The Hoover Dam is undeniably one of the most incredible engineering and construction projects every built. The project was paid for by the government, so it presents me with a philosophical challenge: As a general rule I prefer that the government do less, not more. In most cases governments are inefficient and wasteful, so construction projects are best left to be financed and built by private enterprise, so that the risk is taken by private individuals, not by the taxpayer. However, it is unlikely that the Hoover Dam would have been built without government involvement, and there is little doubt that the Hoover Dam is a great success. It provides power to three states, and much of the development in Las Vegas and California would not exist without it.
So, is government involvement good or bad, in the case of Hoover Dam?
One could argue that government involvement was essential in the case of the Hoover Dam, for many reasons.
First, only the government could negotiate the water rights necessary before the project could start. The states of Arizona, California, Colorado, Nevada, New Mexico, Utah, and Wyoming all use water from the Colorado River, so before a dam could be built to divert the water, an agreement was necessary. In January 1922, Secretary of Commerce Herbert Hoover met with the those state governors and negotiated the Colorado River Compact, which split the river basin into upper and lower halves with the states within each region deciding how the water would be divided. It’s doubtful that private enterprise could have negotiated that agreement.
Second, it’s unknown whether or not private enterprise would have taken the financing risk for construction, or even if it was possible for private enterprise to raise the necessary financing. The construction cost was $49 million, which in current dollars adjusted for inflation would be approximately $750 million. That’s a big risk for private enterprise to take.
However, one could certainly argue to opposite.
If a private company was to go to the six states and offer compensation and a share of the profits, I see no reason why a deal couldn’t have been reached.
As for financing, $750 million is a lot of money, but if you travel half an hour from Hoover Dam to Las Vegas, you will see the Wynn Las Vegas hotel and casino complex that cost $2.7 billion to build. I don’t believe private enterprise had any trouble obtaining the financing, and for almost four times the amount required to build the Hoover Dam.
It should also be noted that, while the government owns the Hoover Dam, it was built by private companies. Six Companies, Inc., was a joint venture of six companies that built the Hoover Dam (apparently under budget, and two years early).
So what’s my conclusion? Can large public works only be constructed by the government?
In my opinion, private enterprise can undertake large building projects. The Hoover Dam may therefore not just be an example of government building, but in fact is more properly an example of private know-how, and good old fashioned capitalism.
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