Kai Ryssdal: Congress held the first of what could turn out to be many hearings on the now defunct solar firm Solyndra today. The company declared bankruptcy last week, laid off more than a thousand people. Solyndra’s now being investigated over how it got — and how it used — government-backed loans. At the time, the company was celebrated as the way forward in green technology and in innovation.
Commentator David Frum says Solyndra’s failure tells a different story — about the role of the federal government in private business.
David Frum: So, you’re working in an administration and you discover a company with a genius new green technology. The company promises: with just a little start-up cash, we can produce a new product — and generate hundreds of high-paying new green jobs.
Quit your administration job, join a venture capital firm, and find investors to back your discovery. If you’re right, they and you will all get rich together.
But here’s what not to do: delude yourself that government can play venture capital investor. It just can’t.
The debacle at the Solyndra solar panel company is only the latest example of a problem that dates back to the 1970s and U.S. support for synthetic fuels.
Government can contribute enormously to economic innovation by supporting basic scientific research. Government can support schools and universities to train future innovators. Government can mitigate recessions, suppress inflation, and otherwise keep the macro-economy humming. There’s lots of things government can do. Playing venture capitalist is the thing it cannot do.
A real venture capitalist has a single mission: earn a return. That mission is challenging enough, and venture capitalists often fail.
A government venture capitalist faces multiple and often contradictory missions. Yes, government wants a positive return on its investment. It also wants to generate good jobs. It also wants to help depressed regions. And it wants to do all this on a timeline tied to the election calendar.
If the U.S. government wants to discourage the use of oil, there is one powerful mechanism at hand: tax the stuff. Private actors will respond to the incentive. They will conserve and substitute and innovate all on their own.
But when it comes time for investments in individual firms? Back off and let Mr. Market do the job that he does best.
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