Like the auto companies today, the railroads of the late nineteenth century received huge subsidies, often in the form of free land adjoining new track. Like GM and Chrysler, most of those subsidized railroads went belly up – not despite the government subsidies, but partly because of them.
That sounds bizarre, but it isn’t. Allegedly friendly governments offer their business patrons a killing embrace – do this or that, and we’ll give you more money or land or trade protection than you could possibly ask. The subsidies are so generous, responsible corporate managers will do pretty much anything to get them. Over time, the corporations acquire more and more skill at pleasing the relevant government officials – and lose the ability to please their customers.