No company should be "too big to fail"
November 21st 2008 05:56
The debate rages as to whether or not the "big three" American auto makers should get a bailout. A 700B dollar "rescue plan" was already thrown at the financial industry. First question might be, if 25B can save the big three, just how deep in the crapper was the financial sector? But that's not the point I'm addressing. In my view, any company deemed to be "too big to fail" is too big to exist. Any corporation falling into that category needs to be either broken up or nationalized.
If you haven't heard the term, "too big to fail" has been used to describe companies whose failure would so damage the economy (or the reasoning goes) that to allow them to fail is not an option. The billions recently poured into the AIG hole are a good example. The ramifications of failure are made out to be much worse than any possible outcome arising from a bailout.
Besides being patently unfair - what about the companies that are not in trouble? Where's their benefit? And what about those that will fail by the thousands in the coming months, but aren't considered big enough to care about? The whole idea of bailout rubs most people the wrong way, to say the least. And it is worth noting how differently the bailouts of a predatory (and quite likely criminal) financial services industry and a badly mismanaged and short-sighted auto group are being looked at.
Of course the conservobots want to blame labor. They say the reason Detroit auto-makers are in such dire straits is because of the high cost of labor. On the surface, it seems true. Car building is still a family-wage job, a dying thing in today's America. In truth, the biggest cost of labor that pushes up the cost of car production is health care. That's another reason I can't understand how any big corporations would be opposed to universal single-payer health care.
The biggest threats against American auto-makers are "free trade" policies, lack of foresight, and the absence of government leadership when it comes to adapting to present/future needs. The last thing we need to do as Americans is to vilify a portion of the working class that still is able to demand a living wage. If only that were more widespread. Here's some logic to consider - if more Americans were paid living wages, Detroit could be expected to sell more cars, eh?
But back to my main point - if a company whose failure represents a threat to the entire economy exists, that in itself is a threat. Teddy Roosevelt broke up monopolies, as did F.D.R. The most recent big example is "Ma Bell," which was broken down into regional phone companies. Perhaps the industry most in need currently is big oil. Screaming to be broken up there!
Or even better, (in my opinion) nationalized. We are all aware of how important energy supply is to our economy and our national security. We are willing to spend billions upon billions to defend oil routes and "secure" oil producing countries. Why are we so willing to give all that to big oil? If we accept that energy is of national importance, why do we not have a unified national energy policy? One that instead of heaping billions of profit on CEO's and major stockholders invested in alternative energy? I know many will argue against nationalization. But how can you argue against at least a breakup?
Whatever solution we ultimately reach, big companies that get into big trouble and then want big bailouts need to be reigned in. It's no way to run a company, and it's no way to run an economy!
If you haven't heard the term, "too big to fail" has been used to describe companies whose failure would so damage the economy (or the reasoning goes) that to allow them to fail is not an option. The billions recently poured into the AIG hole are a good example. The ramifications of failure are made out to be much worse than any possible outcome arising from a bailout.
Besides being patently unfair - what about the companies that are not in trouble? Where's their benefit? And what about those that will fail by the thousands in the coming months, but aren't considered big enough to care about? The whole idea of bailout rubs most people the wrong way, to say the least. And it is worth noting how differently the bailouts of a predatory (and quite likely criminal) financial services industry and a badly mismanaged and short-sighted auto group are being looked at.
Of course the conservobots want to blame labor. They say the reason Detroit auto-makers are in such dire straits is because of the high cost of labor. On the surface, it seems true. Car building is still a family-wage job, a dying thing in today's America. In truth, the biggest cost of labor that pushes up the cost of car production is health care. That's another reason I can't understand how any big corporations would be opposed to universal single-payer health care.
The biggest threats against American auto-makers are "free trade" policies, lack of foresight, and the absence of government leadership when it comes to adapting to present/future needs. The last thing we need to do as Americans is to vilify a portion of the working class that still is able to demand a living wage. If only that were more widespread. Here's some logic to consider - if more Americans were paid living wages, Detroit could be expected to sell more cars, eh?
But back to my main point - if a company whose failure represents a threat to the entire economy exists, that in itself is a threat. Teddy Roosevelt broke up monopolies, as did F.D.R. The most recent big example is "Ma Bell," which was broken down into regional phone companies. Perhaps the industry most in need currently is big oil. Screaming to be broken up there!
Or even better, (in my opinion) nationalized. We are all aware of how important energy supply is to our economy and our national security. We are willing to spend billions upon billions to defend oil routes and "secure" oil producing countries. Why are we so willing to give all that to big oil? If we accept that energy is of national importance, why do we not have a unified national energy policy? One that instead of heaping billions of profit on CEO's and major stockholders invested in alternative energy? I know many will argue against nationalization. But how can you argue against at least a breakup?
Whatever solution we ultimately reach, big companies that get into big trouble and then want big bailouts need to be reigned in. It's no way to run a company, and it's no way to run an economy!
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Comment by mistersmith
I am thinking particularly about a documentary I saw about Wal-Mart: how badly it treated its employees (while making massive profits) and how it put smaller stores out of business, got a monopoly and then controlled people's lives. It was pretty sad.
I agree that companies should not be allowed to get too big. Goverments are short-sighted and economists are forever arguing for allowing them to make huge profits because they keep the fiscal wheels turning. But obviously, as you point out, if their failure results in catastrophe they have gotten too big
Comment by Janet Collins
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This happens in Australia too.But surely it must come down to the ridiculous amount senior executives are paid.
Monopolies are bad. But so is the so called competition policies that shift jobs offshore. It's happened in the US and its happened in Australia too