Let Them Fail!!
I have found myself most disturbed by the actions of the previous administration and the continuation of those policies by the current one. Granted, that the Obama administration is at least making a reasonable attempt to apply some accountability to the “bailout” process, nonetheless something has been eating at my gut as I watch this spectacle unfold.
I finally figured out what that was. Let them fail! That’s right. Let GM, Chrysler and the banking giants collapse or choose bankruptcy protection to restructure themselves. By allowing the government to intervene in the natural process of capitalistic evolution, we are destroying the real opportunity for economic recovery that is being presented here.
In order to function properly, capitalism needs to mirror Darwinism. The survival of the fittest is required for capitalism (and therefore the economy) to flourish and grow. The Obama administration is suffering under the same delusion that led to Bush’s destruction of the economy. “What’s good for GM is good for America!” The reality is that if you want to create jobs and energize economic growth we are focused on the wrong business sector. Large corporations in this country have been the worst at putting people to work over the past 30 years. During that time period, the number of workers employed by those companies has steadily declined. Our job growth (which was most evident under the Clinton administration) comes from the small business sector. This sector has been crushed by the unbreakable stranglehold placed as barriers to market entry by the dominance of the large corporations in this country. Innovation and technological breakthroughs do not come from big business. The sheer size of these corporations stifles innovation and creativity because their workers spend all their time playing corporate politics to survive.
Let GM and Chrysler fail and there will be 20 new car companies setup to fill the void. Let Citibank, Bank of America and Wells Fargo go under and there will be a rush to setup new banking institutions to grab those customers. There hasn’t been a new car manufacturer in this country in over 60 years. That’s not because nobody wants to do it. It’s because nobody has the capital to compete with the big automakers’ distribution and manufacturing capabilities. With the big guys out of the picture, the dealers will be falling all over themselves to sign up with a new company that will provide them innovative products.
In order for capitalism to function properly, there needs to be great rewards for success and equally harsh consequences for failure. The government’s interference in the process has taken the downside away which is what has encouraged the big guys to take extreme risks, continue producing inferior products and think that they won’t be held accountable for their actions. We need to get back to basics.
The Obama economic team unfortunately doesn’t have the knowledge or experience to recognize this reality. Geithner may be a bright guy, but as President of a Federal Reserve Bank he was part of the problem that got us here in the first place. The actions he is taking smack of conventional thinking for an unconventional problem. Take the $350 billion that is earmarked as the second phase of the financial sector bailout and reduce it to $100 billion. Take the $100 billion and put it in a small business lending pool and use that as seed money for innovative startup companies. The financial services companies have already said that their plan is to continue cutting costs (translation, getting rid of employees). That is not stimulative activity. Small businesses will hire new employees and reinvigorate the entrepreneurial spirit which has made America an economic force to be reckoned with. GM has declared that it would need $30 billion and will layoff 47,000 employees to go along with the money. That is not stimulative and that is not job growth.
Liquidate the large banks, use those funds to cover the FDIC costs to make customer’s whole and if anything is left after that, then payoff the creditors. Cost to the taxpayer, $0.