By: Chad Kent
Chad Kent Speaks
By now you’ve certainly read about the Obama Administration’s loan to Solyndra – a solar power company. This particular loan is getting a lot of attention because it appears that the approval process was almost certainly corrupt and political.
But this situation brings up a very important question: why is the government giving loans to private companies in the first place?
In his book Economics in One Lesson, Henry Hazlitt explains exactly why government loans make no sense:
“The whole argument for [government] entering the lending business, in fact, is that it will make loans to people who could not get them from private lenders. This is only another way of saying that the government lenders will take risks with other people’s money (the taxpayers’) that private lenders will not take with their own money.”
Seems simple enough right?
Use Solyndra as an example. If solar power ever really became viable, there is a fortune to be made by being the first company in the industry. So if Solyndra had a solid business plan that gave it even a decent chance to succeed, why wouldn’t private investors want to be a part of that?
Obviously, not enough private investors felt that Solyndra was worth the risk. So the government decided to take our money and risk it on our behalf. As this case demonstrates, when the private individuals aren’t willing to risk their own money on a project there is usually a pretty good reason.
