Wednesday, August 25, 2010

Another Reason That Profits Matter

The famous St. Louis Gateway Arch provides another example of how we cannot trust government to maintain the infrastructure.

Almost 45 years into its reign atop the St. Louis skyline, the 630-foot monument is suffering from growing rust and decay. And nobody knows how extensive.

Corrosion, some of it feared aggressive, and severe discoloration of the stainless steel skin have long been present, according to engineering reports reviewed by the Post-Dispatch.

The documents and interviews with metallurgists indicate that the remedy could be as minor as an "expensive" surface cleaning or as elaborate as a full-blown restoration. One report, completed in 2006, called for a deeper study, for which the National Park Service says it only recently obtained funding.

If the arch were run as a for-profit site, you can be sure it would be in excellent condition. Businesses must maintain their capital because it produces income for them -- government, however, not so much.

Businesspeople know the value of their capital and what it contributes to their operation. Let it deteriorate and profits will fall. Politicians, though, have no such incentive.

They don't receive praise and media attention by budgeting money for routine repairs. Their incentives (getting votes) lead them to prefer funding new and highly-visible public works projects. Those can be claimed to create jobs and they attract TV cameras to ground-breaking ceremonies.

And infrastructure, even as famous as the Gateway Arch, produces no appreciable revenue for government. Politicians raise taxes when they want and the state of the public's capital has no bearing on it. As a result, even the symbol of a great city is allowed to fall into decay.

Profits signal the entrepreneur that what he's doing is working. When there are no profits to be made, no one knows or really cares much. Imagine the condition of your local hospital in a few years if government gets its hands on it.

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