Fur Business
In 1808, entrepreneur John Jacob Astor founded the American Fur Company where he employed hundreds of workers and sold furs and hats all over the world. The United States government wanted to profit from the fur trade as well, so they subsidized their own company and put Thomas McKenny in charge. While Astor’s private company was making great profits, McKenny’s government-subsidized company was losing money every year and was shut down in 1822.
The Telegraph
In the 1840s, Samuel Morse invented the telegraph that would change the way the world communicated. “In the national interest” Morse agreed to allow the United States government to own and operated the telegraph business. By 1845, the business was losing money every month, so congress turned it back over to private enterprise. Entrepreneurs convinced the American press, bankers, stockbrokers, and insurance companies of the many uses for the telegraph and made it extremely profitable. Fifteen years later, Ezra Cornell founded Western Union and cut the cost of construction and rates for service to 1/10 of the original rates first established by the U.S. government.
Steamship Business
In the 1840s, the United States government funded Edward Collins to regularly send passenger steamships across the Atlantic ocean to England. Collins, being a politician, didn’t see the need to improve or provide safe travel for this government-subsidized company. Tragically, two out of four ships sank. In the meantime, Cornelius Vanderbilt founded his own steamship company where he cut the cost of travel, increased his number of passengers, and grew a successful business. He understood that he needed to serve his customers or he would lose his company.
Subsidies Have Historically Failed
Subsidized government companies fail because there are no incentives for bureaucrats and all they have to lose is taxpayer money, not their own. On the contrary, entrepreneurs will lose their shareholders’ or their own money if their business fails and only make a profit if their business grows. Therefore, they are motivated to improve their service, gain new customers, and expand to new cities. This is why private citizens, and now the United States government, value a free market over government control of the economy.
