The Problem with Public-Private Partnerships?

In speaking about the relationship between the government and business, conservatives would say that the government should merely provide a level playing field and otherwise get out of the way. They believe that the government should not try to pick winners and losers because it is incompetent to do so and will produce a misallocation of resources.

Liberals believe in the idea of a public-private partnership in which the government works together with business. Examples of this include Fannie Mae and Freddie Mac, the Affordable Care Act, and the subsidies for green energy. Proponents of this approach believe that in order for the U.S. to compete with countries like China, we need to be more like China.

The problem with this idea is that it often results in a giant mess where both the government and the business end up becoming corrupted by each other. Businesses subject to government largess lobby the government with the money they make, distorting the regulatory structure. The government intervenes further in the business, distorting their decision-making. The government tries to keep the business alive long after the time it should be subject to “creative destruction”.

Public-private partnerships sound good, but the people in government are generally not smart enough to make them work well.

The best approach is for government to maintain an arm’s length distance from business and to avoid micromanaging the economy. The communists tried central planning and it never worked right. Again, freedom produces the best results.

The opinions expressed here are the author’s own and should not be interpreted as the opinions of his employer or an attempt to influence the legislative action.

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