> Does this capital being private ensure "this time will be different"?
South America didn't have a mix of domestic and foreign investors deploying massive quantities of private money into capital assets in the 60s and 70s. They had governments borrowing to fund their citizens' consumption. Massive difference on multiple levels.
Moreover, if a government is funneling taxpayer money into the projects of a few citizens, that is a clear red flag of corruption. Whereas if private entities are deciding to invest their own capital into infrastructure, it's unclear what the complaint even is
> They had governments borrowing to fund their citizens' consumption.
The problem here being that it was money spent that was never earned back, and money that eventually had to be paid back, right?
This can also happen with private capital. 2008 was a bust caused by private banks, for example. AI hasn't proven to be profitable yet [1], and I'm not sure it'll makes a difference, for the success of projects like this, wether the money is coming from government or not.
In fact, if the 2008 bank bail-out, auto industry bail-out, the Silicon Valley bank prop-up, and other such actions by the US government are considered [2], if this turns out to be a bubble it will be taxpayers who end up fronting the bill.
> problem here being that it was money spent that was never earned back, and money that eventually had to be paid back, right?
In part. It was money borrowed by the state. That means when it can't be paid back, it's automatically a systemic issue. And it was money borrowed to fund consumption. There was no good reason to ever expect it to be paid back because it wasn't funding productive activity.
> if this turns out to be a bubble it will be taxpayers who end up fronting the bill
Very possibly, particularly if part of the package are e.g. federally-subsidised loans. Before that, however, private parties will almost certainly lose tens if not hundreds of billions of dollars. That cushion, together with those parties being spread between domestic and foreign sources, is what makes this less risky to the United States than similar relative-magnitude projects in South America. (Plus the fact that this is a capital asset versus consumption.)
>> In fact, if the 2008 bank bail-out, auto industry bail-out, the Silicon Valley bank prop-up, and other such actions by the US government are considered [2], if this turns out to be a bubble it will be taxpayers who end up fronting the bill.
Haven’t all three examples you note (2008 crash, auto bailout, and SV prop up) resulted in a net return/gain for the taxpayer?
$500b is not business as usual for any corporation. Centralized planning doesn't fail because of government bureaucrats, it fails because there is too much spending to be decided on by too few people.
Zuckerberg lost $30bn or more trying to create a VR amusement park. Scale that up to $500bn and see how much waste and dead-weight losses are created.
1. This isn't a single corp, it is multiple corps. For a sense of scale, MSFT alone spent ~$55B in Capex last year. Check out this[1] for a sense of how much different industries spend each year. Note that this will cross several industries including Power, Telecom, Software, electrical equip, etc.
2. There is no commitment to spend in a single year
3. There is no actual contractual commit here, this is a press release (i.e. Marketing)
4. There is not actually a $500B pile of gold being spent. This is more of a "this is how big we think this industry will be and how much we may spend to get exposure to that industry"
The VR investment was a calculated risk that may or may not pay off in a longer time horizon. Meta is the leading VR company and well-positioned to benefit the most from whatever comes from the industry in the future.
The demand for more AI compute is already here and is less risky of an investment.
"Centralized planning" was effective under Bell Labs
Also I am not an economist but the VR failure was not dead-weight loss. If you invested in something downstream of that you profited off of Zuck's venture. Dead-weight loss is more of a gov-driven malinvestment
