Thursday, April 2, 2009

Home and Away

Sable Pelt says:

I'm glad you saw the NYT's article on the Chinese government's interest in electrical vehicle production. The point that is important to draw from this article is it is further proof that EVERY other country in the world supports their automobile manufacturing base. I was reading an article yesterday on CNN talking about whether we should care if GM dies and not surprisingly the majority of comments on the article stated that we should absolutely let them die and cited capitalism as the reason because that is an American core value. I like capitalism as much as the next guy, as it is the main reason for the standard of living that we presently enjoy. However, we should also realize that the rest of the world is not playing by the same rules. The Germans, French, Japanese, and Chinese all support their auto industry more than the US does. And I'm not talking about bailout money, I'm talking about financial support for research and development, and healthcare costs, just to name a few.

The debate that rages in this country about the pros and cons of saving the auto industry is a valid one. Nobody wants to put good money after bad as they say. A viable business model and a plan to return to profitability without government help is not too much to ask. However, we need to understand that this downturn in volume is like we've never seen before (for EVERY carmaker) and when volume comes back, and it absolutely will, the players left in the game will reap the rewards. And they will take their profits home with them - whether it is Detroit or Tokyo.


  1. Gordon,

    Sorry I have not responded to your comments on the Legacy of Failure? post. I will do so in the next few days. The point to be made here is that there is no such thing as a free lunch. The average Chinese citizen will pay the costs of today's policies. The Chinese government does not just get to support their domestic auto manufacturing with money conjured out of a hat. One day the bill will come due and the average citizen will have to pony up....his standard of living will go down. Therefore, I say that if they want to take that hit to make electric cars for the rest of us to drive, then they are more than welcome.

  2. The hope of any country that spends it's money, or it's peoples money, is that it is an investment in the future. Sure, there is no free lunch, but just as a smart investment in an education will one day pay off in a career that pays many more times than the initial investment, so too the Chinese government hopes this investment will pay off. And it may.

    Borrowing money does not mean a future of declining standards of living. Stupid borrowing does. Smart borrowing does not. Businesses would not get off the ground without borrowed money. Governments would not win wars, or travel into space without borrowing money. All of these investments, if done right, should pay off in the future, and not only not result in a decline of standard of living, but actually increase it.

  3. Motorless,

    That is a very good point. I take issue with the implication that government can invest wisely. Government is not a person but a collection of individuals with personal commitments and loyalties. It is impossible to expect such a group to serve the public good in a remotely effective way. History is replete with examples of the tangled web of bureaucratic relationships producing suboptimal outcomes.

    What I am willing to concede is a role for government in making clean fuel technology more profitable via a tax on gas. That type of consumption taxation as it is the single most effective way to substantiate a major shift in our energy usage.

    Perhaps even more people will go you and me both.


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