There was a good article in Bloomberg today describing the many aspects of Chinese dominance in EV’s.  It’s useful if discouraging reading.  How did this happen?  Why is the West so far behind?

Obviously there are multiple items and reasons behind them.  However all of them trace back to a single big one:  the endlessly propagandized right-wing fantasy of the miraculous, all-knowing, perfectly-adaptive private sector.

In this case there were two principal failings of the private sector:

• Denying climate change, because it was inconvenient for current operations.
• Discounting any role for government, because the private sector by definition knew better

With these two failings the private sector was blindsided by a market transition they had gleefully dismissed as nonsense—because it didn’t fit with current mindset and current operations of business.  The Chinese did strategic planning, and the private sector in this country congratulated itself on its ability to squelch it.  The oil companies are still at it.  Trump will do it again if he gets a chance. We lost four years of opportunities to position for change–an eternity for competition.

That is not a surprise.  There are things the private sector does well—principally optimizing current operations.  However the current economic powers-that-be are very poor at major transitions.   Instead they will act, as in this case, to hang on to the optimized past and to delay that future for as long as possible.   In other words to defend their their own immediate private interests against the interest of the country as a whole. 

Government of course has no perfect crystal ball, but it doesn’t have the same limitations and the same vested interests. It can act to support future businesses even before their time has come.  We have had some of that.  Both Tesla and SpaceX exist because of Obama-era seed money. (Some readers may remember Romney’s ridiculing Obama for such initiatives!) The mRNA vaccines that stopped Covid were only possible because of decades of government-funded research.  All of that in the face virulent right-wing opposition.  The Chinese government locked up resources and initiated new businesses.  We were too smart for that!

The bottom line here is explicit.   The private sector is not a miracle machine.  Its interests are not the same as our national interests, and it can’t even do a good job of providing for its own success.  We need government to care about the well-being of our people and even about the well-being of its businesses. 

As a final point here it’s worth noting that–contrary to the usual sloganeering–when Adam Smith talked about the “invisible hand” of the marketplace, he was not arguing for government to stay out of the miraculous private sector.  Instead he was making the case for a competitive “free” market, something only possible if government would stop the private sector from perverting the economy with monopolies and government influence.   That’s still a battle today!