It was recently reported that the government sponsored ‘Breathe’ residential development project, which aimed to provide an example of how the Christchurch central city should be rebuilt post-quake, has been abandoned. The project started as a design competition with the likes of Kevin McLeod (Grand Designs TV fame) being one of the judges. A winning consortium was announced by the CCDU with great fanfare in 2013, but the developers have failed to obtain the backing of financiers, and after 2 years of waiting the government has finally called it quits. Rival bidders for the project are naturally feeling aggrieved, given the time and money they put into their proposal; only to lose to a bid that was presumably not commercially viable.
This provides a perfect example of the folly of mixing business with government, and how a government that tries to ‘pick winners’ and back commercial projects leads to inefficiency and distortions. In the real commercial world without government interference, price signals provide a discipline that must be adhered to, and you have real competition at every step of the process. For example:
At every step there are price signals that tell the market what is and isn’t viable. Government by its nature however is immune to these price signals. Private developers can fail of course too, but they can't do it at taxpayer expense, and they're less likely to spend a lot of money up front on somethings that not commercially viable.