“Soft despotism is a term coined by Alexis de Tocqueville describing the state into which a country overrun by "a network of small complicated rules" might degrade. Soft despotism is different from despotism (also called 'hard despotism') in the sense that it is not obvious to the people."

Friday, August 28, 2009

Cash for German Clunkers meant Clunkers for Africa

AUTO INDUSTRY | 24.08.2009

Germany's car scrapping scheme may have backfired


Germany's car-scrapping bonus has had unwanted side-effects

The German government has decided not to renew its car scrapping scheme, citing costs. Yet there are also concerns that instead of being crushed here, many cars are being illegally shipped to Africa.

In an effort to stimulate consumer spending, the German government has provided a scrap bonus of 2,500 euros ($3,570) for two million old cars this year. On Monday, Germany announced it would not extend the subsidy, which has proved extremely popular.

Many Germans jumped at the chance to replace old cars with new ones. But instead of being crushed here, as planned by the program, many cars end up in Africa.

The German police association Bund Deutscher Kriminalbeamter (BDK) has been bombarded with press interview requests ever since it estimated earlier this month that since January at least 50,000 cars have been exported illegally, after their owners had been granted the scrap bonus.

For his calculation BDK Vice-Chairman Wilfried Albishausen, who spent part of his career fighting organized crime, adapted criteria which are generaly used for estimating drug trafficking.

"The risk of being caught is extremely low, as there is hardly any control," he told Deutsche Welle. "When someone is caught, punishment remains minimal. Thirdly there is a market for old cars in Africa and eastern Europe. And the German scrap industry is in a bad shape and therefore more willing to ignore the law."

Gottfried Hoell, chairman of the association for the German scrap industry, confirms what the police inspector assumes: 80 percent of the 1,400 officially registered scrappers, Hoell says, he trusts blindly. That leaves almost 300 whom he cannot trust.

Hoell understands the wrongdoers: "When a car scrapper has financial problems because of the bonus - because he is getting too many cars and has to rent extra space for them and at the same time sells less spare parts for old cars because the cars are no longer there - then of course when he gets an attractive offer in such a situation, he will not say no," he said.

Thousands of cars have not ended up being scrapped

During a recent visit to a scrap company in central Germany, Hoell met an interested African on the premises, who was willing to pay up to 2,500 euros for any bonus car.

That story doesn't surprise a Nigerian shipping agent based in the Rhineland. The man, who asked to remain anonymous, said he exports up to 150 cars a month to West Africa. He is not involved in illegal business himself, he said. But he hears stories of exporters taking old cars apart before packing them in containers. Once they reach their destination, they are put together again.

Business as usual

If two million German old cars are shredded, one would expect a lack of used cars. German used-car dealers confirm that their business this year sank to barely 20 percent of last year's turnover. But in an interview with German national radio Deutschlandfunk, a dealer in Cotonou, West Africa's main harbour of car imports in the Republic of Benin, said earlier this month he hadn't noticed any difference.

The Nigerian shipping agent has no problems either. "From my situation I don't think anything changed," he said. "From the business I have not noticed any change." The man exports mainly via Antwerp, where Belgian custom authorities may pay little attention to the German scrap bonus scheme.

But even in German harbours like Hamburg and Bremerhaven customs can do little more than check freight papers, said the BDK's Albishausen. "They just don't have the capacity to open up every single container. But when they check, they often find something. In Hamburg alone they detected nearly 50 cases of illegal used-car exports so far this year."

Five billion euros lost

If the bottom line is that the German government's environmental bonus stimulates the export of old cars, the environment may benefit very little. "With that program five billion euros are going down the drain," said spokeswoman Ulrike Fokken of the Deutsche Umwelthilfe, an environmental organisation in Berlin. "It is an old problem that Germany dumps its garbage in Africa," she added.

Scrapper Gottfried Höll laughs off the environmental justification, even for those cars that are demolished in Germany in line with the scheme. Before they are crushed all the parts can be removed, including the old engine, to live a second life in Europe. Or elsewhere.

Author: Patrick Vanhulle
Editor: Rob Mudge


  1. Remember, I said I thought the various forms of Gummint would get that money back? Well, now I'm sure of it.

    Something we all (?) overlooked: That $4,500.00 is Taxable Income. They get $1,500.00 back, immediately.

    Now, add in all the various income taxes, sales taxes, import taxes, fees, licenses, etc. and I'll Guarantee you it's a "break-even" for Gumint.

  2. Blogger allen said...

    " Sam,

    Your point is well made. While renowned historians ("renowned" is, by the way, an honorific adjective) disagree on countless issues, one area upon which there is concensus is the disentigration of empires: Empires rot from within; "barbarians" fill the vacuums created by the growing decay. Adrianople was not a climax, it was an anticlimatic apostrophe.

    When the citizens of a civilization lose confidence in themselves and there guiding institutions, that civilization is doomed to extinction. Like Rome and Michael Jackson, death may be cleverly prolonged through subterfuge, but a dead skunk remains a dead skunk."

    Interesting Allen. I was pondering just such things a few days back as I was ruminating on the evident self-loathing many Americans feel about their democratically elected government.

  3. It's Not "self-loathing," Ash. My self is "My Self." The Government is the Government.

    We "Loathe" our "Government Officials." We, actually, pretty much LIKE Ourselves.

  4. Oh, we Loathe "Your" Government Officials, also. And, the French "Government Officials," and the British "Government Officials," etc.

    See how it works?

  5. Rufus, you nailed it on the $4500. That $4500 leveraged a $25000 sale.

  6. Deuce, the knee-jerk Conservative reaction Against the "Cash for Clunkers" explains why the Republicans are just too stupid to ever be the "majority party" for long.

    I was, actually, the sweetest little "stimulus" scheme I've ever seen, or heard of.

  7. Actually, YOU were the first one on this list (or, any list I've read) to bring it up.

    I didn't start really thinking about it until you pointed out that we would get a lot of it back pretty quickly.

    Only then did I realize that, "Hell, we Might get it All back."

  8. I wouldn't bet that we're going to recover the other $3,000. In fact, I'm sure that I will never see a penny of it but will in fact be on the hook for it.

    The money has come from thin air, hot off the Federal printing presses backed by the full faith and credit of the United States of America or more specifically US taxpayers. You can wrap a happy face around it but the fact is, a few people got new cars subsidized by the rest of us. I guarantee it's no break even, not even close.

    As to the peripheral issues of energy independence and the environment, it's been estimated that all of these cash for clunkers deals will save (if we're lucky) 12k barrels per day of gasoline. (We consume 9.2 million bpd).

    The green issue...kumbaya. groovy.

  9. Well, how Pray tell, will they NOT pay Sales Tax on those new cars?

    How will they not pay insurance? How will the insurance agent not pay income tax on the commission?

    How will those auto workers that were called back to work (thus, taking them off the unemployment rolls) not pay income, Fica, etc on those Wages?

    How will the parts manufacturers Not pay the various taxes on their activity? How will their called-back workers not pay income, etc taxes?

    How does all this happen, pray tell?

  10. If the idea is so great, why not make it permanent?

  11. 46% of the cars sold were foreign built.

    Detroit's big three accounted for 41% of sales.

    Some analysts say that the program pulled in buyers who intended to purchase in September or beyond. How the program will affect future sales is unknown.

    100,000 used vehicles were taken out the supply driving up the price of used cars.

  12. One problem with the program is that the dealers didn't have enough inventory sitting on their lots.

    How many autoworkers were called back as a result of CfC?

  13. I didn't get any cash for my clunkers, one was too old, the other missed on the mileage chart by about 2 mpg. Drats.

  14. smoke and mirrors

    It continues to amaze that "economists" are concerned about a double-dip recession, when we haven't begun to recover from the current one.

  15. I think you're wrong, Whit. A little over 50% of the vehicles sold had a foreign nameplate, but Most of those were, actually, made in the U.S.A.

  16. Cash for Clunkers is a scam pulled off by tax eaters to benefit rent seekers.

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