General Motors Co. announced the temporary suspension of Chevrolet Volt production and the layoffs of 1300 employees, as the company is cutting Volt manufacturing to meet lower-than-expected demand for the electric cars.
“Even with sales up in February over January, we are still seeking to align our production with demand,” GM spokesman Chris Lee said. The car company had hoped to sell 45,000 Chevy Volts in America this year, according to the Detrot News, but has only sold about 1,626 over the first two months of 2012.
Of course this isn’t really a failure of green products, per se. This is a failure of the government attempting to drive markets through force of will. Planners in the Central Bureaucracy attempted to force the market for this vehicle by offering production incentives, mandates and purchase credits to buyers. It didn’t work.
Centralized planners cannot detect consumer preferences, shortages, and surpluses with accurately and therefore cannot efficiently co-ordinate production. It just can’t be done.
This is the “economic calculation problem” and it was first proposed by Ludwig von Mises in 1920 and later expanded by Friedrich Hayek.
Mises and Hayak argued that the only rational way to allocate resources in any market is through price. Socialist planners lack the the information provided by market prices and, therefore, lack a method to rationally allocate resources.
Obviously Volts would sell if they cost, say, $5,000. Unfortunately they cost many times that to produce. The disparity between price demand and cost creates a net loss in production. The Administration believed they could overcome this via subsidies to producers and tax incentives to buyers. They were wrong and have, as a result, socialized the lost of billions to tax payers and the loss of hundreds of jobs that have proved to be unsustainable.
Remember, corporatism is not capitalism.