They have ugly, though sometimes inventive, names.
The auto industry calls the government subsidies for new car purchases scrappage or wreckage schemes.
The British papers, always looking for a clever tabloid headline, call them cash-for-clunkers or dosh-for-bangers.
They are not limited to cars. Mannheim, in Germany, is offering a bounty on old bikes. My wife wants to know when cash-for-clunker-husbands is coming.
Whatever you call them, they are ugly economics and they are proliferating.
Britain is about to introduce a £2,000 ($3,560) old-for-new car swap deal.
The German version, meanwhile, is lavish and extensive. The state is offering a €2,500 ($4,018) freebie if drivers
swap cars that are at least nine years old for a new set of wheels. Angela Merkel's government initially set aside €1.5-billion for the plan, but it proved so popular an extra €3.5-billion was thrown into the pot.
Other European countries have variations on the theme. Canada's auto bosses are lobbying government to take inspiration from Germany.
The argument for scrappage incentives seems compelling. The car industry is in a deep sales rut, wheels spinning, radiator hissing steam. In Britain, car production has fallen by half in the last year.
Fiat, the wannabe owner of Chrysler, last week said its auto sales fell 17.6 per cent in the first three months of the year, and it was happy with the figure given the even worse performance of some competitors.
So governments launched their no-car-maker-left-behind bonanza, care of the taxpayer, and dressed it up as a two-for-one deal: Incentives would not only turbo-charge car sales and fill up the factories; they would also help the environment as old cars with their carbon dioxide-belching engines are replaced with cleaner technology. That, at least, was the sales pitch. Of course the real appeal to consumers was the lure of (allegedly) free money.
In Germany, scrappage incentives can take much of the credit for driving up March car sales by 40 per cent. French and Italian sales were also up that month, though by far lesser amounts. Sounds good, but there is every chance a new car sale today simply robs one from tomorrow. The German program will probably end in the fall (conveniently, no doubt, just after the September election, which Chancellor Merkel is desperate to win).
Roland Dohrn, an economics professor at RWI Essen, a German policy research institute, thinks the car freebies lie somewhere between useless and mad. He notes that France offered a similar scheme in the mid-1990s and car sales fell by 20 per cent after it expired. He thinks the sales falloff in Germany will be similar. "Demand for cars will collapse to some extent next year," he says.
The other problem is that the German scrappage incentives are naturally biased toward small cars, because big nine-year-old cars hold their value better and are therefore not worth junking, freebies or not. Guess what? Germany makes far more big expensive cars - Mercedes, BMWs, Porsches - than cheap little ones. Fiats and Peugeots are being snapped up in Germany, transferring German taxpayer wealth to Italy and France. In fact, only a little more than a third of the incentives in March were soaked up by domestic German car makers.
The environmental arguments for scrappage are, at best, dubious. Yes, new cars emit lesser amounts of pollutants and carbon dioxide than old ones, but not much less. On the carbon-dioxide front, the big reduction improvements (measured in grams of CO{-2} emitted per kilometre) came in the 1990s, according to the European Federation for Transportation and Environment. In recent years, the gains have been smaller and harder won, in part because cars are getting heavier. If carbon dioxide reduction is the goal, governments should buy every car built before 1995 and junk them. The ones built since the early part of this decade are dramatically cleaner.
Nor do the governments appear to be factoring in full-lifecycle carbon accounting. It takes energy to scrap an old car (if indeed they are all scrapped; the European press has reports of allegedly scrapped cars showing up on Eastern European car lots). The incentives are designed to lift production from depressed levels - again, more CO{-2} output. But it would be impolite to ask governments handing out incentives whether the scrappage programs actually do more environmental damage than good.
The last question: Are the incentives worth the cost to the taxpayer? Governments like to think the incentives are partly, perhaps largely, self-financing, in the sense that new cars produce sales tax and registration fees for the public purse. If that were really the case, scrappage schemes would be ubiquitous and permanent and wouldn't just apply to new cars. Every product, from toilet bowls to tea towels, would have them. The incentives are a classic case of buy now as a consumer, pay later as a taxpayer hocus-pocus.
Canada, the U.S. and other car-producing countries are looking at the European scrappage schemes closely. A fleeting glance should be enough to persuade them they are both the worst and best sort of gimmick - deceptive, dishonest but ever-so popular.
