Sorry folks, Volkswagen won’t die
Thanks to the magic of the market economy, the carmaker will come back stronger than before.
By NIKOLAUS BLOME
September 30, 2015
“Sündenstolz” is a particulary German word. It is a combination of both “sin” and “pride”; in a figurative sense it caricatures Germans’ eagerness to come to terms with the dark parts of their past. Such “Sündenstolz” fuels the debate on Volkswagen’s #dieselgate too. Politicians, experts and the media seem to be competing at how radical they can be in their comments on the carmaker’s global fraud. It’s modern exorcism: Not only has Volkswagen been declared dead or doomed to die, so has the famous “made in Germany” label or even German (economic) leadership in Europe. All of that is allegedly now over because Volkswagen is so big, so important and so much the German carmaker. There is no limit to disgust and depression.
So what might take you by surprise these days is that Volkswagen people have not committed suicide in large numbers. Nor have average Germans. Right they are.
Volkswagen will come back from the crisis stronger than before. Why? It’s market economy, stupid. Beyond the mess and public hysteria, #dieselgate offers a brilliant lesson of what market economy is about.
First lesson to learn: Markets do not function properly without governmental — or public — checks and balances, be it the U.S. Environmental Protection Agency or a little NGO like the International Council on Clean Transportation, which first revealed the fraud. That should give pause to all true believers of boundless neoliberalism.
Second, let’s hope that German and U.S. authorities will really make Volkswagen pay for what they have done — officials as well as the organization as a whole. Prosecution and heavy fines might bring back the notion that in a market economy you are eventually held responsible if you take risks. Some years ago banks around the globe took risks and messed it up. Unfortunately, they were too big to fail and taxpayers’ money had to patch things up. But as of today there will be no taxpayers’ money for Volkswagen.
As if Adam Smith’s concept of the “invisible hand” itself had intervened, the scandal broke when Volkswagen just had overtaken Toyota as the biggest carmarker in the world. In essence, “Das Auto” (the car) is the company’s main marketing claim. So what made #dieselgate possible was a blend of imperial overstretch, arrogance and blind addiction to the German art of engineering.
Most of that will be demolished. It is a key moment in a typical market economy cycle. For Volkswagen, Josef Schumpeter’s “kreative Zerstörung” (creative destruction) is at work now. By the end of the day, the organization will be far less centralized, with more autonomy and responsibility for the different brands. It will rely less heavily on optimizing diesel engines again and again because consumers simply won’t believe it for a long time. To restore confidence, Volkswagen will have to reinvent itself: most probably by heavily investing in electric cars to which German industry has not paid enough attention so far. This could bring about a major technological breakthrough.
Germans aren’t always world champion in innovation. But we are pretty good in what you might call “lessons learned.” And the first lesson for Volkswagen is: Let the market economy do its work and you’ll get your happy end.
By NIKOLAUS BLOME
September 30, 2015
Politico EU
“Sündenstolz” is a particulary German word. It is a combination of both “sin” and “pride”; in a figurative sense it caricatures Germans’ eagerness to come to terms with the dark parts of their past. Such “Sündenstolz” fuels the debate on Volkswagen’s #dieselgate too. Politicians, experts and the media seem to be competing at how radical they can be in their comments on the carmaker’s global fraud. It’s modern exorcism: Not only has Volkswagen been declared dead or doomed to die, so has the famous “made in Germany” label or even German (economic) leadership in Europe. All of that is allegedly now over because Volkswagen is so big, so important and so much the German carmaker. There is no limit to disgust and depression.
So what might take you by surprise these days is that Volkswagen people have not committed suicide in large numbers. Nor have average Germans. Right they are.
Volkswagen will come back from the crisis stronger than before. Why? It’s market economy, stupid. Beyond the mess and public hysteria, #dieselgate offers a brilliant lesson of what market economy is about.
First lesson to learn: Markets do not function properly without governmental — or public — checks and balances, be it the U.S. Environmental Protection Agency or a little NGO like the International Council on Clean Transportation, which first revealed the fraud. That should give pause to all true believers of boundless neoliberalism.
Second, let’s hope that German and U.S. authorities will really make Volkswagen pay for what they have done — officials as well as the organization as a whole. Prosecution and heavy fines might bring back the notion that in a market economy you are eventually held responsible if you take risks. Some years ago banks around the globe took risks and messed it up. Unfortunately, they were too big to fail and taxpayers’ money had to patch things up. But as of today there will be no taxpayers’ money for Volkswagen.
As if Adam Smith’s concept of the “invisible hand” itself had intervened, the scandal broke when Volkswagen just had overtaken Toyota as the biggest carmarker in the world. In essence, “Das Auto” (the car) is the company’s main marketing claim. So what made #dieselgate possible was a blend of imperial overstretch, arrogance and blind addiction to the German art of engineering.
Most of that will be demolished. It is a key moment in a typical market economy cycle. For Volkswagen, Josef Schumpeter’s “kreative Zerstörung” (creative destruction) is at work now. By the end of the day, the organization will be far less centralized, with more autonomy and responsibility for the different brands. It will rely less heavily on optimizing diesel engines again and again because consumers simply won’t believe it for a long time. To restore confidence, Volkswagen will have to reinvent itself: most probably by heavily investing in electric cars to which German industry has not paid enough attention so far. This could bring about a major technological breakthrough.
Germans aren’t always world champion in innovation. But we are pretty good in what you might call “lessons learned.” And the first lesson for Volkswagen is: Let the market economy do its work and you’ll get your happy end.
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