The Government’s Regulatory Assault On The Economy

11 Mar, 2005 by John Hawkins

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This MSNBC story called “Activists fight for electric cars” is fascinating reading because it’s an important cautionary tale, although MSNBC doesn’t intentionally try to present it that way. But, let’s do a bit of reframing and put things into perspective.

Originally, a bunch of environmental activists threw a fit in California and convinced them to press for a new law which led to the creation of the electric car:

“Most automakers experimented with electric power during the 1990s when California threatened to require them to sell zero-emissions vehicles. The state eventually backed off the requirement, and one by one the car companies dropped their electric vehicle programs.

Despite what environmentalists often claim — that industry puts little effort into developing vehicles powered by alternative fuels — GM went to great trouble and expense to design these cars:

“The EV1 was widely considered the best of the crop because of its performance and innovative engineering, using a teardrop shape for slick aerodynamics. GM says it gave the EV1 every chance to succeed, spending more than $1 billion on development and dedicating an entire Michigan plant to producing it.”

That’s billion with a “b,” folks. Yet, despite everything GM went through to get this car on the market, they had a basic problem: few people wanted to buy the car…

“But the world’s biggest automaker said the car never appealed beyond a core group of technology enthusiasts and environmentalists.”

Of course, it was no surprise that the car didn’t appeal to the public:

“GM agrees that the car in question, called the EV1, was a rousing feat of engineering that could go from zero to 60 miles per hour in under eight seconds with no harmful emissions. The market just wasn’t big enough, the company says, for a car that traveled 140 miles or less on a charge before you had to plug it in like a toaster.

So government regulations in essence forced them to build a car that almost no one wanted. But, then a funny thing happened: the government regulations went away…

“(California) eventually backed off the (zero-emissions) requirement, and one by one the car companies dropped their electric vehicle programs.

Now that GM has dropped the program since there is minimal demand for the cars, the same sort of environmentalist wackos who demanded the regulations in California that led to the creation of the car, are demanding that GM sell them some cars that are left over from the project:

“Enthusiasts discovered a stash of about 77 surviving EV1s behind a GM training center in Burbank and last month decided to take a stand. Mobilized through Internet sites and word of mouth, nearly 100 people pledged $24,000 each for a chance to buy the cars from GM. On Feb. 16 the group set up a homely street-side outpost of folding chairs that they have staffed ever since in rotating shifts, through long nights and torrential rains, trying to draw attention to their cause.”

GM however, points out that it’s just not practical for them to sell the EV1s:

“The company says it cannot sell the cars because it would have a legal obligation to service them, and it can’t provide service because many suppliers quit making the 2,000 unique parts that went into the design.

So, everyone should have learned a lesson from this, right? Wrong:

“Ted Flittner, a vigil participant and Costa Mesa industrial engineer who never owned an EV1 but used to enjoy riding in a friend’s. He accepts that the situation doesn’t look promising but said the plight of the EV1 has helped bring attention to an innovative environmental project. “It’s just so wasteful,” he said. “They have such a brilliant solution they’ve developed. They’ve put it on the market and proved it works. People still want it and they’re taking it away and destroying it.”

Ok, they spent more than a billion producing a car because of the threat of government regulation, not market demand, and then because there are a 100 people willing to spend $24,000 each this guy thinks it all worked out OK? GM lost their shirts selling this car.

This is a cautionary tale about environmental extremism & what happens when the government interferes with the market, not some “evil” corporation refusing to sell people cars. Every state and Federal government official should read this and think about the enormous negative impact that their ridiculous regulations can have on the economy. In this case, we had just ONE COMPANY waste a billion dollars because of the threat of government regulations in just ONE STATE. Think about the burden that these government regulations cause across the whole country in all industries and you can easily see how much damage the government can unintentionally do to our economy.

Hat tip to Ravenwood’s Universe for the story.