Competing against Government Motors

Posted by Marc Hodak on February 3, 2010 under Invisible trade-offs, Regulation without regulators | 5 Comments to Read

So, Toyota, builder of one of the most dependable machines in history, is being pummeled in the press for a quality problem that can’t quite be isolated.  The U.S. government, which is constitutionally incapable of keeping its nose out of other people’s business, is not content to let the horror of bad publicity and Toyota’s legendary engineering do the job of righting things–the politicians have to pile on:

“This is very serious,” (Transportation Secretary) LaHood said at a breakfast with reporters in Washington. “After I talk with (Toyota’s CEO), they’ll get it. We’re going to keep the pressure on.”

Mr. LaHood said Transportation Department officials flew to Japan in December to meet with Toyota executives and remind the company “about its legal obligations.” The agency, he said, “followed up with a meeting at DOT headquarters in January to insist they address the accelerator pedal issue.”

Because, if the senior U.S. transportation bureaucrat didn’t tell them to do it, Toyota would gladly continue allowing the quality issue to fester, destroying seven decades of branding as the highest quality car manufacturer in the world, and killing off customers as an added bonus.

But there is, no doubt, more to this spectacle than meets the eye.

Imagine that the chairman of the board of your largest competitor had the power to levy fines on your company, and bog you down in a Kafkaesque regulatory nightmare.  Imagine this competitor’s director came to your offices and brusquely threatened you with all manner of punishment, up to shutting down your business.  How would you respond?

Toyota’s chief quality officer, Shinichi Sasaki, told reporters in Japan that prompting from the DOT “greatly helped to push us to act swiftly on the problem.”

Imagine that competing director also being in charge of a nearly unlimited PR budget, able to suggest to your customers that they stop using your products, and having every paper in the country print it.

Now consider that every little thing that the Obama Administration does (any administration, really) is driven by politics, and that politics dictate that the auto companies they own “win” against their competition, and then consider the incentives they have to be balanced in their treatment of their competitors.

End of the story:  Anyone who believes that the government should be allowed to compete against private companies doesn’t understand politics and power.  People good enough to gain that power understand those things perfectly.