Across the pond, the Italian government is paying Lamborghini (a subsidiary of the German Volkswagen-Audi group) 100 million Euros (approx. $112,000,000) to hire 300 new workers to begin production of a monstrously ugly SUV called the Urus. As Lamborghini's products are sold exclusively to young people who have incredible amounts of money and absolutely no taste, I'm sure this thing that looks like a Decepticon and sounds like a bladder disorder will do fine at the $250,000+ they plan to charge for each one.
On the surface this looks like the classic example of European Socialism and in fact I have seen a few commentaries that describe it as such. Another European socialist nightmare state clinging to the failed theories of the past and effectively nationalizing a company that can't survive in the Free Market. In practice, though, this type of policy has far more in common with the "cutting edge" (try saying it, it sounds so ridiculous) of right wing economics today: take public money, slop it in a trough, and invite private enterprise to waddle up and eat their fill. Lamborghini, like the Volkswagen Group as a whole, makes shitloads of money. This isn't British Leyland in the mid-70s desperately asking the government for enough cash to keep them alive. It's a company playing jurisdictions against one another to loot the public coffers and get concessions far beyond any that common sense or economic wisdom would dictate. In this case, Lamborghini's threat to manufacture elsewhere in the EU – no doubt the low-wage countries of Eastern Europe in which Volkswagen is increasingly shifting its labor – was enough to get Italian politicians to abandon even the pretense of making rational decisions.
The government is giving the company $112 million (US) to hire 300 people for a production run of one vehicle. In the auto industry a typical production run (the lifespan of one model with only minor changes from year to year) is usually six years. If you do the math, that equates to $55,000 per job per year, or $330,000 per job over the six year period. That is considerably more than Lamborghini will pay them in salary and benefits. How can anyone making a rational case for this investment believe that employing 300 people for six years is really worth $112 million to the state? Obviously not, but apparently enough influence has been bought to make such a financial non-starter happen. The decision has nothing to do with making a rational case; Italy has moved beyond the torpor of 1970s socialism and embraced the glories of 21st Century crony capitalism.
We see a lot of this in Southern states in the US, where state legislatures slop out billions in tax breaks, infrastructure improvements, and outright cash giveaways to lure in factories that will employ at best one or two thousand people (many of whom will end up being temp hires at or near minimum wage). Like cutting taxes for the wealthy has nothing to do with a sincere belief that it will increase tax revenues – that is merely a rationale for public consumption and the edification of gullible rubes – the real purpose of giving away money in this fashion is simply to those well connected players in the private sector who, having paid the piper, fully expect to call the tune.
Socialism? No, this is where neoliberalism got us. A socialist government would drive a harder bargain before pissing away this much money. Giving it away on the flimsiest of pretenses is more indicative of the urge to serve Big Business than of the urge to control it.
Arslan says:
Italy also blew a lot of money on F35s a few years ago, or so I heard.
But with all the wars Italy's been in since 1945, I'm sure they had a good reason.
BTW, the name is funny because one place you'll find buyers for such a pricey
vehicle is Russia. Too bad the name in Russian is an anti-Russian
ethnic slur used by Turkic speaking peoples in Russia and the FSU.
In other words, think Chevy Nova in Latin America.
Talisker says:
I wonder how much of that $112 million is being siphoned off by corrupt officials and organised crime?
In addition to the corruption issue, Italian politics is (arguably) even more dysfunctional than its US counterpart. At the last election, more than 25% of the vote went to a protest party led by a comedian. The established parties promptly ignored it and went into coalition together.
Whoever is running the Ministry of Industrial Subsidies in Italy, he probably isn't even pretending to be serving the public interest.
Talisker says:
Neoliberalism is too grand a title. As Walter Sobchak might put it, "Say what you will about the tenets of neoliberalism, at least it's an ethos."
This kind of thing is really just old-fashioned graft. You can bet your bottom dollar that politicians who shovel cash at corporations, will be offered cushy jobs with those same corporations after they leave office.
Buckyblue says:
This is Scott Walker's economic plan. He created the Wisconsin Economic Development Commission, a public/private venture whose sole purpose is to shovel gobsmacks of money, that's the public part of the public/private, to private companies. They have given companies so much money they literally can't keep track of it. Seriously, there are millions of dollars that are unaccounted for because why would you want to keep track of it to, say, see if what you're doing is actually working. They give money to companies that then outsource jobs. I don't call it socialism, I call it fascism.
anotherbozo says:
For the life of me I don't know why this post wouldn't read very respectably on an Op-Ed page somewhere or in one of the more fearless magazines (even "bladder disorder" should be O.K.), bringing Ed a little revenue. Or aren't Op-Eds remunerative? Is it all about connections? Would some editor send it back with "develop that theme of Neoliberalism, a little more, please?"
Maybe Charlie Pierce could get it printed at Esquire. Mother Jones? Utne Reader?
On the other hand, there is so much I don't know about media, power, or uncensored column space.
c u n d gulag says:
In a true socialist society, they wouldn't hire 300 people to build ugly $250 ,000 SUV's.
They'd hire 3,000 people to build $25,000 energy efficient cars!
Skipper says:
And in the US, we gave banks $700 billion dollars to do nothing (unless you count multimillion dollar executive bonuses). At least the Italians will get a car.
Chicagojon says:
I think about this form of capitalism every time a big corporation wants to move to Chicagoland or threatens to leave Chicago to go to nearby Indiana or Wisconsin.
At some point I wish the local government would say 'fuck you – go to Indiana if you want but we're not giving you a giant tax break to move your corporate headquarters in'. This is how it should be. Let's see how much talent and prestige they draw in Indianapolis (or Gary) with its states anti-Gay rhetoric or in Wisconsin where it can entice workers with decreasing salaries.
well mostly says:
Has the world tilted a bit? Hard as it is to get agreement and support for any idea, stupid ones seem to go through like greased pigs.
I don't think we have words for this thing yet. It smells so bad in so many ways. But credit is due: they don't even cover it up as some urgent military need. It's just plain force of power.
In 20 years that factory will make it into those abandoned places photo books. I look forward to seeing that if I live that long.
And the Germans bash the Greeks, preaching about responsibility. Hypocrisy, thy name is Audi, this time anyway.
Andrew says:
Are you sure that these workers won't earn $55K/year in wages, benefits, and social charges? That seems low for high-end auto assembly work in Western Europe.
carrstone says:
The amount of money involved is small beer in today's economic world, of course; it's but a fraction of the cost of just building the plant. You appear to have omitted this from your calculation.
Assuming that the tax credit is not to be subsumed into the total corporate account, the Italian IRS, rather than paying out, merely has to wait until the venture generates income. It's only at this point those credits kick in. So it's not so much 'pissing away this much money', it's more like generating taxes you didn't have before.
As for the innuendo of 'well-connected people' wanting value for their money, what's wrong with that? You don't have to be well-connected to have that ambition; in fact, you'd be a fool not to want it.
There are no laws being broken, so what's the beef? I mean, it's not as though any sane person, irrespective of political color, wouldn't clamor for a place in the line to feed at the government's incentives trough when it's offered; need I remind you how all those Democrat-voting recipients of Obama's largess to the solar industry made out like bandits?
ZeroInMyOnes says:
How do they get away with it? For one thing there seems to be a psychological phenomena in which large-sized numbers cause bafflement in many people. And percents cause a total freeze up.
Example: A person earning $40,000 a year witnesses a another person griping about paying a federal income tax bill of $50,000. Non-plussment ensues. OMG he thinks-that's more than I make in a year! Recalling that income taxes have something to do with percents, a cognitive kernel panic flares. OMG he thinks further-$50,000! We have got to lower taxes! By then, he votes right-wing, without ever progressing to the calculation that the $50,000 in taxes, on an income of $1,000,000, represents an effective tax rate of 5%.
A true Socialist would not go for this VW deal, but an obfuscating craven-Capitalist would.
Tim H. says:
If they were real capitalists, they wouldn't be clamoring for the government teat…
mothra says:
Carrstone, you don't know a thing about Italy and their tax system, do you?
Barry says:
Talisker Says:
"I wonder how much of that $112 million is being siphoned off by corrupt officials and organised crime?"
I'll start counting how much is *not*.
I'll bet I finish first :(
Leading Edge Boomer says:
I actually like the look of this car, and have seen more pictures of it. The name is odd, and the price is prohibitive of course.
B says:
Just to play devil's advocate… and being a bit of a CBA wonk myself: You can't judge the benefit of that cost by looking only at the 300 workers that Lambo will employ. Like most car makers, Lamborghini has suppliers. Lots of them. For every worker at the Lambo plant, there are probably 2-4 workers elsewhere making the stuff that goes into a Lamborghini. If those other supplier employees are in Italy, does that make the math work out? Maybe, maybe not, but looking at just Lamborghini will yield an incomplete analysis.
As far as the money going straight into Lamborghini's pockets, who cares? The Italian government is willing to pay out X dollars in order to get Y in return. If Y>X, a pure CBA evaluation wouldn't consider where the money goes – it's a net expenditure of X, period.
B says:
Oh, and it's kind of an ugly car. It looks like my wife's Mazda CX-7 if it spent too much time doing power squats.
eau says:
I thought carrstone's comment was stupid until I realised 'rational' is code for 'psychotically and myopically selfish' (as per Rand). Makes perfect sense now. Except for the value for money in opinion column publishing part, of course. That's still got me baffled.
@b: even if what you say is correct, is the government not still making the cost of a (hugely profitable) private company, public?
carrstone says:
@ eau
Stupid? I may be misinformed, but not stupid; unless you call everything you don't understand stupid.
@mothra
Don't have to know anything about the Italian tax system to make my comment; I rely here on the article Ed attached and you haven't bothered to read which clearly states that the money involved is in tax breaks ("Prime Minister Matteo Renzi's government is prepared to extend as much as 100 million euros (approximately $112 million) – but not in cash") and not, as Ed mendaciously writes,"the Italian government is paying Lamborghini … 100 million Euros (approx. $112,000,000)."
Andrew Laurence says:
@Carrstone: eau didn't say YOU were stupid, just your comment. I'm fairly sure eau DOES understand Randianism, as it's not complicated and most adults understand it just fine.
carrstone says:
@ Andrew Laurence
Oh, well, that's alright then.
I will admit, though, my reaction was only to 'stupid'; the tortuous language of his comment leaves me baffled.
Todd Ernst says:
What we have here is a shifting of the tax burden from the shareholders to the workers.
same ol same ol
carrstone says:
@Todd Ernst
Are you deliberately not understanding how this works? Tax CREDITS only kick in if and when profit is earned, i.e., the Tax Authorities don't pay out anything. Miraculously this is exactly the same amount they would have collected if the company had not manufactured the product.