Regulation, Regulation

I am truly “shocked, shocked” by the Volkswagen deceit.  Similar actions by the financial community were almost to be expected.  Certainly I expected them and if there was a surprise, it was that the financial practices were uncovered.  Financial markets are easy to manipulate.

But VW’s deceit was a knockout roundhouse punch to the jaw.  It is also a punch to the jaw of those who keep arguing that there is too much government regulation in America. In fact, it was not the car regulators (highway traffic safety commission) that got VW, it was the much more powerful Environmental Protection Agency, the defender of clean air and among the most hated of U.S. regulatory agencies by business.

It was surely no “blunder” by VW, as the Financial Times called it in an otherwise good editorial. It was an outright money-making deception that violated the rules and thereby made VW tens of millions, maybe hundreds of millions of dollars. It not only deceived the U.S. regulators, who finally threatened not to approve the 2016 models for sale in the US, but it also deceived global customers.

People bought VW diesels because they polluted less in terms of carbon emissions, and also got better mileage.  For the environmentally conscious, it was ideal.  The diesels also emitted nitrous oxide, however, and VW claimed that they had controlled this.  They lied, and the EPA found out.  They adopted software that reduced the Nox emission, as it is called, only when an emission test was underway. After that, the cars apparently spewed Nox like crazy, which accounted for their good performance, while supposedly meeting emissions standards.

Bravo to the EPA. Bravo to strong regulation in general.  And let’s be reminded that business will often cheat when it can.  Word is that more investigations are coming. VW was rocked by the stock market yesterday. Imagine an America, a world, without strong regulation.

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