It seemed like such a good idea. Use federal money to subsidize the development of lithium ion batteries – a product for which there is little discernible demand – and presto! There will be demand!
And in anticipation of this wonderful development, the government can feel free to announce that its “investment” in companies like Holland, Michigan-based LG Chem will produce hundreds of jobs and equip tens of thousands of electric cars.
Turns out people don’t rush out to buy things just because the government subsidizes its production. Turns out there’s still not much consumer demand for electric cars, so there’s not much industry demand for lithium ion batteries. So what exactly are they doing at LG Chem? As WOOD-TV reporter Ken Kolker exposed in October, lots of things. But few of them involve making batteries.
Employees have been paid to play cards, watch movies and volunteer their time helping nonprofits. As The Detroit News reported on Wednesday, promises to move manufacturing production from South Korea to Michigan have not been fulfilled. A report from the Department of Energy says: “Based on progress to date and despite the expenditures of $142 million in Recovery Act funds, LG Chem Michigan had not yet achieved the objectives outlined in its Department-approved project plan.”
About the use of the word “despite” – you don’t suppose that $142 million in federal funds actually made this outcome more likely, do you? When you start a company that has to sell products to get money, you can be pretty sure the people running that company are going to find out what people actually want to buy, and that’s what they’ll make.
But when the government wants you to make a product that no one wants to buy, and will give you $142 million to do so, why should you worry about markets? Take the federal cash, run payroll twice a week, make sure everybody’s got their health care . . . and oh yeah, you still have to do the really hard part which is finding ways to keep everyone busy when there’s really not all that much work to do. But that’s where feeding the homeless and watching movies comes in so very handy.
President Obama said in his State of the Union address on Tuesday that he wants to establish 15 “manufacturing hubs.” Hey, why set up 15 hubs? They can all just come to Holland and talk to the folks at LG Chem about how you succeed as a manufacturer by making nothing and selling nothing – while collecting lots and lots of government money.
Every time you hear Obama talk about how we need to make “investments” in this or that, keep in mind that real investors do a serious fact-based analysis of whether the money they invest will produce a return on investment. Obama does not. He doesn’t know how. In fairness to Obama, few politicians do. They just know what they want, and figure that throwing money at it will make it come to life.
They want lithium ion batteries because they want electric cars because they’ve convinced themselves that when all this comes together as they’ve been hoping, jobs will be created, the Earth will be saved, and they can take the credit. When it fails to come true because someone forgot to tell consumers they’re supposed to want electric cars, it can’t be that it was a bad idea. It just means that LG Chem employees have to sit tight and watch more movies until politicians can figure out a new way to throw good money after bad ideas.