In a sort of bipartisan piling on, critics of federal support for auto makers or of that proposed oil pipeline from Canada or lost tax dollars in failed alternative energy company Solyndra have captured a lot of attention. Filled with political expediency, what all the critical voices have failed to articulate is any sort of long term view or alternatives dealing with each subject. And there are many.
Before dealing with them, here’s a basic fact: government - and government alone - is often the best (if not only) entity that can make major investments in very large undertakings. Despite our love of “independence” and those who cling to our lost system of “free” enterprise - which hasn’t existed for 150 years - sometimes government has to go first, pay the heavy bills for development and then step aside for private capital to take over at some point.
There are many examples but the best I can think of is our space program. If President Kennedy had not led us into it in 1961, we would likely be speaking Russian. No private company - no group of private companies - could raise the billions and billions of dollars to do what government did. As a nation - and as individuals - we are massively richer for that undertaking. And it’s almost impossible to count the ways we benefitted from computers to cell phones to - well - thousands of things.
And where are we now? Private companies are using that taxpayer-bought engineering, incalculable experience, hundreds of thousands of patents and thousands of highly-trained taxpayers to open space travel to all. We’ve got hundreds of private satellites and even private space shuttles flying around.
For those who say government had no business putting billions into the auto companies - that we should have let them sink - Road Apples! Anyone with any economic smarts knows it had to be done to avoid even more massive unemployment, disaster for thousands of small businesses and a financial mess that would have been incredibly costly.
And look what happened. GM has closed its most profitable year in history - reopened several plants - ramped up production - and has built more and better vehicles than ever. It’s paid back most of the taxpayer loan while GM stock many Americans own has gotten even more valuable. Chrysler basically avoided corporate death - threw out many bad models while developing new lines - reopened closed plants - rehired thousands - and has paid off the loan. And both companies are using new, cutting-edge technology to build the best cars in both their histories. A lot of that new technology the government pioneered in other programs.
No private companies were ready to do what government did. No investors or venture capitalists were willing to ride to the rescue. The results will be taught in business schools for decades to show how government and an entire industry can build huge successes in the face of certain disaster. (more…)