GOVERNMENTS that wish to be seen as hip these days talk a lot about "public- private partnerships," as if these were something new. Yet in a sense, the government is already a partner in virtually every private enterprise in the country. When the state takes through income tax half of a company's profits, and absorbs through writeoffs half of its losses, it becomes in effect a 50-per-cent non-voting shareholder.

But governments use the term public-private partnerships in a more selective sense: for specific capital projects, as chosen by politicians, which either the public or the private sector is unwilling to tackle on its own.

This usually means that private capital will be allowed to participate in what have long been considered public works, such as roads and bridges. But it can also result in public money being spent on what remain essentially private ventures, like oil rigs and hockey arenas. Indeed, the term has become the preferred label in any instance where public and private capital are mixed up together. Where words like subsidy and handout connote inadequacy and dependence, partnership has a sunny, forward-looking feel to it.

The enthusiasm public-private partnerships have stirred up among governments often seems to be inversely related to their success: Hibernia, SkyDome, the Lloydminster heavy-oil upgrader, the fixed link to Prince Edward Island, none of these is normally held up as an example of the wise use of public funds.

Yet still the movement seems to be accelerating. Tight times may have constrained government's desire to put public funds into private ventures, but they have also made it more inviting to use private capital for public works.

The NDP government of British Columbia is looking to make use of private- sector money and management in the construction of schools, bridges, rail lines, even a small port or two. In Ontario, the Liberal party is campaigning to move $3-billion in capital spending into public- private partnerships over the next four years. Nova Scotia, following a trend already established in other provinces, has decided to let a private company build and maintain a stretch of the Trans- Canada Highway, with tolls instead of taxes financing the project.

It's easy to see the appeal of such ideas for nouveaux pauvres governments. Construction costs in the private sector may indeed be less; what interests governments more, however, is the opportunity to reduce borrowing by shifting the burden of raising capital to private or Crown corporations.

This is where a good idea goes bad. The only way such debt may properly be transferred from public into private hands is if the whole of the financial risk of a project is borne by the corporation involved. It borrows the money on its own account, promising to repay creditors out of the revenues generated on the project. If it cannot persuade investors of this likelihood, the project does not get built. If it is built, and the expected demand for the service does not materialize, the corporation is bankrupt, the assets are liquidated and creditors burn their fingers.

More typically, however, the debt in a public-private partnership is guaranteed or even underwritten by the government, even as it is officially moved off-budget - and as the private partner collects the revenues. While public-private partnerships are often said to promise "the best of both worlds," for taxpayers they have come to mean public risk for private profit.

Defenders of the practice point out that it's cheaper: Governments are usually better credit risks than private companies, and can borrow at lower rates. But if that's the case, why doesn't the government underwrite everybody's debts?

Because the lowest price isn't always the right price. The government may be a better risk than private borrowers, but that doesn't mean that every investment it makes is an equally good risk. Individual investors betting their own money, in full awareness of the risks involved, will make better decisions at less risk to the economy than one central authority betting everybody's money. If governments use their borrowing power to reduce the cost of certain projects, they raise the relative cost of capital for every other. The other justification commonly offered for guaranteeing the debts of private investors in this sort of project is, well, it wouldn't get built otherwise. Maybe it wouldn't. Maybe it shouldn't. Public-private partnerships are usually invoked for investments that are said to be "too risky" for private capital to undertake alone. But there is such a thing as too much risk. Public-private partnerships impale themselves on the same logical dilemma as every other industrial subsidy: If the project is economic, it doesn't need the subsidy. If it isn't economic, it shouldn't get it.

The unwillingness of private capital to invest in a project usually means its expected value, measured by the price consumers will pay for it, is not enough to cover its costs, including the profit forgone by investing in this project and not another. If capital is diverted into the project nevertheless, it is only at the price of depriving other projects offering superior returns. On the other hand, if consumers are willing to pay a price that will cover the project's costs, there should be no need for public support.

Public-private partnerships are all right. Just leave the public out of it.