Quintessential capitalism

FEW companies are hailed as proof of free-market genius more than Tesla. Yet, at every turn that mattered, it stood on public capital. In 2010 it borrowed $465m from a US federal programme open to every carmaker building cleaner vehicles, in a country where transport is now the largest source of greenhouse gases. It paid the Treasury’s own cost, roughly one to 3. 4 per cent, with principal deferred until production began. One of the smallest borrowers, it became the star, repaying with interest nine years early. Regulatory credits, earned by beating emission rules and bought by those that fall short, then carried it into profit. Pakistan asks its banks to do alone what no quintessential capitalist economy asks of its own: lend to priority sectors without the state sharing the risk and the price.

This is not a lesson taken from state-led economies such as China, where public support is part of the model. It comes from the market economies themselves, which do it openly and without apology. Tesla is not their exception; it is their method. Look at where they aim interest subsidies, and how deep. Farming comes first: America lends beginning farmers money to buy land at under 2pc and caps their operating microloans at 5pc, while Canada pays the interest on the first C$250,000 of each grower’s cash advance. Housing is next: France gives first-time buyers zero-interest loans and compensates banks through tax credits. Then enterprise: Britain lends start-ups unsecured at a fixed 6pc, with mentoring, and its firms outlive their peers; Germany’s KfW cheapens founders’ loans and absorbs four-fifths of any loss so local banks will lend. In every case, the taxpayer took the first risk and part of the financing cost, at the stage private finance would not, and demanded performance…