"Too Big to Fail"
Jan. 17th, 2009 @ 04:07 am
I keep hearing that the government needs to bail out certain companies (AIG, Bank of America, etc.) because they are "too big to fail." How does one guage the threshold of when a company reaches the point where the government should step in and keep it afloat because we as a society simply cannot afford to let said company fail? Do we not want it to fail because it means a huge loss of jobs, or because it is so intertwined with other companies, as well as whole markets, that its failure would infect, if not destroy, a large number of of businesses in the near term? Or some combination of both?
The way I see it, it is not the responsibility of government to save (e.g. bail out) companies that are "too big to fail." That's not a legitimate function of government, no matter how loud the whining, crying, and complaining may be of those who would be negatively affected by the big company's failure. But it is a legitimate function of government to make sure no company gets to be so massive that it is "too big to fail."
In my opinion, a company that reaches the critical mass of being "too big to (be allowed to) fail" is an impermissible monopoly and should have been broken apart by the government pursuant to our antitrust laws.
I do like the implicit concession that corporations are more important than the lives of individual people (and they are). Nobody is saying the government should step in because a person is "too young to die from X" where X is a treatable disease. We'll spend $700 billion of taxpayer dollars to keep certain financial services businesses afloat, but we wouldn't spend a measley one million of taxpayer dollars to give a 18 year old a heart transplant (assuming the status quo, i.e. no national healthcare system is in place).
We shouldn't be doing either. Corporations that fail should declare bankruptcy, whether voluntarily or involuntarily, and while I believe we should legalize drugs and tax them in order to pay for an all-inclusive national healthcare system, until we do so, we should not be using taxpayer dollars to pay for one-off medical treatments for people who need them (and we don't). But we are bailing out dying companies that could not succeed in the market for whatever reason (incompetence, corruption) because those companies grew to be so large that letting them fail will cause a lot of dumb investors who are not properly diversified to lose their nest eggs.
Which companies are to big to fail? WalMart? IBM? Microsoft? Apple? If so, the government should step in and split them up into smaller companies - they are illegal, impermissible monopolies that are anticompetive but even more importantly, their existence is a financial danger because it amounts to having all our eggs in one basket - a basket "too big to fail."
I don't believe any company is too big to be allowed to fail, but I am unemotional about it and I stay out of the stock market. So I don't care if the downfall of company X causes the DOW to drop 30% and 400,000 lost jobs overnight. Tough shit. Of course, big monopolistic companies that large don't fail because of tough competition. They fail due to the corruption and/or gross negligence of management (usually both - on that level you don't get one without the other). So not only are we deeming certain companies too important to let them fall apart, but we're looking away to ignore the fact that the only reason these companies are falling apart is due to the high levels of corruption and incompetence of those running them.
And we're telling them that it's okay - you can steal from the company, you can fuck the consumer, you can be irresponsible - because your company is so big that we can't handle it failing so we'll use taxpayer money to protect it. So steal from it, pocket what you want, run it into the ground... when things get really bad the government will come in and bail out the company.
Why are so many people so stupid?
|Date:||January 21st, 2009 07:15 pm (UTC)|| |
I completely agree with you on this, except for one thing. I think the only thing that keeps a company alive is the fact that people keep buying there services. This is in the Case of Wallmart etc.... whom everyone seems to hate.
If a company cannot turn a profit for too long, they die, that is the nature of things as they should be. The reason all these automakers etc are failing is for exactly this reason. Why should I buy an American car when I know my Honda is good for 350,000 miles, and there american counterparts last for about 175,000? Why do I have to pay the huge expense for GM's health care plan for their workers when I can spend just as much on an import and get better seats, valves, rockers, camshaft, etc...?
Its pretty simple economics. Make a good product cheaper than the competitor and turn a higher profit. If you went to Pizza Hut twice and both times there was a hair in your pizza would you go back?
on a side note: I went to Rennas Pizza and they had canned mushrooms on their pizza, thats the last time I go to a SMALL chain restaurant.
If you hate Walmart, than dont frickin go, I go to Target if I can because they have slightly more American Made products, which is almost non-existant thanks to all the FU":ING Government mandated High Taxes on big buisness. If its cheaper, to make somthing in America, buisnesses would do it, but if they are taxed to death, it doesnt help. I would love to see a total stop to any imports from Mexico until the Mexican government does somthing about there citizens invading our country.
|Date:||January 21st, 2009 11:15 pm (UTC)|| |
"I think the only thing that keeps a company alive is the fact that people keep buying there services."
You think? You're not sure of that? What else would keep a company alive? But that doesn't mean a company has the innate right to become so large as to either hinder fair competition from its competitors, or endanger the nation's economy by threatening to fail and go bankrupt. No company should be allowed to get so large. Teddy Roosevelt would adamantly agree. The Sherman Antitrust Act is not a new law, after all.
Tarrifs and protectionism is what destroyed the US auto makers. Instead of spending their money on R&D and making better products, they spent their money (1) paying off politicians to pass laws to protect their inferior products from superior foreign products - tarrifs, limited imports of foreign cars, no penalties for poor MPG and no tax breaks for good MPG vehicles; and (2) advertising their poorer quality products in such a way as to get people to overlook the benefits of the superior foreign products. Americans want gas-guzzling SUVs because those are the vehicles the TV commercials claim will get us all laid by hot women, or loved by rich, handsome men.
Had the US automakers instead decided to take the money they wasted advertising inferior products with sex and bribing politicians for beneficial laws and spend it on research and development of more efficient vehicles, I have no doubt that the U.S. automakers would not only have a product that could compete with the foreign cars, but that would be the best in the world. America can always make the best, most innovative products... we've just gotten lazy about it because it's easier to make the same old shit in new colors or with an iPod holder, and get the Government to protect your business model and overall profits.
I don't think we disagree too much on this issue... I just think you like so many are too eager to not blame ourselves. The Bush Cult instilled in the minds of many people that it's unpatriotic and even unamerican to "blame America first." But sometimes that's exactly what is called for (you know, when it's our own fault). Our economic mess is entirely our fault, and not the fault of foreigners, whether they be Mexican or Japanese.