Tag Archives: economics

Prop Up That Industry

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German Chancellor Olaf Scholz wants more government pressure on support for battery cars, their manufacture, and their sale to an uninterested public.

German chancellor Olaf Scholz has called for the introduction of Europe-wide measures to increase uptake of electric vehicles, in a speech at Ford Motor Corp’s factory in Cologne, just weeks after the US car maker outlined plans to lay off 4,000 of its European workers.
In the speech at Ford’s EV factory on Tuesday, Scholz argued Germany should work to facilitate the “leap forward” towards “electromobility” by providing “support” for the country’s car industry, including by subsidizing energy costs for EV battery makers.

And this bit of contradiction:

Scholz said the support for the car industry should also aim to protect worker’s jobs….

He can’t have it both ways, except through government-mandated featherbedding. It takes fewer workers to build an electric motor and a battery car than it does an ICE motor and an ICE-powered car. It takes fewer suppliers to supply fewer parts, and fewer employees at each supplier, to provide the simpler components of a battery car than the more complex components of an ICE car.

The ripples go on from there: secondarily, all those mom-and-pop stores—diners, grocery stores, bars, entertainment venues, and so on—will get fewer customers from those smaller work forces at the EV factories and supplier plants, resulting in fewer mom-and-pops and fewer employees in surviving mom-and-pops.

No. If the battery car industry still needs overt government fiscal subsidies and mandates aimed at pressuring consumers to spend their own money on even subsidized battery cars, those vehicles and that industry aren’t ready for operation.

The only legitimate support for battery cars is the consumers’ interest in buying them in a free, competitive market shorn of government pressures. That interest isn’t yet there.

Yet Another Reason…

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…for moving our supply chains out of the People’s Republic of China, and for no longer doing economic business at all with the PRC. In response to the Biden administration’s lately decision to further restrict the export of advanced computer chips to the PRC, that nation has restricted the export of critical computer-related minerals to us.

China announced Tuesday the banning of exports to the United States of chemical elements and other essential high-tech materials, in apparent retaliation for the US limiting semiconductor-related exports.

Those elements include gallium, germanium, antimony and certain other extremely hard materials to the US. So far, that’s just the ordinary progress of war, including the economic war the PRC has been waging against us for years.

However.

We shouldn’t be dependent on an enemy nation for materials critical to our economic function or our national security. That we are was driven home by the supply chain disruptions caused by the Wuhan Virus Situation; that this administration has chosen to do nothing about it, that our private enterprises have chosen to do nothing about it—each is shameful in its own right. That continued dependency only facilitates the PRC’s war against us and our economy.

We have these elements, along with nearly all of the rare earth elements and other extremely hard materials, in the ground within the political boundaries of our nation as well as within the boundaries of friendly nations. If it costs more to supply from those sources—and it will cost a pretty penny at this stage to guts up the necessary mines—that’s the cost of national defense and of our status as a free and sovereign nation.

Erroneous Analysis

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John Cogan, a Senior Fellow at Stanford University’s Hoover Institution, has one. In his Tuesday Wall Street Journal op-ed regarding a suggestion for fiscal federalism in government spending—an otherwise sound idea for leaving State and local projects to be funded solely by the States and local jurisdictions doing the projects—he had this:

My analysis of federal budget data shows that the chronic federal budget deficits since the 1950s are due to the federal government’s failure to raise tax revenues required to finance its spending on state and local activities.

No. The chronic federal budget deficits have been caused by the Federal government nationalizing the spending on those State and local activities, not by any failure to raise taxes to pay for spending that ought not to have been done in the first place.

It’s not too late to go back to the restraints that federalism places on government spending, but let’s not lose sight of the fact that that federalism never should have been abandoned in the first place. That’s how we have a chance to learn the lessons of that error, rather than repeating it in future.

Why Would We Want To?

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Toyota Motor North America’s COO, Jack Hollis, has a plan for how Trump Can Get EVs Back on Track. The question is why would Trump, or any of us average Americans, want to? Hollis’ subheadline is promising:

Ditch the mandates and subsidies. Let consumer choice drive the market.

Then he goes off the rails.

Our approach provides consumers with many choices: hybrids, plug-in hybrids, fuel-cell electric, and battery-electric vehicles. We believe this is the best way to achieve meaningful emissions reductions while meeting customer needs.

What about the emissions from mining, transporting, smelting, transporting, transforming into relevant parts, transporting, assembling into the final vehicle that occur in the production of lithium, cobalt, nickel, copper—and all that oil that’s used for plastic materials production?

What about the other forms of pollution—from mining to spent battery disposal: all those tailings, the handling of those intrinsically toxic metals (lithium, cobalt, nickel, even copper), the pollution of landfills by all that lithium, cobalt, nickel in those spent batteries?

What about the false claim that atmospheric CO2—plant food—is a pollutant in the first place? That’s never addressed except via the pseudo-science of an erstwhile head of the EPA; this is an underlying assumption that is made only tacitly and conclusorily?

All of these are blithely elided by the pushers of EVs and the punishers of internal combustion engine-powered vehicles.

I haven’t even gotten to the need to expand our electric grid to support the demands a sound EV market would impose. We need to expand, upgrade, and harden our electric grid, along with our electricity production capabilities, for a whole host of reasons beyond just supporting battery-charging.

That brings me back to my opening question: why would we want to put EVs on any sort of track, much less on Hollis’ original one? Ditch the mandates and subsidies, and let consumer choice drive the market, indeed. Add into the free market decision that heretofore omitted information regarding the intrinsically destructive nature of EV production and disposal.

The Left loves to talk about externalities and the need for pricing them into the final product—except when that’s inconvenient to their demands on the rest of us.

Tariffs as Foreign Policy Tools

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President-elect Donald Trump’s nominee for Treasury, Scott Bessent, understands the nature of properly done tariffs. In a recent speech, he noted, as cited by The Wall Street Journal,

…Bessent argued for increasing tariffs on national-security grounds and for inducing other countries to lower trade barriers with the US. He criticized trade policy with China for enriching Wall Street, weakening domestic industrial might, and failing to lead to Chinese economic overhauls.
Bessent called for tariffs to resemble the Treasury Department’s sanctions program as a tool to promote US interests abroad. He was open to removing tariffs from countries that undertake structural overhauls and voiced support for a fair-trade block for allies with common security interests and reciprocal approaches to tariffs.
“President Trump is right that actual free trade is desirable,” Bessent said in prepared remarks at the time. “It might seem counterintuitive from a free market perspective, but he is also right that in order to actually create a freer and more extensive trading system over the long term, we need a more activist approach internationally.”

Yewbetcha, to coin a phrase. Bessent, and Trump, are among the few who understand that international trade is not only about economics—in fact it has little to do with economics—and is mostly about foreign policy.

Even protectionist tariffs—when not done solely for mercantilist reasons—have their foreign policy uses: that removing tariffs from countries that undertake structural overhauls and voiced support for a fair-trade block for allies bit, for instance.

Bessent has serious weaknesses, though, and I did not support his open, public campaigning for the position. That politicking, his penchant for speaking out of turn, is the sort of behavior that was so counterproductive in Trump’s first term. Hopefully, he’ll curb his tongue once installed (if he’s confirmed).

Still, I look forward to his reopening Trump’s proposal to the G-7, made during his first term, of a no-tariff-at-all free-trade agreement.

“No tariffs, no barriers. That’s the way it should be. And no subsidies. I even said, ‘no tariffs’,” the US president said, describing his meetings with fellow Group of Seven leaders as positive “on the need to have fair and reciprocal trade[.]”

That offer was wholly ignored at the time, except by the executives of the German car industry.

We’ll see.