Tuesday afternoon, as I was reading Barack Obama’s Georgetown University speech on “climate change,” it occurred to me that the biggest and perhaps most consequential difference between the government and the private sector is how each reacts when reality doesn’t behave as expected.
The public sector does not have a monopoly on people who become irrationally wedded to ideas and programs which have become outmoded, obsolete, redundant, or worthless. The difference is what happens to such people — and in some cases, their firms — in the private sector when they stubbornly stick to their guns.
At a private firm, if a new product or idea loses — or is on track to lose — serious amounts of money, or if a research project is going nowhere, it gets killed (see: the Ford Edsel, New Coke, Apple Newton). Those who fall in love with these flame-outs and blindly defend them even when the handwriting is on the wall get fired. If a bad product or idea isn’t terminated quickly enough, it has the potential to jeopardize entire companies, even large ones (see JCPenney’s three-tier pricing plan and HP’s 2011 Touchpad debacle).
But within government?
If a new idea or product is failing or initially seems destined to fail, bureaucrats, their corporate beneficiaries, and their cronies work to get them underwritten or subsidized. The fact that the government is even involved likely indicates that the private sector knows better than to touch it without putting taxpayers on the hook. This explains why the Obama administration has had losers like Solyndra, A123 Battery, Beacon Power, and so many others in its energy “loan” portfolio.
When companies continue to flounder, governments usually either institutionalize their failures or double down on them.
Hopeless passenger-rail romantics and then-powerful rail unions couldn’t bear to see the end of nationwide train travel, so they convinced Congress to have the federal government take over the entire enterprise in the early 1970s. What followed were four decades of annual Amtrak losses averaging over $800 million, and benefiting far less than 0.1 percent of daily travelers nationwide. Recent narrower losses should — but won’t — bring on discussions of selling off Amtrak’s profitable routes to private firms and abandoning the losers once and for all.
After a $5,000 price reduction to about $28,500, the Chevy Volt, produced by General Motors — an entity which is still under de facto government control — still sells only about 1,600 units per month. The vehicle’s fully loaded cost to produce is about $75,000. Yet don’t expect GM to pull the plug, figuratively or literally, on their financially disastrous electric car experiment any time soon. Too much false pride is on the line.
Private companies which kill products or ideas administer the pain quickly and move on. If government ever tries to end a program or operation — “ever” is the operative word, as Ronald Reagan frequently noted: ”The nearest thing to eternal life we will ever see on this earth is a government program” — they go about it slowly, in hopes that outraged politicians or constituents will come to their rescue. If total termination ever occurs, they call it “a learning experience,” which of course was carried out with other people’s money, and rarely includes any learning.
They also frequently replicate their mistakes, which is how Uncle Sam ends up having “47 separate job training programs run by nine different agencies” costing $18 billion per year, and why 173 out of 209 science, technology, engineering, and math programs overlap with at least one other program.
This brings us to President Obama and “climate change.”