In the Aftermath of the Foreclosure Crisis, Public Funds can put Business back on Rails?

Public funds can help the business to go back on track

In the aftermath of the foreclosures crisis, after absorption of the initial shock the question is arising if public finds can put business back on rails and thus help the common man?

Josh Lerner in a series of writings published by Princeton University Press tries to answer these questions. He said, “To be sure, government has a role in stimulating a vibrant entrepreneurial sector.

But at the same time, it is easy for the government to overstep its bounds and squander its investments. Only by designing a program that reflects an understanding of, and willingness to learn from, the entrepreneurial process can governments be effective.”

Lerner has the authority to speak on public and private economic issues, having his theoretical knowledge backed by field experience. A Jacob H. Schiff professor at Harvard Business School he has engaged in consulting jobs for governments across the world.

Lerner opines that “far more often than not, public programs have been failures.” He was referring to venture capital and entrepreneurship. But even then he thinks that many of the defects could have rectified by resorting to simple measures.

Referring to the Small Business Investment Company plan that had offered federal loans as well as tax incentives nearly half a century ago he said that the criticism levelled against it was that the status of the recipients was not properly scrutinized. Basically the programme is not doing as much it could have done because of the bureaucracy scaring off the best of those venturing forth with their capital.

Lerner said that during the start of this decade a grant was offered via the Small Business Innovation Research Program. It was an effort on the part of the government to help the high tech companies that were relatively modest in size. This grant was taken away from Intronn – a firm doing research in remedial steps for curing cystic fibrosis. The reason for this was that a stake from Intronn had been bought by a venture capital company that employed over 500 persons. This withdrawal led to Intronn abandoning the research.

Lerner elucidated that the problem of public sector assistance is global. He cited the instance of what happened in Norway couple of decades ago. It wasted a good part of its wealth coming from oil on “ill-conceived new businesses begun by relatives of parliamentarians and bureaucrats.”