Why Private Investment Works & Govt. Investment Doesn't
From transportation to energy, and everything in between, should the government invest money in as many promising projects as possible? Or would that actually doom many of those ventures to failure? Burt Folsom, historian and professor at Hillsdale College, answers those questions by drawing on the fascinating history of the race to build America's railroads and airplanes. Donate today to PragerU: http://l.prageru.com/2eB2p0h Do you shop on Amazon? Click https://smile.amazon.com and a percentage of every Amazon purchase will be donated to PragerU. Same great products. Same low price. Shopping made meaningful. VISIT PragerU! http://www.prageru.com You can support PragerU by clicking here: https://www.classy.org/checkout/donation?eid=60079. Free videos are great, but to continue producing high-quality content, contributions--even small ones--are a must! FOLLOW us! Facebook: https://www.facebook.com/prageru Twitter: https://twitter.com/prageru Instagram: https://instagram.com/prageru/ JOIN PragerFORCE! For Students: https://www.prageru.com/student-ambassador-program For Educators: https://www.prageru.com/educators Sponsor a Student: https://www.prageru.com/become-pragerforce-sponsor Script: In 2011, a solar power company called Solyndra declared bankruptcy. A company going bankrupt is not news. But Solyndra was not just any company. Its biggest “investor” was the federal government which had given it $500 million dollars. That was news. But, really, it shouldn’t have been. If history is any guide, it was quite predictable. The government is a very poor investor. And always has been. There are countless examples, but two should serve our purpose here. After the Civil War, American leaders were anxious to bind the country’s North, South, East, and West regions together with transcontinental railroads. Congress therefore gave massive federal aid to build the Union Pacific, the Central Pacific, and later the Northern Pacific Railroads. But all three of these roads had huge financial problems. The Union Pacific, for example, was mired in financial scandal from its inception, went bankrupt several times, and had to rebuild large sections of track thanks to shoddy construction practices. At that same time, James J. Hill, with no federal aid whatsoever, built a railroad from St. Paul to Seattle -- the Great Northern. How was Hill able to do with private funds what the Union Pacific failed to do with a gift of tens of millions of federal dollars? The starting point is incentives. The Union Pacific was paid by the government for each mile of road it built. It was in the railroad’s interest not to build the road straight. The more miles it took the UP to cross Nebraska, for example, the more money it made. Hill, by contrast, used his own capital. To make a profit, he had to build his Great Northern Railroad sturdy and straight. Hill’s company remained in business for almost a hundred years until 1970 when it merged with other railroads. The original Union Pacific, riddled with corruption and numerous other financial misdeeds, including the wholesale bribery of public officials, went broke within ten years. The story of the airplane is even more stark. By the opening of the twentieth century, the major nations of Europe and America were frantically at work trying to invent a flying machine. The first nation to do so would have a huge 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 national emergency. There was no time, they argued, to wait for private industry to get the job done. The government needed to pick the best aeronautics expert and give him the money he needed. That expert was Samuel Langley, the president of the prestigious Smithsonian Institution and holder of honorary degrees from Harvard, Yale, Oxford, and Cambridge. Langley was already an accomplished inventor and he had written a highly praised book Experiments in Aerodynamics. Federal officials gave Langley funds for two trial flights. He immediately set to work. His theory was that his plane needed to be thrust into the air from a houseboat on the Potomac River. The big engine on the plane would then propel it through air for several minutes. When his first attempt failed, and the plane splashed into the river, Langley was not deterred. But when his second flight did no better, Langley and the politicians gave up. If Langley, with the full backing of the government, could not solve the problem, people simply assumed that it could not be solved. Indeed, The New York Times wrote that human flight might take a million years to accomplish. For the complete script, visit https://www.prageru.com/courses/history/why-private-investment-works-govt-investment-doesnt
Comments
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I've got a problem. Oooh, I know how I'll solve it: - another tax cut! No problem that a tax cut won't fix!
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Americans have lost the faith in goverment..... wich demokratic goverment can rule withoth the peoples faith?
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So, that means that the CP Railway in Canada should have been a failure? Yet it succeeded, even though it was funded by a very young Canadian Government.
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i love you
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The weakness of this video is that it focuses exclusively on the American experience, ignoring other countries. Hindsight is 20/20, but it's also tunnel vision. You don't see what America could have been if it's culture had taken a very different path.
For instance, the South Koreans had a lot of success with government meddling in business, most notably with Daewoo and Hyundai, who took money and occasionally orders from the government. These were a product of cooperation between government bureaucrats and businessmen. The South Korean experience suggests that the best approach is the middle path between central planning and free market. -
Cant believe how much we have to spell it out to liberals. Socialism does not work!!!
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Scanning down to see what the socialist proclaim ... |
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I am a liberal but This is a video that needs to be viewed by both sides in order to make wise investments in clean energy.
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I love this argument. I'd also like to point out that even if you want to encourage certain types of businesses, such as renewable energy, etc. (I don't, but whatever), you can do so by promising to reward whoever happens to conquer the problem instead of investing taxpayer money into specific companies that'll probably fail.
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I am confused, the video didn't give me a reason "Why Private Investment Works & Govt. Investment Doesn't," it just gave me 2 examples
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This is why Bernie lost, doing everything with government money is a bad idea, same with giving people money they don't deserve.
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polish coal mines in silesia. under polish government needs hiuuge amount of money from taxpayer to survive, when sold to private germans well... it gets profitable in months.
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and yet the Union Pacific is still standing....
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He omits to mention about Obama's "glorious" role in the `Solindra` case.
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The government has more than made up for its bad investments in companies like Solyndra (that the right loves to hold up as a poster child of inefficient government "picking winners and losers"), with the financial assistance it has given to Elon Musk (who is arguably one of the most forward-thinking people in the world and who is creating an enormous amount of NEW value and wealth through his innovations, and we've only seen the tip of the iceberg.)
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Just to point out that in fact who invented the first plane was Alberto Santos Dumont from Brazil. Americans think that they invented the plane but they didn't.
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What a dishonest neoliberal propaganda. Cherrypicking examples how government investments don't work, while posting the video on the Internet, which was invented and developed by US defense department (yes, government) and while people are watching the same video on computers, which are made possible due to government investments in research of quantum physics almost 100 years ago. Also, until recently, how many communication and other satelites do you think we would have up there if there wasn't any government funded space agency, such as NASA? Really, really dishonest video. Shame I can only downvote once.
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Tremandous experience for everybodies investment
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The Swedish government owns most of the train traffic, and the trains aren't known among Swedes to be on time...
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The government paying per mile is a bad incentive, I agree, but that doesn't mean that all government investment is bad. Why couldn't the government specify the exact route it has to take or something like that? And trying to extrapolate that point into an argument against public health care is insane.
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