Tuesday, March 16, 2010

Government Funding into private Enterprises?

Well, I read this article by the Dilbert comic guy and I think it is interesting. He thinks that the usual way of economics, entrepreneur opens business and then hires people he needs, can be reversed. There would be a website where unemployed would leave their resume and what they are good at and then people with necessary skills would be grouped to open a business. Of course, initial funding would come from the government, because it gets the best return if people are employed (tax money).

The problem here is that money allocation and the forming of businesses is left to GOVERNMENT. While they, as he shows in the post, leave the business alone after the initial funding, they seem to be responsible for the type of business and the allocation of funds.

And this is the major problem, because government is bad at “just” funding and then keeping out of it. The problem here is perception. Government would “perceive” a certain problem or a certain opportunity and throw money at it (remember education!). However, it is not their money, but someone else's money, so they will not tightly control who is actually a good investment.

If his perception of government is a one-dictator Barack or a Bernanke, then he might have a point. However, usually politics and government consists of hundreds of bickering politicians that all have no stake in the outcome, only in the signing of bills (the appearance to do something).

This is why I am very skeptical that government is a good investor and can pick the right winners. Already today, government picks winners with every earmark and private-public cooperation. However, already there corruption and stupidity in contract law reigns. Often government doesn’t know how to decide if an investment is good. Government workers are not trained in ideas like “return of investment” and discounting money, so they won’t make good investors.

No comments: