BY ED DRISCOLL SEPTEMBER 29, 2011
And thus, corporatism comes full circle. Under the old definition of corporatism, the government simply got in bed with a seemingly private corporation once it became sufficiently large and/or unions made it sufficiently hidebound and sclerotic, as GE, GM, Chrysler, public utilities, defense contractors, etc. Or it took over a corporation that failed, such as 1971’s Amtrak, formed by Congress to run the nation’s passenger trains, which had been rendered outdated by jet air travel, and Conrail in 1976 to absorb Penn Central and other bankrupt northeast railroads (which eventually went private under the Reagan administration).
The Obama administration now jump starts the process by shoveling ginormous amounts of start-up money (courtesy of you and I) at future businesses they wish to control, such as Solyndra. As Stephen L. Carter, a Yale law professor, writes atBloomberg.com:
That relatively high expected failure rate, together with the fact that the Energy Department’s portfolio of green-loan guarantees stands near $30 billion, has led some observers to argue that the program should be considered as analogous to a venture capital shop. The department, after all, is putting money into lots of startups, knowing that some will fail, but betting that a few will hit it big.Government Making Bets
True, the program deals with loans rather than making investments — but we are speaking here of an analogy, not an identity.
Like the Energy Department program, the venture capitalist makes bets, many of them very high risk, on many companies that otherwise would have trouble raising capital, except perhaps at prohibitive cost.
Yet the analogy fails because the venture capitalist is disciplined in his lending by two forces that government does not face. First, if the venture capitalist makes too many bad bets, he will lose his investors. Government loan guarantee programs, on the other hand, can be refunded by Congress as often as politically convenient, and have been known to grow larger after making bad bets.
“No wonder many Democratic strategists predicted their party’s 2008 landslide win would usher in a generation of political dominance,” James Pethokoukis discussed earlier this month in a column titled, “Solyndra, the logical endpoint of Obamanomics:”