Thursday, March 8, 2012

Putting the Electric Car on the Back-Burner

Last week, GM announced that it was temporarily suspending manufacture of its Volt hybrid electric car, claiming that there was not enough market demand at the moment to justify production. Sales of the electric car have fallen short of projections, recently, despite several government interventions at the local and federal level to boost sales. These interventions included a $105.9 million grant to help produce battery packs and $151.4 million grant to produce battery cells,* a tax credit to buyers of electric cars, and the ability to drive in High Occupancy Vehicle lanes in the state of California.

The decision relieved many Congressional Republicans, who opposed the heavy hand of the government in this particular branch of the automotive industry and, needless to say, the President's ringing endorsement of it. They claim that, as Pennsylvania Representative Mike Kelly said in a recent House hearing, “When the market is ready...[the car] won't have to be subsidized.” Without delving into whose interests these Republican leaders serve (hint: it rhymes with Shmig Boil), their claim overlooks several key points that expose the most insidious myths of “free market” in this country.

First, the free market does not take care of everything for the greater good of all. The Reagan-era, trickle-down theory-- that profits at the top eventually find their way down to the bottom through increased spending--has been time and time again proven false. At best, the free market mass produces some value-neutral items and services at low cost, the profits of which go into the hands of those who control production.**

So what's wrong with this, and what does this have to do with the electric car?  The problem with this arrangement is that often what's most available and the cheapest is inherently damaging to one's health, the environment, or the general well-being of humanity. By definition, we need government intervention in exactly this case-- when the uninhibited free market would lead to an outcome that is detrimental to the public good. This is where we are in America. We are destroying the environment with the emission of fossil fuels, a direct consequence of our automobile use, and our dependence on foreign oil has threatened our national security. Clearly, subsidizing the electric car, promoting its use, and creating policy to incentivize ownership are all positive interventions the government needs to take in order to protect the public and planet from the unintended consequences of the free market.

Related to this first point, intervention is necessary because in a capitalist society, information, itself, belongs to the highest bidder. Research in this country is often privately funded by those who would benefit from the research. And I can tell you that Exxon Mobile is probably not keen on researching alternative forms of energy that would destroy their market. On a more conspiratorial note, it has long been speculated that oil companies buy out any research which contradicts their interests, and this is why it has taken so long to produce a car that runs on alternative sources of fuel.

Last, even if we did assume that the free market takes care of every need for the benefit of all, and that all consumers had the necessary information to make the best choices, we still would be in a predicament. This is because we simply do not live in a “free” market, if we take “free” to mean a market absent any government intervention. On the contrary, market intervention is extremely common in this country, yet often hidden under the illusive title of “free market.” If not, what do you call the many policy interventions on behalf of Big Oil? Tax breaks for the wealthiest Americans? How about the subsidies that benefit industries and products that actually harm Americans? Unfortunately, in this country, “free market” is merely a rhetorical term that has no basis in actual market principles.

All this is to say that arguments from Republican representatives that rely on “protect-the-free-market” reasoning need to be closely examined. If those same representatives are supporting some of the interventionist policies mentioned above, especially if those policies benefit the wealthiest Americans and corporations, their word is null.

So instead of worrying about “intervention” and “subsidies,” as though they are terrible things, let's make sure that when government intervention occurs it is for the right reason. Let it protect people, instead of corporate interest. With this said, in a time when gas prices are up, the environment is decaying, and there's heated debate over our dependence on foreign oil, it seems like a win-win-win to publicly invest in the electric car.

*Full disclosure: I do not know what the difference is between a battery pack and a battery cell, please do not embarrass me by asking.

** I, personally, am wont to believe the Charles Wheelan axiom that capitalism is the best of bad options.


  1. If you claim that "free market" is a rhetorical device because some or even most people use it incorrectly, then it is impossible to have a discussion about the role of government in society. It would just be better to point out that some people are hypocrites who abuse the definition of words. I wouldn't claim that "the will of the people" is just a rhetorical device because much of the time policies enacted by "the will of the people" *aren't* the will of the people. I would point to evidence proving that people who make that claim are wrong.

    The government doesn't just create wealth out of thin air. Whenever it gives grants or subsidies to someone, it has to take that money from someone else through borrowing which must be paid back later or through inflation (seigniorage revenue).

    Electric vehicles are expensive as you note. Even with large subsidies, they are still out of reach of most Americans. The Volt is the cheapest nearly all-electric vehicle I know about and I still couldn't afford one. On top of that, the Volt doesn't use significantly fewer fossil fuels than traditional cars. Battery production and disposal is not generally very "green" and the Volt only averages 60MPG. Unfortunately, if you drive it more than 35 miles between charges, it is only able to average 37MPG. It's actually a gas hog compared to the T.25 City Car which should be coming out next year. The T.25 should get 75MPG for as long as you want to drive it...because it isn't even a hybrid! In addition, it's predicted to cost only around $10,000. I'm sure it's also much greener to produce than the Volt with its heavy batteries and larger frame. In this case, cheaper is also greener.

    Hybrid cars seem to me to be more of a subsidized status symbol for the relatively wealthy than they are a necessary component of going green. Justin Bieber was just gifted a Fisker Karma by Ellen DeGeneres. That car, like the Volt, also receives massive subsidies. Similar to the Volt, it has an all-electric range of 32 miles. Also similarly to the Volt, it has a gas/electric hybrid MPG rating of 52MPG, but after you run out of battery power, it drops dramatically to only 20MPG. The Karma, however, costs over $100,000. That means the only people purchasing one are what I would call very wealthy. Why are we subsidizing their cars? In the end, all of us are helping to pay for Bieber's new sports car.

  2. I actually completely agree with you on all these points.

    First, I'm not saying at all that the free market doesn't exist, just that what a lot of people say is "free market" is not. In other words, use of the term is often simply used for rhetorical effect. My overall point, as you say, is "some people are hypocrites who abuse the definition of words."

    Second, thanks for the information on the Volt! I'm not pushing for the Volt, per se, but rather the desire to find greener, more cost-effective ways of transportation. I think this desire is often impeded, however, by special interest groups. My impetus for this particular post was a reaction to the PA Rep saying that when the market was "ready" there would be no need for a subsidy.

    So I totally agree that we should not subsidize something that is not the best option. However, the larger point I'm trying to make is that we (1) shouldn't denounce subsidies altogether for things that DO benefit people, the environment, etc, (2) should actually put some money into research for environment-friendly cars, and (3) call out the assholes who are trying to suppress socially beneficial research/outcomes to make money.

    Thanks so much for the comment!