Government Investment? Or Government Waste?
When you here the warning, “don’t try this at home”, it means leave it to the experts because you might get hurt. This has never been more true than when it comes to Government “investment”, except the difference is the politician, who “try’s this at home” profits politically, and the taxpayers are the people who get hurt. The politician making the investment decisions doesn’t suffer any of the consequences for his failures. If you could “invest” money that wasn’t your own, and do it with no repercussions for failure, and your whole life was incentivized and constrained by politics, wouldn’t you invest in something that produces the most votes for the “investment” dollar. When the costs are diffused among the taxpayers, and the benefit is concentrated to the politician, we can begin to understand that what seems like complete idiocy from our perspective, makes perfect sense from the perspective of the politician. Politicians couldn’t survive as venture capitalists.
Politicians are in the business of verbal sleight of hand, and “Government investment” is an example of this. The true meaning of Government investment is simply Government spending. Investment in the free market is the process of refraining from consuming present production, and saving what you have produced for future consumption. The act of production always ends in consumption, and in the case of investment the consumption comes at some point in the future. When these savings are invested in capital, the capital will multiply the original savings by an unknown factor. Real investment allows capital to be risked by entrepreneurs who find more effective methods of production, which increases output per unit of imput, resulting in a higher standard of living of society as a whole. If the entrepreneurs go through this process and don’t make a profit, the loss is limited to the investor, and the entrepreneur. Their can be no real investment if the losses can be socialized to the taxpayers. Losses are an important part, maybe a more important part than profits, not only in the allocation of scarce capital to its most productive end, but more importantly in the acquisition of knowledge about what won’t work, or in the acquisition of knowledge that never existed before the risk was taken. Many times we profit more from our failures than we do from our successes.
We know Government allows the losses to accumulate for a longer period of time than what would be allowed in the market. Many times these losing businesses continue to be propped up forever, just look at the post office. These greater loses are socialized among the taxpayers which wouldn’t happen in a free market. There is no knowledge gained from the loss, because the consumer and the taxpayer are usually blamed for not wanting to pay enough to keep the Government subsidized business model operating. You can’t learn from failure if you are not willing to admit the failure in the first place. On the one hand Government “investment” is a waste of resources, land, labor, capital, and knowledge, but on the other hand it is a very efficient way for politicians to purchase votes at the taxpayers expense.
Read previous post here.
Let’s look at some Government investment failures.
The complete list of faltering or bankrupt green-energy companies:
- Evergreen Solar ($25 million)*
- SpectraWatt ($500,000)*
- Solyndra ($535 million)*
- Beacon Power ($43 million)*
- Nevada Geothermal ($98.5 million)
- SunPower ($1.2 billion)
- First Solar ($1.46 billion)
- Babcock and Brown ($178 million)
- EnerDel’s subsidiary Ener1 ($118.5 million)*
- Amonix ($5.9 million)
- Fisker Automotive ($529 million)
- Abound Solar ($400 million)*
- A123 Systems ($279 million)*
- Willard and Kelsey Solar Group ($700,981)*
- Johnson Controls ($299 million)
- Brightsource ($1.6 billion)
- ECOtality ($126.2 million)
- Raser Technologies ($33 million)*
- Energy Conversion Devices ($13.3 million)*
- Mountain Plaza, Inc. ($2 million)*
- Olsen’s Crop Service and Olsen’s Mills Acquisition Company ($10 million)*
- Range Fuels ($80 million)*
- Thompson River Power ($6.5 million)*
- Stirling Energy Systems ($7 million)*
- Azure Dynamics ($5.4 million)*
- GreenVolts ($500,000)
- Vestas ($50 million)
- LG Chem’s subsidiary Compact Power ($151 million)
- Nordic Windpower ($16 million)*
- Navistar ($39 million)
- Satcon ($3 million)*
- Konarka Technologies Inc. ($20 million)*
- Mascoma Corp. ($100 million)
*Denotes companies that have filed for bankruptcy. Read full article Taxpayer Backed Green Energy Failures, at Heritage.org.
How about GM. 49.5 billion taxpayer dollars were given to GM. 13.4 from the Bush bailout, and 36.1 from the Obama bankruptcy. 6.7 billion was in the form of a loan, and our “venture capitalist” purchased 2.1 billion taxpayer dollars worth of GM preferred stock, and 912 million shares of GM common stock for roughly 40 billion tax payer dollars. As you can see from this article at zerohegde.com, the return on our taxpayer invested dollars isn’t a return at all but a loss.
Here is an excerpt from the article. “ … the US Treasury continues to divest of all its bailout stake, this time proceeding to GM, where the channel stuffing firm just announced it would buyback 200MM shares from the US government at a price of $27.50. More importantly, the “Treasury said it intends to sell its other remaining 300.1 million shares through various means in an orderly fashion within the next 12-15 months, subject to market conditions…. Assuming a price in the $27.50 range, this implies a nearly 50% loss on the government’s breakeven price of $54. So much for the “profit” spin. One hopes all those Union votes were well worth the now booked $40+ billion cost to all taxpayers”
This is just the tip of the iceberg.
Explore posts in the same categories: Econ. 101, Government and PoliticsTags: A123 Systems, Evergreen Solar, GM Bankruptcy, Government Investment, Solyndra, SunPower, Venture Capitalists
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