Those who do not learn from history are doomed to repeat it. As one example, today’s progressives have failed to learn a lesson from the railroads of the nineteenth century (railroads were the “green energy” of their day).
Under the Pacific Railway Act of 1862—which was subtitled “An Act to aid in the Construction of a Railroad and Telegraph Line from the Missouri River to the Pacific Ocean, and to secure to the Government the Use of the same for Postal, Military, and Other Purposes”—the federal government was to provide land and low-interest loans to facilitate the construction of railroads from the Missouri River to the Pacific Ocean.
The Pacific Railway Act awarded railroads land for a right-of-way to construct the rail lines, as well as land adjacent to completed lines. The adjacent land was to be sold to settlers as a source of revenue. The act also authorized the federal government to purchase 30-year bonds from the railroads with an interest rate of 6 percent.
Prior to the Pacific Railway Act, the railroads had regarded construction of rail lines in the west as economically unjustifiable. The sparse population and difficult terrain simply made no sense economically. This however, did not fit with the federal government’s plans, and so it responded by essentially bribing the railroads to engage in activities that they would have otherwise avoided.
The railroads had concluded that they could not make money building lines in the west, and so they did what any prudent business would do—they didn’t build. But federal subsidies suddenly made such construction feasible, even though other market conditions—such as an adequate market for profitable operations—had not changed. In other words, federal intervention provided incentives to act in a manner that was previously regarded as irrational.
All of the companies who received federal aid eventually went bankrupt. The small, isolated markets and great distances to travel simply could not support the railroads. In short the railroads had been correct—the market did not justify building in the west.
Today, Obama and his supporters advocate for “green energy” and mock those who question its viability. Even as an increasing number of these “investments” go bankrupt, Obama continues to pour money into them.
The markets spoke in the nineteenth century, and declared that building railroads were not yet economically viable. That was proven when the railroads went bankrupt. The same is happening today with “green energy” companies. Those who fail to learn from history are doomed to repeat it.