Uncle Sam, Venture Capitalist?

Tom Friedman, previously famous for idiotic predictions about Iraq (something he actually knew something about) has lately concentrated oninternational economy, a subject he doesn't know about. Previously his economic researches have discovered that Erastosthenes was wrong obout that spherical Earth thing.

His latest column suggests that the government should forget trying to prop up losers like GM and get into the venture capital business.

G.M. has become a giant wealth- destruction machine — possibly the biggest in history — and it is time that it and Chrysler were put into bankruptcy so they can truly start over under new management with new labor agreements and new visions. When it comes to helping companies, precious public money should focus on start-ups, not bailouts.

You want to spend $20 billion of taxpayer money creating jobs? Fine. Call up the top 20 venture capital firms in America, which are short of cash today because their partners — university endowments and pension funds — are tapped out, and make them this offer: The U.S. Treasury will give you each up to $1 billion to fund the best venture capital ideas that have come your way. If they go bust, we all lose. If any of them turns out to be the next Microsoft or Intel, taxpayers will give you 20 percent of the investors’ upside and keep 80 percent for themselves

It's hard to overstate just how many levels this is wrong on, but his title, "Start up the Risk Takers" provides a hefty hint. It was the risk takers in big banks who got us here. In no way is the government prepared to do the work of trying to figure out who to bet on in the technology marketplace. It has neither the expertise nor the right incentive structure. Such an enterprise would be a call to every swindler and con man around to take the sucker's money.

Saving GM is a dirty job, but it probably has to be done. Unlike Friedman's proposal, it could save hundreds of thousands of American jobs this year. If we got really, really, lucky, Friedman's idea might create some jobs five, ten or twenty years from now.

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