Short Circuiting The Market

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


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.

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.

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.

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.

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