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Volkswagen, emissions and diminishing returns


The Volkswagen emissions scandal looks like becoming the car industry equivalent of the Libor and Forex scandals in banking.  According to European campaign group Transport and Environment, cheating on emissions tests is widespread across the car industry and applies to both petrol and diesel engines.  The group claim that there is as much as a 40 percent gap between the emissions during testing and emissions under real road conditions.

At face value, the Volkswagen scandal appears to be just another example in a tediously long list of psychopathic corporations putting short-term profit ahead of long term sustainability.  Indeed, in Volkswagen’s case, there may not be a long-term now that sales are plummeting, record fines are anticipated, and investors seek alternative investments.  When we discover – sadly unsurprisingly – that other car companies have also been fiddling their emissions data, we may simply assume some undocumented cartel-like behaviour in which everyone involved turned a blind eye.

There may, however, be a darker story here.  Why would a trusted company that has led the world in engineering risk everything on a short-term gamble to fiddle the data?  The stock answer is “profits”.  But this doesn’t stack up.  German companies have a track record of investing for the long-term.  They tend not to suffer the British disease of having to put the immediate gains for shareholders and bankers ahead of the long-term development of their companies.  So what else might be going on here?  An alternative answer is “diminishing returns”.

In the late 1970s and early 80s, the internal combustion engine was under threat from two directions.  First, and most painfully, the oil shocks in the 1970s had demonstrated just how vulnerable western countries were to any future shortage of oil on international export markets.  Second, a growing environmental lobby was raising concern about the damage to the atmosphere caused by millions of cars belching out carbon dioxide and other noxious emissions.  With millions of jobs worldwide dependent upon the car industry and the oil industry that feeds it, these concerns threatened a major economic upheaval.

The absence of an electric car with anything like the performance of petrol or diesel cars undoubtedly saved the internal combustion engine.  Moreover, with the temporary glut of oil coming out of the newly profitable North Sea fields, the crisis seemed less urgent.  But the car industry did not emerge totally unscathed.  In a concession to detractors, the industry had promised that they could cut emissions and improve the fuel efficiency of their cars.

Initial technical improvements to engine design, improved exhaust systems and the use of catalytic converters were simply lying around waiting for someone to deploy them – they had simply been ignored back in the days when performance was considered to be the prime aim of car engineering.  The problem was that environmental and fuel concerns did not go away or even stand still.  The price of fuel continued to rise even as awareness of man-made climate change was spreading.  Having made the initial easy gains, the car industry was obliged to deploy growing teams of scientists and engineers to continually improve fuel efficiency and lower emissions.

As with all such processes, having made the initial gains, each new small increment came at an increasing cost.  More scientists and engineers were needed to work on the problems, while solutions came with an increasingly steep price tag.  Eventually they were doomed to reach a point beyond which improvements would render the vehicles unprofitable.

Of course, both the governments responsible for the emissions tests and the manufacturers themselves had vested interests in maintaining the illusion of progress.  Indeed, since the crash of 2008, exports are one of the few areas where GDP growth can be generated; and cars make up a large proportion of exports.  So both governments, struggling with balance of payments deficits, and manufacturers desperate to maintain market share, were willing to allow lax testing and inflated results.  That they would get caught out in the end was certain.  But as with all things economic in the current depression, kicking the can down the road has become the only workable approach.  Volkswagen undoubtedly hoped that someone else would be caught out first.  However, it appears to have been the high-tech manner in which they fiddled the figures that has singled them out for particular disapproval.  Where other companies have deployed low-tech cheats like sloping the test bed, ensuring batteries are fully charged, and smoothing and hardening the tyres, Volkswagen deployed their software engineers to create an algorithm that could sense when their vehicles were being tested.

The deeper issue here is not that companies cheat or that even world-leading Germany appears to have moved into short-termism.  The real problem is with our understanding of progress itself.

Progress has been the religion of the West since the Second World War.  In those heady days we told ourselves that through the white heat of technology, our road to the stars had been mapped out.  There is, we were assured, no problem that science cannot solve, no technology that our engineers cannot create.  .  In the real world, our economic wellbeing has been falling like a rock.  Middle class families that could once operate comfortably on the income of a single (usually male) earner now struggle to get by with both partners working; and often only then by accumulating mountains of debt based on the illusion that their house earns more than they do.  Working class families do not even enjoy this standard of living, finding that even with both partners working it is impossible to buy their own home.  For several decades now our road to the stars has appeared only in Hollywood’s CGI fantasies.

In truth, the story of human “progress”, like the Volkswagen story, is a tale of diminishing returns.  In every field of human endeavour we find the same story.  Initially, great discoveries and inventions could be made by lone scientists and engineers given enough time to retreat to their laboratories and think… something that did not happen too often prior to the industrial age.  Given sufficient time, a Newton could figure out the movement of the planets while a Darwin could put together the basics of evolution.  Throughout the nineteenth century, great discoveries and inventions could be made by single (mostly) men who enjoyed enough spare time.  But by the twentieth century, fewer inventions and discoveries were made by lone individuals.  More often, small research teams were required to make real breakthroughs.  In the modern – internet enabled – world, thousands of scientists and engineers in teams spread around the planet are employed to make incremental advances in our understanding and our technology.

Medical writer and doctor, Ben Goldacre has made this point well in relation to medicine.  He argues that most of the genuinely new medical breakthroughs came in the years between 1929 – with the synthesis of insulin – and 1969 – with the first transplant surgery.  Since then, we have added detail to what we already knew, and we have engineered improvements to technologies we already have.  But – and this is the point – despite vastly more scientists engaged and exponentially more money deployed, we have made very few genuine breakthroughs.  Physicist Tom Murphy has made the same point in relation to technology more generally:

“[Today] the big deals are: the computer revolution, the internet, mobile phones, GPS navigation, and surely some medical innovations. But I would characterize these as substantial refinements in pre-existing gizmos. It’s more an era of hard work than of inspiration. I’m not discounting the transformative influence of the internet and other such refinements, but instead pointing out that the fundamental technological underpinnings—the big breakthroughs— were in place already.

Murphy asks us to imagine what it would be like to be transported from the world of 1885 to the world of 1950.  What would have been new and not understood?  The list includes cars/trucks, airplanes, helicopters, and rockets; radio, and television (but not, just, the telephone); toasters, blenders, and electric ranges; radar, nuclear fission, and atomic bombs.  What would it be like if we were transported from the 1950’s into the present?

“Most things our eyes land on will be pretty well understood. The big differences are cell phones (which they will understand to be a sort of telephone, albeit with no cord and capable of sending telegram-like communications, but still figuring that it works via radio waves rather than magic), computers (which they will see as interactive televisions), and GPS navigation (okay: that one’s thought to be magic even by today’s folk). They will no doubt be impressed with miniaturization as an evolutionary spectacle, but will tend to have a context for the functional capabilities of our gizmos.”

What about the technologies that we have been promised will solve our most dangerous and conflicting problems – energy insecurity and climate change?

“Solar, wind, hydro/tidal, geothermal, nuclear fission (including thorium), wave, biofuels, fuel cells, etc.: all were demonstrated technologies before I was born. Where are the new faces? It’s not as if we have lacked motivation. Energy crises are not unknown to us, and there have been times of intense interest, effort, and research in my lifetime. Tellingly, the biggest energy innovation in my time is enhanced recovery techniques for fossil fuels: perhaps not the most promising path to the future.”

This brings us back to the Volkswagen scandal, because of its part in the fight against climate change and energy shortages.  What it tells us is that we cannot escape the process of diminishing returns.  For a while, at an increasing cost in resources, energy, capital and labour, we can enjoy some incremental improvements.  But ultimately we reach the point of denial – the point where the only thing left to us is cheating and fiddling the figures.  But when it comes to curbing carbon emissions and deploying clean energy generation, cheating will not do.  Quite simply, if humanity has a future, the lesson here is that we need to invest far more than is currently the case if we are to have even the remotest chance of coming up with a game-changing new technology.  The alternative is that, sooner or later – and probably sooner – much of what we take for granted in our western lifestyle – private motoring, constant electricity, affordable heating, abundant drinking water, free medical care and education, and much more – is going to disappear.

We can cheat for a while – as governments have been doing with their GDP figures, and oil companies have been doing with their reserves – and we can hide in a CGI-generated fog of denial – as we have been doing with climate change.  But we are fast coming up against limits that will not be ignored – we might be able to defy gravity and thermodynamics in a Hollywood movie; but in the real world these hard physical laws result in collapse and decay.

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