Too Big to Fail
There’s a meme that’s been going around the government and the media for the last few months. Some companies, they say, are too big to fail. If these companies were to go under, declare bankruptcy, and fall off the face of the earth, the vacuum left in their absence would be too much for our economy to survive.
On the one hand, they’re right. Companies like GM and Citigroup employ, directly and indirectly, millions of people across the world. Losing them would drive this already sick economy into a death spiral.
But there’s something to think about in calling anything too big to fail. Beyond abandoning the free market, which is supposedly God to many economic policy makers, it also points to the failure of deregulation. These companies got so big because the anti-monopoly, regulatory, post-robber-baron financial world that was in control for most of the 20th Century got chucked out in the Reagan Revolution, and the trend continued through Clinton until Bush 2 got into power and totally screwed the pooch.
Yes, we should be bailing out the big companies right now. But there have got to be strings included. And one of those strings should be that no company be allowed to get where it is too big to fail. Companies fail all the time, and new companies come along. It’s financial natural selection. That’s what commercial bankruptcy is for. We shouldn’t get to a point where any company is too big to declare bankruptcy if that’s what is needed.
Just a couple weeks ago, GM was talking about buying Chrysler as a way to get both companies out of trouble. That’s the opposite of what should happen.
Tags: Economy
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