Corporate welfare; Yes, No?


#1

All this talk about bailing out big corporations reminds me of the quote “Socialism for the rich, capitalism for the poor”


#2

“Socialize the losses, privatize the profits” is how I’ve heard it described, but they’re both accurate.


#3

Personally I have no problem in public money being used to take private companies into state ownership when it makes economic sense. If a big company (like a car maker) goes under, then that will be a boost in unemployment and maybe resulting crime, both of which the tax payer has to pay for anyway.
The problem comes when the government hands over money but doesnt take a share of the company. When the company gets back on its feet, the taxpayer should reap the rewards of this investment. If companies come to the state with a begging bowl and no other options, they need to be nationalised, at least in the short term.
The other problem is the CEO’sof these companies. Clearly they had no idea what they were doing, and need to be treated as such. If you run a business so badly the state has to buy it, you should be fired on the spot with no payout and no pension.
Sadly governments in the UK and the US seem to lack the ooomph to push through measures like that, even now :frowning:


#4

Its a bit hard to punish a system.
There are people to blame, but most banks were only on the risky side, not completely reckless with our money.
The UK government hasn’t given £37Billion to the banks, they have invested £37B in them, while at the same time preventing their collapse. On the downside, we cannot get the money back until the bank is back on its feet, and investing in a failing bank isn’t the sensable financal thing to do, hence were £12billion down on market valuation.


#5

That boost in unemployment will also be a boost in retrainment and mobility. People will move around from areas in which they were ineffective to areas in which they’re more effective. The process is painful but it happens and is ultimately beneficial.
Besides, it’s rather rude and pessimistic to suggest that any sizable portion of the people left unemployed by a bank’s collapse will turn to crime. Transitory unemployment is different from permanent unemployment. Permanent unemployment may cause crime, but I doubt it. Transitory unemployment certainly shouldn’t cause any.

It’s more accurate to say that poverty causes crime than to say that unemployment causes crime. Lasting unemployment causes poverty which causes crime - unemployment doesn’t cause crime directly. I wouldn’t lose my job and decide to go start scamming people and robbing houses immediately. Why, I’d already be a criminal if that’s how I’d reacted to losing my last job. If it were a choice between eating or not eating, or between barely eating and eating decently, then I’d probably be more tempted.

Also, once governments extend benefits, they rarely retract them. Nationalizing a company creates political pressures which are likely to leave lasting inefficiencies even if the company is later privatized. What about the risk that the government won’t privatize it again? Further, what if the company was truly incapable or undesirable? Nationalizing it won’t resolve those issues and may exacerbate them.


#6

I’m fairly sure that governments bail them out by providing them with a loan. They do have to pay back, with interest of course. It’s a rather cheap way to avoid sudden mass unemployment. Taking a share could be good, but that also means that the government might have to become a majority shareholder in those companies. In effect the government becomes bigger and less efficient, since now they have to manage them and name CEOs/directors (I smell cronyism). And when you’re a shareholder, you want your company to succeed, there might be a conflict of interest here (Let’s kill the competition by planting evidence using MI6). Besides, by being a shareholder, the government will take unnecessary risk. What if stock prices fall significantly and take years to regain its initial value? Or worse, what if the company becomes so unsustainable that it goes bankrupt? When liquidation is an option, creditors get paid first after paying the workers in totality, but the residuals (if any) are distributed proportionately among the shareholders, further reducing the government’s chance of recovering its initial investment.


#7

These are all fantastic points that I wish I’d thought of, frankly :smiley:


#8

socialism can only be for the poor, or its not socialism.

put all industry under direct workers control!


#9

This is true in a country that has a free market but not necessarily true in a country that has a market society.


#10

I agree with some of this. However, short term unemployment will inherently, to a degree, increase poverty. How? If you live in usa there are many people who live off there weekly pay checks and they would starve (credit is nearly ‘frozen’ here). Also, if there are more people looking for jobs and at the same time less jobs being available, wages for everyone will decrease (no incentive for employers to increase or maintain wages because people are desperate for jobs).


#11

Wouldnt that make things even worse? At the very least, If all industry were under worker control how would money flow into the system from outside investors? Also under that system there would be no form of competition, which would foster decay and inefficiencies.


#12

to play devils advocate it also leads to widescale efficiencies of scale.
Only having one rail company is more efficient in terms of scheduling, maintenance etc than having tons of competing ones. The same is true of energy production.
Still not a system I’d like to see though. The potential for government waste, and lack of global competitiveness is a major issue.


#13

Actually, wouldnt having only one rail company make the company become less efficient because it wouldnt need to compete with another company. Thus it wouldnt need to have better maintenance or scheduling because its customers would have no choice but to use that company (for their rail needs). However, in this era, less people use rail and rail would have to compete with other modes of transportation but still, if someone had to use rail they would have no other choice but to pick the monopoly railroad company.


#14

in a marxist economy, there is no money, only labour vochers which hold no value they are only representations of amount of labor someone dose.

there would be compition, workers who TRY(not HAVE produce more) there best will earn more.


#15

the factions within the corperation would compete.


#16

Some industries are natural monopolies like public transport, energy production, telecommunications infrastructure, water distribution and the lotteries. The amount of investment required is either too huge for a competitive market to handle, or it’s impossible to create a competitive market without huge public subsidies, or there are negative externalities associated with creating competitive markets like the proliferation of gambling. If a monopoly must exist, I’d rather see it in public hands than private hands, and in the long-run there are no certainties, as technology changes a natural monopoly may disappear.

The purpose of public transport is to take the pressure off the road system. It’s far cheaper for governments to subsidise public transport, than it is to build and maintain extra roads; if public transport did not exist. It is a natural monopoly because it’s not designed to run at a profit. Attempts by governments to split public transport monopolies by creating artificial territories that are then privatised to private providers, just makes public transport more expensive to run, and discourages it.


#17

the recent telecommunication revolution we have today occured after at&t the monopoly was broken up. However, i agree with you on the other parts.