by this President and it is hard not be appalled by the apparent economic ignorance they contain. We’ve remarked on it several times. In particular this statement is stunning in that regard:
Factories where people thought they would retire suddenly picked up and went overseas, where workers were cheaper. Steel mills that needed 100—or 1,000 employees are now able to do the same work with 100 employees, so layoffs too often became permanent, not just a temporary part of the business cycle. And these changes didn’t just affect blue-collar workers. If you were a bank teller or a phone operator or a travel agent, you saw many in your profession replaced by ATMs and the Internet.
Richard Epstein of the Hoover Institution noticed it too. And in very blunt language, points the very same thing we’ve been talking about:
To anyone schooled in economics, these statements reveal a breathtaking ignorance about the sources of national prosperity. It is a good thing when plants can achieve the same output with less labor. Do we really want an America in which thousands of people work in dangerous occupations to turn molten lava into steel bars? Far better it is that fewer workers are doing those jobs. The jobs lost in that industry will be in part replaced by newer jobs created in the firms that build the equipment that make it possible to run steel mills at a lower cost and far lower risk of personal injury. The former workers can seek jobs in newer industries that will only expand by competing for labor.
And what about those ATM machines? Does the president really want people to have to queue up in banks to make deposits or withdraw cash in order to make a boom market for human tellers? Perhaps we should return to the days before automation, when phone calls were all connected by human operators. And why blast the Internet, which has created far more useful jobs than it has ever destroyed?
The painful ignorance that is revealed in these remarks augurs ill for the long-term recovery of America. With the president firmly determined to set himself against the tides of progress, innovation will be harder to come by. The levels of unemployment will continue to be high as the president works overtime to impose additional restrictions on the labor markets and more taxes at the top of the income distribution—both backhanded ways to reward innovation and growth.
The problem, therefore, with the president’s speech is not that it is demagogic in tone. The problem is that it is intellectually incoherent. As a matter of high principle, the president announces his fealty to markets. As a matter of practical politics, he denigrates and undermines them at every step. It is a frightening prospect to have a president who lives in a time warp that lets him believe that the failed policies of 1935 can lead this nation back from the brink. His chosen constituency, the middle class, should tremble at the prospect that his agenda might well set the course for the United States for the next four years.
Well said, but frightening. Take the time to read the rest of Epstein’s piece. It’s worth the read.
I‘ve mentioned before about the seemingly unbridgeable ideological divide confronting our federal representatives in Washington, DC. This seems to be a generational version of the same thing (my emphasis):
Young folks today appear to have the same dreams and ambitions that my generation had at the same age. We wanted an education, a good career, a home of our own and a happy life. The main difference between today’s youthful opinion is that most of us expected to stay in school, work hard and earn a good life instead of having it given to us at someone else’s expense — a point of view expressed by many young adults today.
Proof of the pudding showed up this fall in a survey conducted by Professor Jack W. Chambless at Valencia College in Florida. He asked his students to write a short essay expressing their view of The American Dream.
Most of the students responded with the familiar notions of youth expressed by my generation with one important and notable exception. Instead of taking personal responsibility for their future, they noted that the government should, “Pay my tuition, provide me with a job, give me money for a house, make sure I get free health care and pay for my retirement.” If necessary, “… raise taxes on rich people so that I can have more money …”
What else would you expect from young Americans, who, after several generations, have grown accustomed to a “Nanny State” in which the Federal Government has taken more and more license with the lives of individual Americans? This entire process has resulted in a citizenry in which one-half of wage earners pay no income tax at all and, indeed, in some cases even get a “refund” even though that refund comes from one of the other half of Americans who have paid income tax. If this is not a prime Marxist example of government, “From each according to his ability; to each according to his need,” I don’t know what is.
In fact, according to clip below, 80% of the students opined that health care, tuition, down payments and jobs should all be provided by the government at no cost to themselves. And, while this certainly isn’t a scientific poll or anything even approaching the sort, it should be noted that this was from a class of 200 college kids. So, at least 160 of them thought this way. Which is more than just pathetic and sad. It’s a harbinger of terrible things to come.
I truly pray that Valencia College has cornered the market on freeloaders, thus making this a terribly skewed sample. Or maybe the students surveyed are just a bunch of smart-asses having fun with their professor. Indeed, I’m sure that something far less than 8 in 10 college students believes that government should just provide for their every want and desire, paying for out of the pockets of the “rich” if need be (one wonders where they think all these goodies originate?).
But the number doesn’t really need to be all that high before serious issues arise. If, instead, the number is only 20% (or 1 in 5), that would be better, but still alarming. Consider that if 20% of the electorate feels this way, and that the remaining 80% are diametrically opposed on almost every issue, then pleasing that smaller cohort becomes the key to political victory. In short, giving free stuff to the 20% in exchange for their votes. Which is not at all unlike what we have now.
Of course if that number is higher that 1 in 5, the problem becomes much worse. At least, until they run out of other people’s money.
You can see a video of an interview with the professor who conducted the survey here.
Apparently the public has seen and read enough about Occupy Wall Street to make up its mind that it isn’t something it supports.
According to a Public Policy Polling survey, support for OWS has dropped rapidly as more and more reports detail theft, violence, rape, and all sorts of other anti-social behavior (such as defecating in the street) among its participants.
Only 33% now say that they are supportive of its goals, compared to 45% who say they oppose them. That represents an 11 point shift in the wrong direction for the movement’s support compared to a month ago when 35% of voters said they supported it and 36% were opposed. Most notably independents have gone from supporting Occupy Wall Street’s goals 39/34, to opposing them 34/42.
Note again the all important demographic (independents) in which the big switch has occurred. Democrats who’ve hitched their wagon to OWS should begin deserting it like rats deserting a sinking ship when they see these results.
As for the claim that OWS is more popular than the Tea Party? Yeah, not so much:
Tea Party 43%, Occupy Wall Street 37%. Last month, Occupy Wall Street had a narrow advantage of 40%-37%.
Again the movement with independents is notable- from preferring Occupy Wall Street 43-34, to siding with the Tea Party 44-40.
That said, the issue OWS supposedly represents is still alive and well even if it is a misinformed position:
I don’t think the bad poll numbers for Occupy Wall Street reflect Americans being unconcerned with wealth inequality. Polling we did in some key swing states earlier this year found overwhelming support for raising taxes on people who make over $150,000 a year. In late September we found that 73% of voters supported the ‘Buffett rule’ with only 16% opposed. And in October we found that Senators resistant to raising taxes on those who make more than a million dollars a year could pay a price at the polls. I don’t think any of that has changed- what the downturn in Occupy Wall Street’s image suggests is that voters are seeing the movement as more about the ‘Occupy’ than the ‘Wall Street.’ The controversy over the protests is starting to drown out the actual message.
This is most likely true since most people don’t understand that the economics of earnings isn’t a zero sum game. On the one hand the left has done a good job of selling the idea that income inequality is important and can be solved through higher taxes on the so-called or relatively “rich”.
Of course that’s nonsense. That said, OWS is now more of a detriment than a asset to that cause if this poll is to be believed. And that means the usual thing for politicians with their fingers firmly in the political wind – those who have embraced the OWS protestors will be trying to find a way to desert and then denounce the rabble.
OWS will linger – today they’re going to try to rally in NYC on Wall Street – but I’d argue we’ve seen the movement’s high tide. I will now recede into a mere annoying shadow of itself as support is withdrawn by political figures and organizations. And, of course, you can count on participants getting even more desperate to rally support and I think we all know what that means. More excess, more stupidity, less support.
I say good riddance.
Watch and listen. Schiff makes a lot of points we’ve been hitting for years. It is a fundamental misunderstanding of capitalism and what it is that drives a lot of the OWS supporters to focus on the wrong entities. Schiff has a lively discussion with them. Interestingly some agree and some simply won’t take the ideological blinders off. You’ll quickly identify who is who.
That’s a quote
from attributed to Abraham Lincoln* as delivered by Richard Epstein in his discussion of economic inequality (a meme that is all the rage right now). Interestingly enough, this interview was conducted and broadcast by PBS (as tree hugging sister notes “I’m sure whoever’s idea it was has been sacked. Along with all the llama trainers”).
In any event, this is as good a retort to the #OWS nonsense as you’ll likely find. Enjoy (HT: Insty):
ADDED: Although Epstein doesn’t say it explicitly, essentially he describes “economic inequality” as a benign effect, rather than a malignant cause. Understanding the difference leads to understanding why allowing for the greatest number of opportunities works better at increasing everyone’s wealth instead of trying to equalize outcomes.
* Thanks to DWPittelli for pointing out this misattribution in the comments (“It was the Reverend William John Henry Boetcker (1873–1962) who wrote “you cannot help the poor by destroying the rich” and 9 other related aphorisms in 1916. A printing error in 1942 led to the confusion between some Lincoln quotes and these Boetcker quotes.”).