February 16, 2004
John Edwards & The National Venture Capital Fund
Posted by Gordon Smith

For the most part, I steer clear of politics, not only on this blog, but in my less-public life. I used to be a Republican booster. Now, I plug my nose and vote for Republicans ... or I abstain. No level of disgust could force me to vote for a Democrat ... for anything. While I am sympathetic with Libertarian ideals, I usually don't like Libertarians very much. They scare me. So does everyone who wants power, no matter what the professed ideology. In my view, ideology is usually a cover for the desire to boss other people around, and I don't have much time for people who have that as a life goal.

Despite my reluctance to wade into a discussion of the Democratic presidential race, I feel obligated to say something about John Edwards' proposal for a national venture capital program, which he has been touting in Wisconsin this past week.

Before I do that, however, I should say that I like John Edwards. He seems like a decent and sincere person. He appears to be bright, and I like his story ("A proud product of public schools, John became the first person in his family to attend college."). I also like the fact that he has not spent most of his adult life pursuing elected office. Indeed, if it weren't for the whole "Democrat" thing, I would probably vote for him.

That said, the national venture capital fund (estimated cost =$3 billion) is a supremely stupid idea. His website says this about it: "Edwards will enact the Rural Economic Advancement Challenge, or REACH fund, to bring venture capital and management expertise to entrepreneurs and small businesses in small towns and areas that are losing jobs today." This is an idea that might play well in Wisconsin, a deeply "progressive" state, but I hope that it doesn't catch on with any viable candidate (read: John Kerry).

What a leap of faith (with a dash of condescension) to assume that rural America contains a store of eager entrepreneurs just waiting for government funding and big-city business consultants. An even bigger leap of faith is Edwards' assumption that people who are not investing their own money will select winning business ideas. The history of government-funded venture investing is a history of waste for the simple and obvious reason that people investing tax dollars make very bad choices.

Of course, some governments have experimented with public-private partnerships, and those offer some advantages over purely public programs. The Edwards proposal seems pretty short on details -- at least my search of the internet turned up very little -- so I am not sure how he plans to administer the program. The lack of detail suggests that this is more about "showing love" than anything else, but as far as I know, no one has made a compelling case that rural America suffers from a capital formation problem. Until I see that, I will follow the direction pointed by common sense and experience: capital finds good business ideas.

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