The governments of the richest nations, as well as those nations who’s populations are poor but their leaders stashed reserves of funds, “invest” in the richest companies of this world that mismanaged their and our wealth in the first place and then ask for a bailout pretending to help us, by mainly hoping to help themselves, to step back on the road of economic “recovery”.
Although it is a seemingly rational response presented by “the world leaders” to satisfy surprised by the crisis public, but in effect the action by the governments through financial intervention is rewarding the inefficiency which is at the root of the present economic recession.
I think that big companies whether banks, investment firms, and hedge funds that run their businesses on a pro-forma basis because of weak regulation; or large manufacturers of non-competitive products, mainly located in the west, who were outmaneuvered by more inventive and agile competitors should be let to fall flat on their face and break into peaces. Indeed I understand that the consequence will be great for the host nations in terms of unemployment and human sacrifice but by putting more money into their hands it is just delaying the inevitable
Indeed there is no reason to believe, based on their past record, that they will improve, become more agile, and competitive because they will continue to operate within the same environment, with the same labor costs, with spending more money on employee benefits then on research and development, and spending even more money on lobbying and fighting regulation.
We are indeed spinning fast in the whirlwind of the destruction of individuals and small business who will have, if any, only small benefit of few hundreds of dollars per year as a result of the tremendous bailout package. The largest portion of the benefit will go to the large firms at the expense of small businesses and those individuals who will also often loose their jobs and as a result most that they have owned.
Inefficiency and unethical behavior should not be rewarded by the political machine. But let us not forget that this machine is oiled by funds from those big companies –unregulated and inefficient or not. Sadly, the race to the bottom will continue its course.
Joseph Schumpeter was right writing early in the past century that to make capitalism work we must allow inefficiency to fail and more innovative enterprises will pick up the pieces – that is where the bail out package should be spent. Since the resources are always limited they should be spent where they produce the most of results. Otherwise we are running a high risk of putting a bandage on a gaping wound that will only have a short lived minimal effect, if any, on the patient that is contemporary economy.
Long term planning is necessary and the solution can not be to outsource all manufacturing to China and customer service to India, or elsewhere. If the imbalance of production and trade is such that some nations can not afford to produce, because it is much cheaper to order their products to be produced in the developing nations, they must have alternative means of sustaining their own populations by providing them with sufficient and adequate opportunities to remain competitive. And it can not be by simply printing more currency. One can not perpetually consume without producing, earning, saving, and investing in the future.
A strategy for the recovery is complex and when developed it should not be final. It should be revised and transformed as we observe and measure the results of our investment – bailout. Although this option is not politically practical because altering the proposed maybe construed as flip-plopping or not knowing what one is doing and very costly when the next election campaign comes about.
The stakes are high however, and only the most innovative and agile should prevail. I am worried about those small businesses and large alike, and individuals who are able to innovate, offer efficiency, and are responsible in running sustainable businesses that they will be taxed out and disadvantaged by the machine of our governments and big business.
If the last worry will become true we will only temporarily delay the inevitable while piling up a tremendous debt and passing it to our children and grand children to pay off while at the same time not taking necessary steps to equip them, with the necessary technological and efficiency advancements, for that task in the future. Regardless of the recession it may be a time of opportunity if we will support the most prepared, and let them pick up the pieces.