Thursday, September 24, 2015

Politicos and Their Private-Public Partnership Panacea

Many politicos maintain that the private-public enterprise model aka private-public partnership (PPP) is a grand solution to particular undertakings. The idea sounds great as proposed by politicos: Private enterprise expertise coupled with taxpayer funds administered by bureaucrats, equals success. Further, the private-public enterprise model is framed by politicos as a rather new concept that should be given a try. Sounds pretty good, huh? (1)

First of all the private-public enterprise model dates back to Prussian State Socialism of the late nineteenth century. Nothing new here. Further, private-public enterprise models have less than a stellar record. Yet the private-public enterprise models do have a better record than pure public enterprise models. But both models are far exceeded by the success of the private enterprise model.

Why does the private-public enterprise model have lukewarm success? One component of “why” was observed in 1922 by Ludwig von Mises. Von Mises observed that the entrepreneur, in a private enterprise model, has free rein. Dealing with risk and uncertainty, and the success or failure thereof, lies directly with the entrepreneur. When state (government) enters the picture as a partner, so does the hindrances of bureaucrats and bureaucracy. Further, the bureaucrat model is a model of no failure (nothing can fail). Hence the bureaucrat deals with risk and uncertainty diametrically opposite to that of the entrepreneur. (2) (3)

In the end, the entrepreneur as well as the bureaucrat are fish-out-of-water in the private-public enterprise model. The entrepreneur is stymied by the bureaucrat model and the bureaucrat is scared to death of the entrepreneur model as failure is not an option.

(1) Public-Private Partnerships, Investopedia

(2) Socialism, an economic and sociological analysis, 1922, Ludwig von Mises, pgs. 256-257

(3) Ibid, pages 214-215.