Government attempting to pick winners again

Same old nonsense here:

To counter this the new corporation will contain a Growth Capital Fund providing mezzanine debt and a UK Innovation Investment Fund that will take equity stakes in digital, life sciences and clean technology companies. The Government has already pledged £150m to the innovation fund.

It\’s entirely possible to construct a theory where the investment market fails and government can then step in and perform better.

It\’s extraordinarily difficult to continue to support that theory after it\’s met the reality of what governments actually do when they try to so intervene.

\”Digital, life sciences, clean technology\”…..you think there aren\’t investment funds falling over themselves at the moment looking for opportunities here?

Further, why does the government think that it is only in these sectors that the equity finance market for SMEs fails? What about wheelbarrows?

Does the market fail with wheelbarrows? Well, if James Dyson is to be believed yes, it did. What about vacuum cleaners? Again, now Sir James Dyson will tell you that it did (although his companies rather show only that it\’s difficult, not an entirely failed market).

But the real problem here is that the analysis, a failed market, doesn\’t lead to the conclusion, that the government should be picking which sectors need the investment. This is back to the government picking winners again and that\’s never been a successful program.

Think through the justification for such investment funds again. What we\’re really saying is that a group of polytechnic lecturers, country solicitors and various assorted bods who have never had a job outside of the Westminster bubble are able and capable of deciding which new technologies, which management teams in charge of such, are going to be world beaters and thus deserve taxpayer support.

It\’s an extremely odd idea, isn\’t it? That those with no knowledge of business, markets, technology or management, are best placed to make decisions on business, markets, technology and management.

Such an odd idea that no good has come from it every other time we\’ve tried it so why would it now?

2 comments on “Government attempting to pick winners again

  1. Your point about the various markets notwithstanding, picking the winners isn’t the problem, its what they do when they realise that they haven’t got a winner.

    Even the best venture funds have a number of failures on their hands. The difference is what happens to the failures. Venture funds admit failure and make rational decisions to cut their losses and move on.

    Politicians faced with a similar problem are less likely to admit failure and do everything they can to make their investment a success, especially if the closure involves job losses around election time. We have plenty examples of this: DeLorean, BL, British Steel mines etc. And to be fair they have picked winners, Rolls Royce being a notable case.

  2. Without the government “picking winners” , we would never have cracked the problem of time travel with the innovative DeLorean DMC-12 whose innovative business model was a spin-off of earlier work on the ground-breaking Morris Marina and Austin Allegro.

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