One view that is typically touted by capitalists is that competition is good. This view was most famously presented by Adam Smith. His view, to oversimplify things a great deal, was that competition between individuals and businesses would result in better and cheaper products. This would be good for everyone. Obviously, the monopolies of the robber baron era showed that unregulated competition turns out to have rather negative effects. However, too much limitation of competition can also have very negative effects as well.
While I am not an economist (which is looking like a better thing each day), one concern I have about the bailout is that it might create some unforseen harms.
One harm worth considering is that bailing out failing companies serves to limit the rise of competing companies. For example, with AIG failing (yet still trying to pay out huge executive bonuses) there would seem to be new openings where AIG had been doing business. This would seem to open the door for new companies (or older companies that are still functional) to move in and take AIG’s business. Since AIG is failing, this would seem to be a good thing-after all, having successful companies filling these allegedly essential niches in the economy would help stabilize the economy. Further, these companies would not be using taxpayer money to get the job done.
While we need companies in key niches to be successful, we should consider whether propping up failing companies is better than allowing other companies to arise or healthier companies to move in.
In the past, capitalist types loved to (mis)use Darwin’s theory to justify their misdeeds. Well, the eco-system metaphor can be trotted out once again. AIG and the other dying companies are like failing species that occupy key niches. We can try to keep them alive; but we must be aware that doing so is very expensive and serves to keep others from moving into those niches.
“In the past, capitalist types loved to (mis)use Darwin’s theory to justify their misdeeds. Well, the eco-system metaphor can be trotted out once again. AIG and the other dying companies are like failing species that occupy key niches. We can try to keep them alive; but we must be aware that doing so is very expensive and serves to keep others from moving into those niches.”
Sounds like the capatalist types are right. Who in this country isn’t a capatalist?
Seriously Dr. Labossiere. Should the government keep Company A afloat with bailout money that makes widgets that don’t work when Company B is barely scraping by and has widgets that work? Bailing out Company A causes the eventual failure of Company B because they cannot compete with a government backed company(A). Then we are still left with nothing but failed widgets brought to you by the government(at least they are politically correct and are OSHA approved). I this does not sound like a fascist state I don’t know what does. Blue Eagles anyone? Wake up people!
All can say is that the entire budget for the Department of Defense for 2009 is less then half what this bailout amounts to. This is foolishness.
I remember you, Mike expressing your anger at the cost of the Iraq War. That cost was approx. 4.5 billion per month and even that cost is deceptive as the inherant cost of maintaining a standing army is included in that. That is, no matter where your troops are, you’re paying them, housing them and equiping them. It does cost more to deploy troops, but the “cost of the war” is not an accurate assessment of actual cost over and above having an army in the first place.
And yet, when Obama spends 1 trillion dollars at the drop of a hat, his acolytes bow in obedience.
This bill gives a doggy treat to all the dogs that just crapped on the rug. The dogs that paced back and forth in front of the door whining get nothing.
Brilliant. And yes, shame on Republicans who agree with this bill. Get the hell out of politics and get a job. Stop screwing up my country.
Let’s not forget that the White House underestimated the damage to the deficit they are piling on our heads.
http://www.usatoday.com/news/washington/2009-03-20-federal-deficit_N.htm?csp=34
This sounds just great for the economy. I’m going out to buy my potato sack clothing today before it’s all gone. People have been duped into paying taxes through incrementalism in the past. small amounts are not noticed. See what happens when the government whacks the people (who actually do the work for everyone else) at the knees with a 10-25% tax increase all at once. That may not be enough to pay for this mess, especially with the tax pool dwindling.
I just read a statistic that said even if you raised the tax rate of all Americans making $250K or more to 100% it would only pay for roughly 25% of this future debt. Even if this stat is wrong, which it probably is off I am sure it is not far off. Doesn’t look good for the working classes.
The White House appointed financial positions are still in denial, of course these are just intellectual elites and not people who actually ran successful businesses…for the majority.
addendum to the above post: I do not consider getting elected running a successful business.
No serious observer can ignore the fact that Obama is as Mit Romney stated: “learning on the fly.”
We elected someone we knew had little experience and had an far-left voting record. The market is not recovering, except for a three day period in which it climbed several hundred points. The media practically went into euphoric seizures when this happened.
Then of course there was the AIG dog and pony show. People were “outraged” at CEOs getting money in fulfillment of contracts. Apparently, we should be able to pich and choose which contracts we honor. Maybe everyone who has a fixed-rate home loan should be forced to pay higher rates when banks decide to break their contracts. “No one should make that much money.” I keep hearing that. What this really means is: “Real people who aren’t in Hollywood shouldn’t make that much. My favorite actor though, should make $20 million for a single, bad movie and then keep his assets in Swiss accounts so as to avoid taxes. Then I want to hear his expert analysis on how terrible America is and how Rush Limbaugh should be taken off the air.”
If I didn’t think that the hype about Obama will carry him through a second term (that is–people won’t want to admit they could have been THAT wrong about him), I’d say he may have already lost his chances at being an 8 yr president.
Paul Krugman is a Nobel Prize winning economist, and explains why the Geithner plan will ammount to a catastrophic FAIL which will probably lead to a very long world-wide depression.
http://www.nytimes.com/2009/03/23/opinion/23krugman.html?_r=2
Who wants to ride the zany-whacky-super fast roller coaster that only goes down?!?! Woot!!!