Should governments bail out automakers directly, or should they boost automotive sales by giving consumers cash for upgrading to new vehicles? If you've been following my recent posts, you know that I prefer door number 2.
Germany, for example, launched a "green" program that pays consumers about $3000 to trade in their old vehicles for new, more fuel-efficient models. Economically, the program has had dramatic short-term results, with 21% growth in auto sales. But from an ecological perspective, I've expressed my doubts that such programs are truly green.
Well, it seems that I'm not the only one. Yesterday, the Green Inc. blog of The New York Times stated that "a growing chorus of critics say such programs may do little for the planet." In fact, George Monbiot, a columnist for The Guardian claims that cash incentives to scrap old cars and buy new ones are a "scam," both economically and environmentally.
What do you think? Are governments muddying the conceptual waters by promoting such programs as "green"? Is it enough that the incentives give a short-term boost to the automotive industry? Or should the government simply forego all cash handouts and allow Adam Smith's invisible hand restore balance to the market?