Let’s stick with the subject of the Detroit bailout for a moment. The public debate on the issue has been intelligent, interesting and invigorating. That doesn’t mean it’s all smart. The latest me-too line of reasoning is that all the auto execs are incompetent. But I think that’s a little too easy. Undisciplined, yes. Unfocused, maybe. But what’s been happening in Detroit for the last few years has been dynamic too. Look at what Steve Miller did at Delphi and smart folks like Wilbur Ross haven’t exactly sat around with their thumbs . . you know . . . there.
Next to their homes, cars are most folks biggest asset. Unlike a home, it’s a depreciating asset but that doesn’t mean there isn’t a lot of value tied up in thing. Just as the credit bubble deformed the housing market–not just prices but also the size, style and location of houses–the auto market has been misshapen by easy money and cheap gasoline.
Since the auto problem is tied into the energy problem–and the convoluted knot suggests Obama needs an industrial policy to go along with that national energy policy–most people recognize that we should be working on cars and the oil issue in concert. That doesn’t mean there is an obvious solution. Creating demand for alternative energy cars and building an infrastructure to support them is a huge task.
Government should create the conditions that allow entrepreneurs to build businesses within and around this “new” industry. The free market opportunities are great. But they won’t get started without a goose from government, especially right now. If the Defense department got the ball rolling on the Internet, there’s no reason we can’t look to Washington to get a new, green transportation industry underway. But smart folks will disagree on how to get it done. And they should.
But the American Enterprise Insititute’s Kenneth Green isn’t one of them. Using The American as a platform, he’s made some dubious comments already. But this dim-witted one is tendentious beyond belief.
It’s hard to see how greening Detroit will help car companies, car drivers, or American taxpayers. Greener vehicles are more expensive to make and bring in less profit than other cars. They cost more to finance, more to repair, and more to insure. Their sales depend heavily on tax incentives—which means that selling more of them will require more taxpayer dollars.
That scare graph is followed by a bunch of numbers that can all be dismissed by pointing to the fact the all of the costs for energy efficient cars are elevated by their tiny market share. Don’t get me wrong, the path to a new auto industry won’t be cheap or easy. But to throw up a bunch numbers for parts, insurance and the cost of the prototypes as proof that a new type of car is inherently too expensive to pursue is just amateurish debating.
As for fuel cells, GM’s prototype fuel-cell car runs on hydrogen and emits nothing but water vapor. It’s hard to get greener than that—but it’s also hard to find a more expensive car: the prototypes cost $1.5 million to produce.
With this kind of thinking, we would never have had a cell phone industry (not that we might not have been better off.) New products are expensive; prototypes are expensive. But when something catches on, costs fall. This is about as axiomatic as it gets for modern industry.
Instead of engaging the new challenges in a useful way, Green is just making himself and his political/intellectual fellow travellers irrelevant in every way.
KENNETH P. GREEN
November 20, 2008, The American