Thursday, 29 January 2009

Why do governments believe that the car is a device of the future?

The British government seems set to guarantee £2.3 billions of loans to the motor industry. Meanwhile in Germany, people are being given financial inducements to scrap cars over 9 years old, if they buy a new one. The US and the rest of Europe also seem intent on bailing out their motor industry. This indicates that these governments believe that the car as it has developed over the past century has a future.

If the car does have a future - and I'm not sure that it does - it will be a wildly different device to the one that we see today. I'm not sure what it will look like, but you can be pretty certain it will look like neither a Jaguar or a Range Rover. I'm also pretty certain it will not look like a Toyota Prius - this innovative car has just played around the edges.

So what would a sensible approach have been from the government? Well we need innovation, that seems to be a given. So how does a government encourage this? In this case they have taken the apparently low risk option of guaranteeing large loans to a few manufacturers. We can be pretty certain that a large chunk of those guarantees will be exercised. In other words they are concealing a subsidy - and they should know that these businesses will fail. How long do you think it is likely to be until someone goes out and buys a Jag or Range Rover? Innovation is not something that this government does well.

The Conservative opposition is not making much sense either - except in their recently released briefing document on Open Source software. This document has been a long time coming - contributions were being sought for it early in 2008, and another, very similar but longer, document complete in April 2008.

Amongst other things it says:

  • Smaller IT projects mean less risk of failure, and will cut costs by opening up the procurement system to more companies, increasing competition for IT contracts.
  • These data standards will create a level playing field for open source software.
The document proposes a £100 million limit on IT procurement contracts. Personally I think this is still too high - it still reeks of the think big attitude, that has brought about this boom and crash. I would halve or quarter it. Now apply this thinking to the car industry rescue. Let individuals, SMEs and divisions of the large car firms bid for relatively small amounts of funding. I would like £50,000 to develop and car that Colin Chapman build - plywood and small engined. The design branch of Jaguar might like to bid for a few tens of millions to produce designs for possible new cars. The condition of taking the money would be that you were required to publish all the results of the work.

Why? Well the message is getting through slowly, but the only future of mankind is through co-operation, not vicious competition. Spend the time to read Adam Smith - he did not expect the sort of capitalism we have now, it would have been abhorrent to him. He was thinking of rows of small shops and workshops, not multinationals with apparent balance sheets bigger than most nations.

Excellent suggestion from Richard Smedley:

"How about a £3000 voucher given to every family to spend towards a British-built electric car. Within six months there'd be something on the market, and a support infrastructure on the way. We could always licence the best new design from that Chinese battery manufacturer."

Not sure how that would sit with EU rules, but it's an interesting idea.


  1. Looks to me that the government proposal for £2000 voucher to trade in 9 year old cars is self funded by Car Purchase Tax and VAT on sales that are not happening now. This is the usual Government "funny money" but it might make people feel better and that is a good thing.
    Why does all the money always go to the mega corporations who have proven track record of being incapable of running profitable businesses and IT contracts? I would like to see access to seed development funding for ordinary people to start their own businesses.

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