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Show liquidation, operates to direct the flow of capital away from ventures which will not pay out. The decisive question is, "Will it pay?" This stand- ard has behind it the powerful sanction of suc- cess. Its demonstrated efficacy for the direction of private investment has gained for it widespread confidence and acceptance, particularly among the business community. Its success in private investment makes its transfer to the field of public investment easy, though inappropriate. But increa.singly, as the Government has under- taken large investments for public purposes rather than simply to serve private purposes not fulfilled by private capital, the principle of full reimbursement has ceased to be useful or neces- sary. The Government has come to be recog- nized as an a.gency for social and economic action which need not follow the rules of the private capital market in order to obtain the necessary capital or to make investment decisions. In multiple-purpose water resources programs, private and public interests are so intermingled that neither full reimbursement in accordance with the rules of private economy, nor total non- reimbursement in accordance with those of public economy, is appropriate or justifiable. Although the main im.petus, in such developments, comes from the Federal Government, and the basic justi- fication is predicated on the considerations of the general welfare, very significant benefits accrue to private individuals. The costs of providing these should be reimbursed. This is a typically American situation, de- veloped out of a long tradition. While our eco- nomic system is predominantly private, it rests on a foundation of public investment in basic fa- cilities such as roads, communications, schools, and other necessary public works, without which it could not function effectively. The Govern- ment becomes the investor on behalf of the people whenever the public interest becomes so com- pelling as to warrant committing public capital to necessary public undertakings. This was the impetus behind the early building of railroads by the State of Virginia and of Federal subsidy to the transcontinental railroads. At the local level, this has in a number of instances led the private business interests of a city to support public ownership of the electric power system. One re- sult has been to attract private business to the city. The range of possible reimbursement in the field of public economy is between "free" serv- ice, which would tend to promote the maximum, and in some cases wasteful, use of resources, and a price so high as to preclude general use. In the case of public undertakings it is obvious that if users are required to repay all costs, including interest and amortization on the full investment, the resultant price may keep some potential con- sumers from utilizing the facilities. How seri- ous this will be in terms of both private and pub- lic welfare depends on circumstances. Gener- ally, if the good or service is vital to the well-being of the community, full reimbursement may be regarded as detrimental to the general welfare, and reduced as a matter of public policy. Objectives of Reimbursement Policy Present reimbursement policy is for the most part oriented toward isolated, single-purpose functions designed to serve local needs and pri- vate interests. Only recently have such con- cepts as multiple-purpose, basin-wide develop- ment, regional planning, integration of func- tions, and the relation of economic and social needs to program formulation challenged the former approach to water resources development. Urgent needs and physical realities have com- pelled Federal development of resources, even while we deny the necessities and fail to set up the political and administrative organizations needed to make the development fully effective. We justify expenditures under the public inter- est, but maintain that reimbursement should con- form to private business practice. We recognize the efficiency of multiple-purpose development, but resist creation of the institutions needed to apply it. We speak of comprehensive basin planning and development, but act as if the vari- ous functions were separable, thereby failing to realize the full potentialities of development. In the Commission's reappraisal of policy, it seems clear that these contradictions in public 68 |
