The problem with government intervention is it can be horribly wrong. Governments are, frankly, no more likely than anyone else to pick out sensible evidence over dud nonsense.
That, at least, is one obvious conclusion from the Volkswagen diesel scandal – even leaving aside the fact that Volkswagen itself is partly owned by a State Government (that of Lower Saxony).
A side issue in the scandal, but a serious issue generally, is that the whole reason Volkswagen cheated was that it was trying to rush “clean diesel” to market, when no such thing (yet) exists. This is, in the immediacy, a disaster for Volkswagen. But it is also a black eye for governments across Europe.
Because it turns out diesel is no cleaner than petrol anyway. Governments across Europe, particularly on the Continent, had taxed diesel fuel at lower rates and in at least two cases (Belgium and Spain) actually applied a lower tax on the purchase of diesel cars all in the belief that they were cleaner and healthier. They’re not. They got it completely wrong.
Europe will now pay the price. The really clean technology comes in the form of full electric or hybrid cars (which generally use petrol, but much less of it), in which US and Japanese manufacturers invested heavily while the Europeans were messing about with filthy diesel because their governments thought it was a good idea. This means that Europeans have caused environmental damage while their manufacturers have been left behind – to the extent they have been forced to cheat blatantly to try to keep up with the “clean” image customers rightly demand.
This was, fundamentally, a disastrous case of government intervention gone wrong. Meanwhile, the rest of the world forged ahead. The free market isn’t always right – but it is sometimes…