After Waltham-based green-tech company A123 declared bankruptcy, critics were quick to pounce on it as another Solyndra-esque publicly-financed boondoggle.
Today, Globe columnist Steven Syre put these types of investments firmly in his sights, warning that governments make lousy venture capitalists (Globe subscription required).
But government decisions to bankroll individual companies aren’t simply dangerous bets that fall far outside the skillset of most elected officials. They are bad policy.
Those officials don’t have any business using public money to pick — and perhaps make — individual winners in any industry. That goes beyond the scope of any reasonable economic development strategy and invites suspicions of corporate cronyism.True, sometimes we need new businesses that no investor in his right mind would back. But that rarely translates into a rationale for public officials to invest in individual companies.
But just yesterday, Globe correspondent Scott Van Voorhis reported on how tax credits and other incentives provided by the quasi-public Life Sciences Center (Globe subscription required) have successfully helped the state lead in generating life sciences jobs.
So how do you balance the government investing in industries without investing in bad companies? Syre suggests that its best when governments make those investments indirectly, and he offered some ways governments can do that:
— Infrastructure: Government routinely builds roads and bridges that make business development — and commerce itself — possible in particular areas. Infrastructure can mean a lot more than pavement, but those kinds of investments create resources that can be broadly utilized.
— Education: Spending money to give people the skills or knowledge to perform jobs — especially work in developing industries — creates important new human resources. Education and training is a no-brainer in any economic development plan.
— Knowledge: General scientific research, often conducted at universities, has developed the knowledge building-blocks that investors and business have used to create new products in all sorts of developing industries. Much of Greater Boston’s booming biotechnology industry depends on academics and their research.
— Creating demand: Sometimes an industry needs a big customer to get off the ground. The Pentagon was an important customer for America’s nascent computer industry many years ago. State officials across the country are creating new competition today by requiring utilities to buy more alternative energy.
What else would you add to the list? And what should governments avoid if they don’t want to find themselves holding the bag after another failed investment? Let me know at email@example.com or on Twitter at @HiveBoston. I’d love to hear your thoughts.