Examples of long time-scale production by private companies

[tonyfernandez]

I’m debating an annoying pseudo-libertarian on another forum who’s claiming that we need government to invest in big projects because private companies can’t sustain a loss for such a long time period. Any good examples to the contrary? I’ve already thought of the early American railroads and the Transcontinental Railroad and the New York Subway system, but do you have any other examples?

[Gero]

Consider bonds. You loan money and can be repaid in a year, 5 years, or 25 years. The fact people loan money without expectation of repayment until the future is evidence of the ability and willingness of people to finance projects short, medium, and long term.

[filc]

@Tony Fernandez

private companies can’t sustain a loss for such a long time period.

I don’t understand the argument? So we should force people into investing into shit they don’t want?

@Tony Fernandez

private companies can’t sustain a loss for such a long time period.

It’s not.. that… hard…

.

The whole, “The Private market just doesn’t invest enough” is such a retarded argument. What your friend has to ask is, does society want to front the bill to pay for a multi-billion dollar bridge? When they, all along, have been getting along just fine without it? Do the wants, outweigh the costs? It always comes back down to economic calculation.

[Jack_Roberts]

In a lot of countries what would be considered to be large infrasturcture projects are monopolised by the state.

But there are many examples of private companies investing in what could be considered large infrastructure projects. Channel Tunnel being one example:

The Channel Tunnel, Thirty-two miles in length, it stretches from
Cheriton, Kent in England to the town of Sangatte in the Nord
Pas-de-Calais region of France. It is the second-longest rail tunnel
in the world, the longest being the Seikan Tunnel in Japan. It is
operated by Eurotunnel plc. The average depth is 45 m (150 ft)
underneath the seabed. It opened for business in late 1994, offering
two principal services: a shuttle run for vehicles, and Eurostar
passenger service linking London with Paris and Brussels.

In 2004, 7,276,675 passengers traveled through the tunnel on Eurostar
while in the same year Eurotunnel carried 2,101,323 cars, 1,281,207
trucks, and 63,467 coaches on its shuttle trains.

Rail freight carried through the Channel Tunnel increased by 8% to
1,889,175 tons in 2004.

A journey through the tunnel lasts about 20 minutes.

At completion, it was estimated that the whole project cost around £10 billion.

The American Society of Civil Engineers has declared the tunnel to be
one of the Seven Wonders of the Modern World.

In 1984 the idea was proposed for a privately-funded link and a
request for bid submissions was given. Of the four serious submissions
received, the one most closely resembling the 1973 plan was chosen,
and announced on 20 January 1986. The Fixed Link Treaty was signed by
the two governments in Canterbury, Kent on 12 February 1986 and ratified in 1987.

The winning bidder, CTG/FM, was a private consortium of 15 British and
French construction companies and banks. It quickly reformed itself as
two holding companies, Eurotunnel PLC and Eurotunnel SA, which were
given the job of raising finance, and an umbrella holding company, the
Eurotunnel Group. The company was led by two co-chairmen; Lord Pennock
on the British side and Andre Banard on the French

[GooPC]

Prior to central banking and rampant inflation, businesses regularly issued long term bonds for their long term production projects:

The threat of inflation led to the extinction of long-term corporate bonds, which were popular in the early twentieth century. Bonds with 100-year terms were not uncommon. Making such commitments is surely difficult to fathom for American investors today, who have grown accustomed to inflation and, indeed, have grown to accept it.

But the investors of the early twentieth century had no such experiences. They were just as accustomed to deflation, which often followed the inflationary booms of the nineteenth century. As an extreme example, the years 2361 and 2862 represent maturity dates for two railroad bonds issued in 1900. However, even as late as 1960, it was still common for corporate bonds to carry maturity dates of twenty to forty years into the future.

The Trouble with NASA | Mises Institute

[EmperorNero]

@Tony Fernandez

I’m debating an annoying pseudo-libertarian on another forum who’s claiming that we need government to invest in big projects because private companies can’t sustain a loss for such a long time period. Any good examples to the contrary? I’ve already thought of the early American railroads and the Transcontinental Railroad and the New York Subway system, but do you have any other examples?

Oil rigs can take 30 years to break even. And pharmaceutical companies engage in projects that last for decades before they see a cent. Most technological gadgets are produced in huge international supply chains that have a lot of capital tied up and might not break even for many years.

His line of thought is wrong because every investment has a present value that can be sold or borrowed against, even if it won’t make any money for decades.

[Azure]

Consider as another example the fine wine industry. The product being made today won’t be ready for sale for up to 30 years.

But honestly, since when has government been the go-to for long term planning? The only government agency that can work on longer timespans than 6 months is NASA, and even their success rate is awful. Remember the Ares program?

[Giant_Joe]

Microprocessor fabrication plants.

http://www.globes.co.il/serveen/globes/docview.asp?did=1000033749

Intel will invest $4.42 billion in Fab 28, of which $3.5 billion is eligible for a 15% grant, amounting to $525 million. The study found that the investment will generate a value of $451.8 million to the economy, net of the grant.

Of course, that grant comes from the fact that governments are actually trying to keep this type of business within their country/state.

[tonyfernandez]

So now the claim is that companies can’t gather enough capital for large projects such as highways and things like that, because the investment is too large and the risk too great for all of that capital, and that any examples have had government assurances. I’ve pointed out commerical real estate, but apparently these are just piecemeal investments. Anyone have any mega-projects that don’t have government involvement that are successful?

[Autolykos]

This happened a while ago, but relevant just the same: The Great Northern Railway (U.S.)

@Wikipedia

The Great Northern was the only privately funded, and successfully built, transcontinental railroad in United States history. No federal land grants were used during its construction, unlike every other transcontinental railroad built. It was one of the few transcontinental railroads to avoid receivership following the Panic of 1893. [Emphasis added.]

[hardway]

Deep sea oil/gas drilling rigs (although oil companies are subsidized by governments, they don’t need to be. There’s plenty of capital in the oil companies) and large scale mining operations.

I think that many more projects would be privately funded if it wasn’t so easy to lobby for tax payer dollars. It’s not that private industry can’t do these things, it’s just that lobbying has a higher return on investment. If you could invest 3-5 million in lobbying and get back 300 - 500 million in grants or interest free, guaranteed loans, you’d have to be trying to make a point, or a terrible business man to do otherwise. Business operates as efficiently as possible in the world it finds itself.