“Today’s announcements show that President Biden understands that building the cars of the future also necessitates helping the communities challenged by the transition away from the internal combustion engine.” —U.S. Secretary of Energy Jennifer M. Granholm, announcing $15.5 billion worth of funding and loans for the conversion of existing auto plants to factories that can churn out electric vehicles.
That is how nations accelerate modern industries. Yes, the birthplace of modern capitalism, the US of A, is not waiting for banks to finance the redesign, rather, it is pumping money to make sure American car companies can compete in the future.
But in my native country, Nigeria, we want to be too capitalist, leaving everything to market forces. That was why they defunded the postal service because it was not making money; in the United States, its postal service has lost money in the last twenty years!
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Good People, it is an illusion to think that companies can help themselves. What happens is that nations build platforms, and companies participate on them. But expecting companies to build platforms, you have to return to the eras of Carnegie, Mellon and Rockefeller, but those eras have expired. These days, governments lead on big things in economies.
I am a Keynesian strategist and I like governments to open the wallets and INVEST in productive things, not the acceleration of consumerism. And if we do just that, Nigeria will rise.
Comment on Feed
Comment 1: “The US Postal Service I believe was only profitable for a small duration of time and it wasn’t in the modern era. I believe it was before the automobile was invented. Biden’s plan for transition has a lot of unforeseen and unintended consequences. Here in the US we are going to see the cost of electricity increase. I truly value your insights and ask that you read The Bitcoin Standard. After reading that, I am confident that you will no longer be a Keynesian strategist.”
My Response: I started reading “The Bitcoin Standard ” but stopped when they were talking of “decentralized” option to central banking. It is an illusion to think that a product whose top 10 miners control more than 80% of the mining capacity is decentralized. For a village kid like me, I will prefer the central banks to be mining the money than those “10” guys.
Simply, bitcoin is not decentralized in production even though there is an illusion of decentralization in consumption. More so, even at that consumption, exchanges unify them and very few control those exchanges. If you believe in BTC, you believe that FTX, Coinbase, Binance etc and those ten miners are better custodians than the US Federal Reserve and central banks. I do not believe that.
In the political economy, bitcoin sneezes when one government speaks. How is that decentralized if it responds to all perturbations like that? I have no problem with BTC or coins, but that does not mean I accept that it is decentralized because it is not. It has no native capacity to mutate if the US government bans all exchanges and banks from doing any BTC. Yes, that decentralization will not save it from crashing!
Comment 1R: It is also estimated that a full energy transition in the USA would cost 10-14 Trillion USD… The problem with government funded initiatives is the allocation of the resources (money and time). It has been proven time and again that we cannot trust ourselves or politicians and that free market capitalism is the best means of finite resource allocation.
My Response: I agree with the free market system. But the free market system works when governments have built the PLATFORMS. No free market could have built the US interstate, the universities, etc which make America great. As a Keynesian, I have empirical data to show that more than 80% of America’s finest universities are in blue cities. More than 80% of the largest cities are blue cities. More than 80% of net-tax sender are blue cities. What makes them better? Governments building platforms where companies thrive. As Alabama cuts costs on universities, California opens the vaults on R&D and in ten years, California extends the gaps on innovation and wealth creation. Free market system is amazing but it requires governments to do the hard things to kick off!
Comment 1RR: I have thought of this a lot and like what Napoleon did. He offered what was a King’s ransom for a way to store food, because an army marches on its stomach. This is how canning was invented. I like the concept but also don’t want it tied to taxation so that politicians can repay those that brought them into office. I think an innovation policy needs to be supported with at most low cost loans.
This also goes back to the comments you made about democracy the other day… There needs to be a foundation. EVERYTHING a solid foundation. I see what El Salvador is doing. I like what Singapore did. I like how Rwanda is progressing. They all built the foundation first.
Comment on 1RRR: Nigeria is a different country from the USA.
It doesn’t matter the amount of funding you pour into the Nigeria Postal Service or any government entity for that matter, the result will remain the same because of corruption.
The intended benefits will hardly get to the intended Beneficiaries.
Unfortunately, no government, whether military or democratic, seems to have any solution to the kind of corruption in government establishment in this part of the world.
Instead of throwing money into leaking government baskets, let’s reduce governments footprint to the barest minimum by entrusting most of the resource allocation assignment to the free market. Since governments in this part of the world are not set up to run any business, anything and everything that can be run like a business should be privatised.
Let us banish all form of subsidies that enrich the few at the expense of the majority. And let the naira remain floating.
Let’s embrace free market economy, at least until such a time that we figure out how to effectively deal with corruption.
Comment 2: But there is a huge market to transform existing gas cars to electric or hybrids. The Joe Biden administration should incentivize existing car companies to build branches to retool gas vehicles, rather than only create new electric cars. Hydrogen powered cars are also better than electric- due to the problem of Li iron mining. Speaking of which – African countries need to produce their own electric or hydrogen cars to make use of their mineral deposits – not just selling the raw material. We certainly have the ingenuity to build better products.
African politicians are largely clueless about building business. Their incentive is always to exploit the tax revenue, they have done relatively little to create industry. The private sector in Africa needs to take more initiative
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Uncle Sam and feeding bottle economy, the play is for the big boys, we are yet to conquer power supply, remember. Germany poured billions of euros into renewable energy projects, but it’s still looking for cheap fuel to power its economy, and no one is accounting for all those large government investments…
As for government investment, well, we invested in railway projects that lead to nowhere, we also did Trademoni, they are all government investments, the difference is in intent and quality.
We are too political and corrupt here, so any large government investment won’t escape those demons, people collected aviation and agriculture support funds here and diverted them elsewhere. We were not properly formed to exist as normal humans with sense and purpose.