Short Circuiting The Market

<:hgroup> <:hgroup>by  via Eric Peters Autos

Evidence continues to accrue that the Soviet Union did not disappear in 1991. It simply transplanted itself to another part of the world.Brezhnev lead

Here.

One of the hallmarks of the Soviet System was top-down central planning – with “incentives” provided by the government. Natural market mechanisms were crippled. You got what the government decided you needed – at whatever price the government decided was appropriate.

The result – back then – was the Trabant and Lada.

Today, the result is electric lemons like the Tesla and Chevy Volt and Honda Fit EV.U.S. President Barack Obama inspects an Opel Ampera electric car

People won’t buy them on the merits – because there aren’t any merits (not any that make economic sense, that is) so the government steps in with “incentives” – massive subsidies: $7,500 to the individual buyer and god-knows-how-much to the corporate cartel that made the thing. Anything rather than accept the market’s verdict that these vehicles are not economically viable.

And that’s as Soviet as it gets.

Only in the case of post-Constitution America, the fiction is maintained that a free market exists – even as market mechanisms such as moral hazard have been effectively eliminated and losses for large corporations with pull are “insured” by a mafia state that will not permit its crony capitalist partners to not make money – no matter how poorly conceived their products, no matter how ineptly or even criminally they run their businesses. It is Soviet in every way except for the doddering old Premier on the review stand – but no doubt that’s coming, too.Brezhnev picture

GM just announced it will drop the price of the 2014 Volt by $5,000 – to $34,995. This is before GM’s partner – the government – cuts the price down by another $7,500 via a taxpayer-funded individual  subsidy. In a roundabout way, GM is conceding that the car was priced at least $12,500 too high. (That sum, incidentally, will just about buy you a very decent economy car – the Fiat 500, for instance – without any “help” from the Politburo in DC.)

Why not just go whole hog and give them away? The plant where the Volt is built – currently idled – could be ramped-up to full production. GM could point to all the cars being made (as in Soviet Russia) and never mind about how much they cost to make – or whether anyone would be willing to part with their own hard-earned money to possess one.ELR picture

GM Is actually doubling down. A Cadillac version of the Volt is on deck. It is even more divorced from economic reality than the Volt. Instead of an electric Trabant, we’ll get (to pay for) an electric Zil (the staff car of the Soviet elite). With an anticipated sticker price somewhere between $60,000 and $70,000 it will be – like the infamous Tesla – a  car for the New Nomenklatura of Bailout Nation. The ideal chariot for crony capitalists. Perhaps they’ll get their own special roads to drive them on, too.

It’s not just American corporations that have gone Soviet. Honda recently announced that it will cut the cost to lease its electric Turducken – the Fit EV – by a third. And will also throw in “free” home charging station set-ups and allow the lessee unlimited mileage during the term of the lease.Fit EV picture

Except, of course, it’s not free.

Honda will either:

Make up for the losses by cost-padding other (economically viable) cars, forcing consumers to subsidize the Fit EV that way.

Or:

Honda will claim some sort of government “write-off” – which will transfer the costs onto the backs of taxpayers that way.

The obvious thing to do – stop trying to force-sell a product that the market doesn’t want – never seems to occur to the increasingly Soviet-minded bosses of the corporate world.Soviet bosses

Of course, they are “incentivized” by the existence of government mechanism that not only insulate them from market forces but actually encourage decisions about what to make and how to make it that are profoundly Soviet.

Take the case of Tesla as a for-instance.

This “company” – I put the word in italics for the same reason I do “customer” when used by the DMV – exists only because of government and its system of payola for the politically favored. Because its profits depend entirely on Soviet-style rigmarole such as “green credits” – which transmute into FRNs just like an EBT card enables a welfare lout to eat lobster at your expense. If Tesla had to sell its cars on the merits, there would be no Tesla cars. Not until Elon Musk figured out how to make one that was functionally appealing and cost-competitive with conventional cars.

Same goes for GM. And Honda. And everyone else.Homer's car

Which is exactly how it ought to be.

But which, increasingly, it is not.

You may remember an episode of The Simpsons TV show. Homer is given carte blanche to design his ideal car. He doesn’t have to take into account what “stupid” buyers want. Nor what “stupid” accountants tell him the car will cost to make. All that matters is what he wants.

The end result is predictable, but the lesson goes right over the heads of corporate America – and Americans, generally.Homer car picture 2

To be clear: I’m not opposed to electric cars any more than I’m opposed to cars powered by unicorn flatulence . . . provided I’m not forced to subsidize them. But it’s enraging to see someone driving down the road in a car that others paid for – the money taken from them at gunpoint. You want a Volt or a Tesla? Then pay for the damn thing yourself. Full cost to make – plus a profit for the company that made it.

Too much? Too expensive?

Then too god-damned bad. gun in face picture

Stop shoving your hand in my pocket – and a gun in my face.

If a $60,000 electric car is such a great idea, why not also subsidize $600,000 homes for all? It would be so nice to live in a 4,000 sq. ft. house with granite-topped counters and Viking appliances. A new Cadillac electric car would look great in the garage. Hey, it’s a three car garage… why not three of them?

If we had a free market, bad ideas would simply go away – or better yet, never see the light of day. But because we have a Sovietized system, bad ideas can make you rich.

On the dime of your fellow man.

Throw it in the Woods?

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About Land & Livestock Interntional, Inc.

Land and Livestock International, Inc. is a leading agribusiness management firm providing a complete line of services to the range livestock industry. We believe that private property is the foundation of America. Private property and free markets go hand in hand—without property there is no freedom. We also believe that free markets, not government intervention, hold the key to natural resource conservation and environmental preservation. No government bureaucrat can (or will) understand and treat the land with as much respect as its owner. The bureaucrat simply does not have the same motives as does the owner of a capital interest in the property. Our specialty is the working livestock ranch simply because there are so many very good reasons for owning such a property. We provide educational, management and consulting services with a focus on ecologically and financially sustainable land management that will enhance natural processes (water and mineral cycles, energy flow and community dynamics) while enhancing profits and steadily building wealth.
This entry was posted in Economic & Market Analysis, Government Failures, Interventionism and Unintended Consequences, Libertarianism, Social & Economic Collapse, The Nanny State and tagged , , , , , , , , , , , . Bookmark the permalink.

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