In “Alice in Wonderland”, the White Queen recounted how as a child she had been required to believe six impossible things before breakfast. This would be good training for European legislators – though they seem to be quite good at it already. For example, some of them believe that the Greek crisis has been resolved.
Their own beliefs are bad enough, but it gets worse when they expect others to do the impossible things that they legislate for. Take the banking crisis. We asked the banks: (A) To lend more responsibly, and avoid the risk of default; (B) To lend more to industry, to promote investment and growth; (C) To rebuild their balance sheets; (D) To repay to governments and taxpayers the sums that they had received in bail-outs.
We seem to have forgotten that you can’t spend the same pound on three or four separate things. Meantime we continue to beat up on the banks, to the extent that several majors are looking at the possibility of moving elsewhere.
And it’s not just the banks. BP are taking terrible punishment in the US. Of course they made some serious errors, and they have to be held to account, but I wonder if the US authorities are deliberately seeking to damage a non-American oil company to give their own oil majors a competitive advantage.
The airline industry is being brutalised by European compensation legislation, which threatens to destroy the low-cost airline business model. In the name of “consumer protection“, we provide compensation to delayed passengers, even (following a recent court ruling) where the airline had little or no responsibility for the delay. I strongly suspect that in these cases the administration of claims may cost more than the compensation itself.
Recent court decisions appear to be retrospective, which could hit hard-pressed airlines with a bill for many millions. If you ask a delayed passenger if they’d like £300 compensation, they’ll say “Yes”. If you explain that this could be the end of low-cost air travel, they might think twice.
And now we have the Volkswagen case. Volkswagen has apparently been using software that recognises when the car is being tested, and adjusts the engine to reduce admissions. But in general use, the emissions may be many times higher. One news report suggests that VW could be fined $18 billion in the USA. You read that right –Billion – not million.
Let’s be clear: if VW is guilty as charged, then they were wrong to do what they did, and should face appropriate penalties. But $18 billion is beyond reason. It amounts to more than 14% of VW’s Market Cap. Chances are that other auto companies have being doing the same thing. This story could run and run.
And why did it happen? Because of mixed messages from legislators. On the one hand, they were keen to promote diesel in order to “save the planet”, since diesel produces lower CO2 emissions. On the other hand, they set draconian limits for other emissions like SOx and Nox and particulates. These two objectives appear to be incompatible. Let me repeat: I’m not trying to exonerate VW for cheating the system. But I am trying to understand why it happened – and it happened because legislators made impossible demands.
Suddenly I feel a whole lot better about driving a petrol car. Not that I felt too bad about it beforehand. On my desk in Brussels I have a mug with the legend: V8: I’m doing my bit for Global Warming!