Investing in obsolescence

20-30 years ago, Mrs Thatcher dragged us kicking and screaming out of our last chronic slump.  An important element of Thatcherism was the idea that it’s not a good idea for industry to produce things noone wants to buy.  Against huge opposition, she stopped pouring taxpayers money into a number of obsolete lame-duck industries.

But there was one suicidally inconsistent exception: she threw taxpayers money into lame-duck motor industries.  Thus she perpetuated an industry that’s gone bust and (as predicted at the time) been back for more taxpayer billions every few years for as long as I can remember.  More recently it’s been made just a little more subtle, morphing into things like sweeteners for a takeover by management, alchemy, BMW, or Tata, but it’s never changed from pouring good money after bad.

Now there’s pressure for a bailout of Jaguar-Landrover, as our lame-duck-in-chief calls itself these days.

The argument for a bailout is unchanged from the one that ruined us before Thatcher: jobs.  Those directly employed are the tip of an iceberg, with far more in the supply chain.  If rebranded-BL goes bust, so do lots of suppliers.

But many (most?) of those suppliers have put substantial investment into their capability to supply specialist widgets.  So long as the bailouts continue, we’re perpetuating a false market for suppliers.  Some of them will inevitably be pouring their own money into further investment in this zombie of a market.  It’s not just the jobs that are the tip of an iceberg: it’s also the money poured in.  This is a huge fraud perpetrated on all those suppliers!  But for Mrs T’s bailout, they’d’ve been spared nearly 30 years investing in failure!

If there was ever a clear case for correcting Thatcher’s inconsistency, this is it.  Put the lame duck out of its misery, and draw a line under the fraud perpetrated on the supply chain.  At the same time, seek to help the latter re-gear to real markets: produce things that someone actually wants to buy!

One suggestion: help that huge industrial capacity re-gear to energy-efficiency projects and production of clean energy!  Not by selecting projects, but by stimulating that market.  But that’s another rant.

Posted on December 20, 2008, in economics, rants, uk. Bookmark the permalink. 1 Comment.

  1. Yeah well. I was having my Dodo serviced and using the opportunity to check out the new vehicles at the local VW shoppe. From the driver’s point of view, lots of things were quite appealing – right up until I asked myself why they weren’t all electric.

    I want an electric car with a range of 300mi+, top speed over 80mph, about the size of a Seat Ibiza or similar, solar panel on the roof for extra charging. Where are they?

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