Public Private Partnership – We Need Separation of Business and State

I just watched Maria Bartiromo interview Jennifer Granholm, the Governor of Michigan. The topic of the interview was the great job Granholm was doing revitalizing the Michigan economy by partnering with automotive green energy companies, specifically those producing the batteries to be used in electric vehicles. After much blabber about access to capital, the desperate Granholm said she is just all about doing what works. And therein lies the rub. Just doing what works is another way of saying, the ends justify the means. So are the means objectionable? Well it depends on what you mean by Public Private Partnership. If it means Government taking an equity position in industry, is that objectionable? How about just giving favorable tax treatment to one industry that is not available to others? Sounds benign, after all it creates jobs right? The problem is that it likely can not stay benign, no matter the good intentions of those involved, which I would not take for granted either.

If the Government takes an investment position in an industry, that means taxpayer dollars are being allocated by elected politicians. Aside from the fact that politicians are historically bad stewards of capital, the incentives under which they operate mean that they will have pressure to make decisions based on political calculation rather than economic calculation. And there will be a strong incentive on the part of industry to help get the politician elected who will promote their industry. This means there will either stated or unstated quid pro quo transfers of money for influence. This is unhealthy over the long run for a democracy. If the Government gives favorable tax treatment to one industry but not another, that flies in the face of fundamental fairness. Rules should apply to all equally. These kind of shenanigans are the way the third world operates. Again it is unhealthy for the world’s heretofore leading nation to allow such nonsense to take place.

Bartiromo said at the end of the interview, “I just love the idea of Public Private Partnerships”. Why? Another reason not to take any CNBC people seriously I think. We have Separation of Church and State enshrined in the First Amendment. I think the Framers erred by not also penning something about Separation of Business and State. Combining business and state in this way is something that is done in places like China, Russia and historically in places like Hitler’s Germany and Mussolini’s Italy. It is corrosive to ordered liberty.

Comments are closed.