Why Private Investment Works & Govt. Investment Doesn’t|5 Mi…
Why Private Investment Works & Govt. Investment Doesn’t|5 Minute Video
From transport to energy, and everything in between, should the federal government invest money in as many appealing projects as possible? Burt Folsom, historian and teacher at Hillsdale College, addresses those questions by drawing on the remarkable history of the race to construct America’s airplanes and railroads.
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Script:
In 2011, a solar power company called Solyndra stated personal bankruptcy. Its most significant “financier” was the federal government which had actually offered it $500 million dollars.
If history is any guide, it was quite predictable. The federal government is a really poor investor.
Congress for that reason offered massive federal help to develop the Union Pacific, the Central Pacific, and later the Northern Pacific Railroads. The Union Pacific, for example, was bogged down in monetary scandal from its creation, went insolvent numerous times, and had to reconstruct large areas of track thanks to substandard construction practices.
At that very same time, James J. Hill, without any federal aid whatsoever, constructed a railroad from St. Paul to Seattle– the Great Northern. How was Hill able to do with private funds what the Union Pacific stopped working to do with a gift of tens of countless federal dollars?
The beginning point is incentives. The Union Pacific was paid by the federal government for each mile of road it developed. It was in the railway’s interest not to develop the roadway straight. The more miles it took the UP to cross Nebraska, for example, the more money it made.
Hill, by contrast, utilized his own capital. To make a profit, he needed to develop his Great Northern Railroad straight and tough. Hill’s company remained in service for practically a century up until 1970 when it combined with other railroads. The original Union Pacific, riddled with corruption and many other financial misdeeds, including the wholesale bribery of public officials, went broke within 10 years.
The story of the plane is much more stark. By the opening of the twentieth century, the major countries of Europe and America were desperately at work trying to invent a flying device. The first country to do so would have a substantial military and commercial advantage.
In fact, leading American politicians of the day, such as Teddy Roosevelt, President William McKinley, and others argued that building an airplane was a nationwide emergency. There was no time at all, they argued, to wait for personal industry to do the job. The federal government required to pick the very best aeronautics expert and give him the money he needed.
That professional was Samuel Langley, the president of the distinguished Smithsonian Institution and holder of honorary degrees from Harvard, Yale, Oxford, and Cambridge. Federal officials offered Langley funds for two trial flights. The huge engine on the airplane would then propel it through air for several minutes.
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source
Burt Folsom, historian and professor at Hillsdale College, answers those concerns by drawing on the interesting history of the race to construct America’s aircrafts and railroads.
Congress for that reason offered huge federal aid to build the Union Pacific, the Central Pacific, and later the Northern Pacific Railroads. The Union Pacific was paid by the government for each mile of roadway it built. It was in the railroad’s interest not to construct the road directly. To make a revenue, he had to construct his Great Northern Railroad straight and sturdy.
