Get a Widget for this title
RSS FeedShould the federal government intervene to save big corporations from bankruptcy?
Results so far:
| Yes | 23% | 81 votes | Total: 358 votes | |
| No | 77% | 277 votes |
Yes
Write now
Print
Invite a writer™
Add to FavoritesIn short, the answer to this question should be yes, this does not mean there should not be repercussions for the financial destruction wrought at the hands of Corporate Executives whose careless actions caused the financial collapse of the system, however, the time for repercussions is after the country is stabilized. One of the most significant failures of the great depression in the 1930's and 1940's was the choice to let the financial institutions fail. The second major mistake was to let the currency reserves become dangerously low.
While this may seem counterintuitive, the country needs these institutions to remain functional in order to recover from the recent financial disaster. Once we have recovered, then there should be some strict parameters and guidelines put in place that holds these significantly powerful institutions (and their leadership) accountable for major fallout affecting the entire populace.
Many people believe capitalism is the most successful form of free government the currently exists however, in a free market system money eventually flows to one place. The end result being less than one percent of the population holds more wealth than the other ninety-nine percent combined. Once this happens, the end result is the loss of the middle class with only the rich and the poor.
If we are seriously interested in having history avoid repeating itself, there must be a mechanism of checks and balances that prevents this flow of financial wealth to such a significant few. We have learned from history that no one person should have too much power. That is why we have a government built with checks and balances. We have not learned this yet for wealth. There is no limit to how wealthy a single person (or institution) can become.
This is not to suggest that it should not be allowed to be wealthy however being "wealthy" is not obscenely wealthy, incredibly wealthy, really wealthy, or just plain wealthy. At some point, collecting too much wealth keeps significant portions of currency and commodities from freely circulating. We have seen the economy does not do well without the buying and selling of commodities.
Without a system of checks and balances that impartially protects and insures a significant portion of the middle class is sustained, the system becomes imbalanced preventing reasonable cross sections of the populace from surviving comfortably. Once this reaches crisis proportions, significant portions of the populace will revolt from the discomfort and disparity created. This effectively equates to the overall destruction of society.
The foreshadowing of such a sequence of events is the mass populace being disinterested in salvaging the financial institutions that precipitated the downfall. The public is clearly tired of the rich getting richer at the expense of the dwindling middle class that can no longer remain flexible to the crushing burden of circumstances squeezing it out of existence.
No, now is not the time to allow these institutions to collapse, rather, now is the opportunity to place significant checks and balances in place that insure the wealth is not distributed to an unequally small portion of the populace. Now is the time to insure there remains a broad cross section of classes from poor to lower middle, middle middle, upper middle, lower upper, middle upper and upper upper classes that allow for the same degree of financial diversity reflected in our cultural diversity, and limits on the acquisition of power instilled in our system of government.
We shall not be so foolish to cut off our noses to spite our face, rather, we must correct the problem and salvage our institutions, only we do not return those institutions to those so callous as to let them fall, rather, we return them to people who can manage them with dignity and integrity a republic founded on capitalism deserves. We shall not leave them to the despotism Benjamin Franklin predicted to which this country would degenerate over time.
Learn more about this author, Darrin A Yarbrough.
Click here to send this author comments or questions.
No
Corporatism is a form of government that traditionally has been closely allied with Fascism. Companies are allowed to exist and control markets under the guidance and approval of the State. They are allowed to profit as long as their operations fall in line with the Ideology of the existing power structure. Examples are Nazi Germany and Mussolini's Italy.
Corporate Socialism is a system in which Corporations are "chartered" by the State and aided in their enterprises by tax preferences, subsidies and overall beneficial actions of the State. The Government, while not always fundamentally Socialist, utilizes the corporate structure to satisfy the needs of its people. The Socialist agenda is realized through the workings of the Corporation. The government struggles to ask more in terms of the needs of the people and the Corporations lobby for greater profits and more self determination.
When government intervenes to "bailout" corporations that are approaching or surpassing insolvency, the workings of the market are being dismissed. The market will naturally eliminate less efficient companies and more efficient ones will move in to take their place. This competitive nature of the marketplace assures that the production and distribution of goods in the economy are determined by those who purchase those goods, the consumer. Subsidizing or rescuing corporations that have made enough bad business decisions to jeopardize their credibility in the marketplace, removes this power of choice from the consumer and bestows it on the corporations and the government.
"Moral Hazard" is the term used to describe the effects of repeated bailouts. With the possibility of a government rescue in the back of their minds, firms lose the fear of risk. Instead, they take a cavalier approach which allows them to experience greater return. Other firms must compete in the same climate, and the attitude spreads, creating a higher rate of failures and subsequent bailouts.
Other corporations feel that they should also be compensated. The argument does have some bearing and soon they are also receiving a subsidy or favorable tax treatment. There is no end to this slide into one of the two categories of Socialism mention above. In economics as in most things, precedents are extremely influential in later action.
There is never a valid reason for government intervention to rescue corporations. The "too big to fail" argument, is simply an admittance that government actions and intervention have been going on for a long period. No firm in a real marketplace can ever be too big to fail. True competition would never allow this. Any company that grows, requires sizable profits and sizable profits are always endlessly chased by many until they are no longer sizable. The acknowledgement that a corporation is so big that its demise could endanger the entire economic system, is proof that there has been no market forces in place.
On the other hand, we really don't have any idea if this too big situation is even a valid truth. It may be simply an excuse for maintaining the existing status quo and power structure. Corporatism is not a system of change. It is a system in which "selected" companies are allowed to continue their operations under the auspices of the State. Change would suggest an actual market, not a controlled market. And, it is certainly possible those "experts" who tried to instill the fear of collapse into our hearts, don't really know much more than we do. After all, no matter the circumstances, the future is extremely hard to predict and economists and political leaders have traditionally been some of the worst at foretelling future events.
What is certain, is that the current economic situation was a window of opportunity for great change in our economy. The possibility of a market correction, that while trying, would in the end leave us with a much more streamlined and efficient system; geared to the needs of the consumers and not the power elite, has slipped right through the fingers of our decision makers. Instead, hundreds of billions of our hard earned taxpayer dollars have been spent or promised to prop up a corporate financial system that was the cause of the predicament in the first place. And we were never really asked what we thought about it!
Learn more about this author, Gene Denardo.
Click here to send this author comments or questions.
Difference of opinion? Debate now.
- Political & Economic Theory
- Is capitalism and the free market system best for America?
- Would the United States be better off as the Divided States?
- Supply-side economics: Do lower taxes increase a country's economic health?
- With the nation's economic outlook improving, should the US Congress pass stricter finance regulations?
- Does illegal immigration help or harm the country of destination?
- Is civil disobedience just in a democratic society?
