You Suck At Central Planning
Submitted by Marla Singer on 11/10/2009 12:26 -0500
Occasionally, one finds absolute gems floating around in the aether. Coyote Blog is one such, which yesterday uncovered this gem:
Those of us who accused Chrysler and GM of hyping their electric car programs merely as a honey trap to capture money from the Obama Administration were accused of being ridiculous cynics. But....
Chrysler has disbanded a team of engineers dedicated to rushing a range of electric vehicles to showrooms and dropped ambitious sales targets for battery-powered cars set as it was sliding toward bankruptcy and seeking government aid.
It will surprise no one, we expect, to learn that we considered the notion that Chrysler or GM would somehow remake themselves into "green automakers" overnight (in the auto business this translates to "several decades") the insane ramblings of redistribution-rationalists. It should surprise no one to learn that Chrysler and GM also considered the notion that Chrysler or GM would somehow remake themselves into "green automakers" overnight the insane ramblings of redistribution-rationalists. As Coyote Blog points out, after all that noise has anyone actually seen a triple digit city MPG Chevy Volt in the wild? Of course not.
The reality is that there are only two things that will get alternative technologies that may happen to be "greener" out and about.
1. Getting them cheaper (even net switching costs) than the entrenched alternatives.
2. Making the alternatives more expensive than expensive new technologies at the expense of... well... everyone.
Manipulating bankruptcy priorities and strong-arming management from the behind the marble facade of a federal building will get you nothing in the long-term if the economics don't support your endgame. Further, the moment you look away for 15 seconds to pass a sprawling healthcare bill the entire thing slips away from you thusly:
The move by Fiat SpA marks a major reversal for Chrysler, which had used its electric car program as part of the case for a $12.5 billion federal aid package.
As late as August, Chrysler took $70 million in grants from the U.S. Department of Energy to develop a test fleet of 220 hybrid pickup trucks and minivans, vehicles now scrapped in the sweeping turnaround plan for Chrysler announced this week by Fiat CEO Sergio Marchionne.
Defying economic realities requires constant vigilance (as you badger rational or semi-rational actors away from where incentives are pulling them) not to mention constant and massive cash injections to continually make up the shortfalls created by your stable disequilibrium. Does any of this sound familiar?
Pouring several trillion dollars of someone else's money into, for instance, keeping mortgage rates below their natural risk-adjusted equilibrium, works great. Until you run out of everyone else's money.
In the meantime, kudos to Chrysler. Kudos to Fiat. They managed to extract billions of dollars in exchange for a vague promise to do something politically yummy in the present "money is no object" climate. This should, however, make it sort of obvious that not only is the present administration easily characterized as a bunch of looting central planners, but also, given how easily Chrysler played them, that they absolutely suck at central planning.
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