Like other dying industries of the past century, the global auto industry has entered decline after having fully embedded itself in the political complex. Regardless of political leaning, federal governments from Europe, to Japan, to the United States have and will continue to do everything possible to save the industry.
US automakers received their first bailout in late 2008 from the Bush Administration. The bailouts continued in the Obama Administration. (Both presidencies that could hardly be more dissimilar, but were united in their assumption of an enduring future for cars). For Republicans — a party that claims to adhere to free-market principles — releasing a first payment of over $13 billion to the industry was a classic foxhole-conversion in the midst of the financial crisis. For Democrats — a party that claims to be concerned with climate change, the environment, and public transport — the enormous financial support to the industry was only one part of the current administration’s continued embrace of the auto-highway complex.
More broadly, however, global governments are captured by sunk-cost decision making as the past 60-70 years of highway infrastructure investment is now a legacy just too painful to leave behind. Interestingly, whether citizens and governments want to face this reality or not, features of the oil economy are already going away as infrastructure is increasingly stranded. Moreover, there are cultural shifts now coming into play as young people are no longer buying cars – in the first instance because they can’t afford them, and in the second instance because it’s increasingly no longer necessary to own a car to be part of one’s group. See this piece from Atlantic Cities:
Indeed, the migration from suburbs back to the cities, the resurrection of rail, and the fact that oil will never be cheap again puts economies – and culture – on a newly defined path to other forms of transport and other ways of working. (...)
Obsolete Infrastructure
For half a century, the auto-highway complex has been a conduit for political power, and myriad players have self-interested reasons to maintain the system. However, the contraction of motorized transport in the West – a natural outcome of high oil prices and debt saturation – will gain further strength as various states (or countries) simply run out of money to build new roads.
As discussed in California: Bellwether for the Rest of America, the highway-rich landscape of the Golden State (for example) sucks up 90% of its transport budget. But California roads are now among the worst in the nation, costing drivers some of the highest on-road expenses merely as a result of poor surface conditions.
To the extent that states can no longer maintain roads to an adequate standard, infrastructure will become stranded.
We see the same related effects in US airport infrastructure as many regional airports have either seen a huge reduction in traffic or have shut down completely. (The US Postal Service and its current financial difficulties also reflect the emerging trend, as the USPS is obligated to deliver mail to remote locations even as postal revenues drop on the higher cost of – you guessed it – energy and gasoline.)
US automakers received their first bailout in late 2008 from the Bush Administration. The bailouts continued in the Obama Administration. (Both presidencies that could hardly be more dissimilar, but were united in their assumption of an enduring future for cars). For Republicans — a party that claims to adhere to free-market principles — releasing a first payment of over $13 billion to the industry was a classic foxhole-conversion in the midst of the financial crisis. For Democrats — a party that claims to be concerned with climate change, the environment, and public transport — the enormous financial support to the industry was only one part of the current administration’s continued embrace of the auto-highway complex.More broadly, however, global governments are captured by sunk-cost decision making as the past 60-70 years of highway infrastructure investment is now a legacy just too painful to leave behind. Interestingly, whether citizens and governments want to face this reality or not, features of the oil economy are already going away as infrastructure is increasingly stranded. Moreover, there are cultural shifts now coming into play as young people are no longer buying cars – in the first instance because they can’t afford them, and in the second instance because it’s increasingly no longer necessary to own a car to be part of one’s group. See this piece from Atlantic Cities:
Youth culture was once car culture. Teens cruised their Thunderbirds to the local drive-in, Springsteen fantasized about racing down Thunder Road, and Ferris Bueller staged a jailbreak from the ‘burbs in a red Ferrari. Cars were Friday night. Cars were Hollywood. Yet these days, they can’t even compete with an iPhone – or so car makers, and the people who analyze them for a living, seem to fear. As Bloomberg reported this morning, many in the auto industry “are concerned that financially pressed young people who connect online instead of in person could hold down peak demand by 2 million units each year.” In other words, Generation Y may be happy to give up their wheels as long as they have the web. And in the long term, that could mean Americans will buy just 15 million cars and trucks each year, instead of around 17 million.If future car sales in the US will be limited by the loss of 2 million purchases just from young people alone, then the US can hardly expect to return to even 15 million car and truck sales per year. US sales have only recovered to 14 million. (And that looks very much like the peak for the reflationary 2009-2012 period)
Indeed, the migration from suburbs back to the cities, the resurrection of rail, and the fact that oil will never be cheap again puts economies – and culture – on a newly defined path to other forms of transport and other ways of working. (...)
Obsolete Infrastructure
For half a century, the auto-highway complex has been a conduit for political power, and myriad players have self-interested reasons to maintain the system. However, the contraction of motorized transport in the West – a natural outcome of high oil prices and debt saturation – will gain further strength as various states (or countries) simply run out of money to build new roads.
As discussed in California: Bellwether for the Rest of America, the highway-rich landscape of the Golden State (for example) sucks up 90% of its transport budget. But California roads are now among the worst in the nation, costing drivers some of the highest on-road expenses merely as a result of poor surface conditions.
To the extent that states can no longer maintain roads to an adequate standard, infrastructure will become stranded.
We see the same related effects in US airport infrastructure as many regional airports have either seen a huge reduction in traffic or have shut down completely. (The US Postal Service and its current financial difficulties also reflect the emerging trend, as the USPS is obligated to deliver mail to remote locations even as postal revenues drop on the higher cost of – you guessed it – energy and gasoline.)
by Gregor McDonald, Gregor.us | Read more:
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