‘Venture Socialism’ and Public Policy
‘Green energy’ has been a hot topic, a supposed industry on the rise, a breeding ground for breakthrough technology and a source of ‘jobs of the future.’ However, many of the companies touted as industry leaders have experienced layoffs, closed, gone bankrupt or struggle to survive. many had government grants for employee job training/re-training, incentives and tax breaks, and so forth. it was as if the managers of the public’s money and credit were determined to pick the winners of tomorrow’s economy. They largely failed to do so.
This situation is not restricted to the high-tech visions of future energy independence. More mundane businesses, such as movie studios in Michigan, have opened up or expanded because some government official thought that putting public funds into them or using them to guarantee their credit would somehow be a ‘good investment’ for the future. Private individuals and groups invest for the future, as well. They may make miscalculations and may pay the price for error (or even for bad luck). Loss of invested capital. With public officials, the sting of loss is largely absent, as they do not put their own money on the line in choosing where to ‘invest,’ but rather use someone else’s: the public’s. The public official reaps the good press from the ribbon-cutting ceremony, and if all goes well, for having ‘created jobs’ or for having ‘saved’ a struggling company.
When the doors close, however, or a company backed by public credit misses a bond payment, the official who took the credit for the grand opening is long gone, and someone else – in the case of the Pontiac, Michigan film studio that couldn’t make its’ bond payment, the state employee pension fund, which the former Governor used as a de-facto co-signer. Only insofar as her own pension is proportionally affected or put at risk by this bad investment is the former Governor exposed to personal financial loss of any kind, while civil servants, who had no voice in this transaction, bear both the risk and the loss upon themselves.
A reader comment to the film studio story included the phrase, ‘venture socialism.’ How apt. This is indeed the socializing of investment, with all the negative consequences and moral hazard that come from being able to gamble with other people’s money.