Car Scrappage Scheme: A Nice Little Stimulus...for Germany and Japan

Tom McDonnell29/06/2011

Tom McDonnell: The much maligned car scrappage scheme comes to an end tomorrow. Unsurprisingly the car 'industry' proclaims it a success.

The scheme was a nice little stimulus for...Germany and Japan.

Another example of hairbrained policy making and wasted money. Ireland does not make cars and most of the money from these sales goes to overseas manufacturers in countries like Germany and Japan. It is hard to imagine a stimulus with a higher rate of leakage. Spending money on imports simply boosts jobs in other countries while channeling spending away from the domestic economy.

If the Government insists on handing out the gift of tax breaks (meaning money lost somewhere else in the economy) to specific types of retail businesses in the future it would be prudent to at least target those goods and services that are made in Ireland.

Paddy Logue over at the Irish Times has a good take on it:
"It used Government money to discount new cars for people who already have access to money or credit while getting them to junk a perfectly good car and then buy a new one whose production no doubt caused another small rise global warming."

And Friends of the Earth point out:
"each new car represents two to three years of pollution before it even hits the road"

Posted in: EconomicsEnvironmentFiscal policyFiscal policy

Tagged with: stimuluscar scrappageleakageclimatechange

Dr Tom McDonnell

McDonnell, Tom

Tom McDonnell is senior economist at the NERI and is responsible for among other things, NERI's analysis of the Republic of Ireland economy including risks, trends and forecasts. He specialises in economic growth theory, the economics of innovation, the Irish and European economies, and fiscal policy. He previously worked as an economist at TASC and before that was a lecturer in economics at NUI Galway and at DCU. He has also taught at Maynooth University.

Tom obtained his PhD in economics from NUI Galway.


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