Europe Is Firmly Committed To Economic Suicide
/In various posts over the years, I have argued that the long-term economic prospects for the likes of China and Russia are not very good. Among other reasons, the dictator-for-life governance model leads to inherent instability that undermines incentives for investment and growth. And then there’s the inevitability of state-directed capital allocation leading to massive investment in boondoggle projects that fail spectacularly. See as a couple of examples, from March 2018, “Is It Possible For A Dictatorship To Be A Top World Power?”, or, from July 2015, “In Case You Thought The Chinese Knew What They Were Doing.”
Therefore, Europe should have a huge leg up on these successors to Stalin and Mao. After all, the European countries basically have market economies, although overlain with bloated and unaccountable regulatory bureaucracies. They have a solid base of creative entrepreneurship. Really, how badly could they go wrong?
But the big problem for Europe is that most of their governments are firmly committed to economic suicide. This is particularly true for the countries with the largest economies, Germany and France. Among data points from just this week, here are a few:
From Deutsche Welle, we learn (May 20) that the European Commission is circulating a draft plan for massive support of the auto industry — 100 billion euros or more — that has been very hard hit by the virus crisis (sales down as much as 97% in April). However, the Commission intends to use the money to subsidize, in its words, “clean” modes of transport: “[T]he paper proposes that €40 to €60 billion of the package come in the form of investments dedicated to "clean cars" such as electric vehicles, and other new technologies that do not rely on fossil fuels. The Commission is also seeking to have 2 million public charging ports across the EU by 2025. However, the plan does not touch on the fact that there is still massive debate on how clean small occupancy private vehicles can really be, electric or not.” The rest of the industry will be out of luck.
Not surprisingly, the desertion of Europe by the traditional auto industry continues, as so-called “climate” policies make it difficult to impossible for the sector to operate. From the Daily Express, May 22: “Europe's car industry was put on alert for more job losses on Friday as a French minister warned Renault could disappear if it didn't get help soon and a Japanese news report said partner Nissan was considering 20,000 layoffs, with many in Europe.”
And from Clean Energy Wire, May 21, there is a report of a German association of “energy-intensive” industries sending an open letter warning against layering on additional energy costs if Germany wants to have a successful exit from the virus-induced recession. From the head of the German Chemical Industries Association: "Energy costs could become the industry's biggest stress factors," said Wolfgang Große Entrup, head of the German Chemicals Industry Association (VCI), told newspaper Die Welt. He called emissions reduction policies like emissions trading, the renewables surcharge or the coal exit a ‘sword of Damocles’ already looming over the companies, which is why a further tightening of regulations would hit them particularly hard.
Meanwhile, back in China, while the world’s attention has been diverted away from the “climate” obsession by the virus thing, they are taking the opportunity to push forward on fossil fuel development. From Reuters, May 22:
China said on Friday it will bolster the capacity of the country’s energy reserves and offer lower gas and electricity charges to key industries, as it looks to ensure energy supply and offset the impact of the coronavirus pandemic. In energy announcements on the first day of the parliament, known as the National People’s Congress (NPC), authorities also pledged to boost the country’s oil and gas network and continue to support exploration for unconventional gas reserves.
The Chinese may be operating with a ball and chain attached to their economy as a result of the dictatorship governance model and the crony-capitalist economic model, but at least they are not committed to economic suicide.
Here in the U.S., at least while Trump is President, we’re leaving the economic suicide to the crazy blue states like California and New York. The rest of the country at least has a fighting chance.