lemon socialism

Posted on February 4, 2009 by Matt

Paul Krugman, Columnist for the New York Times refers to the times ahead as a crash course in “lemon socialism.” He defines it as, “taxpayers bear the cost if things go wrong, but stockholders and executives get the benefits if things go right.” Good news if you are the majority shareholder in giant corporations, but bad news if youre an honest worker.

In a capitalist economy a business must have the ability to fail. If there is no chance in it failing then it has no incentive to offer a higher quality of product or service of their competitor. Look at state governments. What if private firms were allowed to offer valid drivers licenses, do you think these private companies would make you wait inordinate amounts of time to get a license or handle trivial issues? Of course not, for they know if you did you would merely go to one of their competitors. The state does not need to provide a proficient, high quality products and services because they have no competition. These bailouts are leading big business to have similar thoughts.

What if an eccentric million took you to his house and said, “When you enter next room there are five suitcases spaced 20 meters apart. In the suitcases is a hundred, a thousand, 10 thousand, a hundred thousand, and one million dollars respectively. Before the first suitcase the floor is covered with cobras, before the second, poison arrows are shot at you, before the third, acid is dripped on you, before the fourth you must defeat a ninja, and the fifth suitcase is connected to a bomb. Begin whenever you are ready” Now if you wanted that money you would have to go to great lengths to prepare so that would be safe from each of the obstacles, you would need to get a snake charmer or just walk very carefully through the first room, wear some type of armor so the darts couldnt hurt you and so on…

How would you react if just before you began to leave to prepare for you trek into the other rooms the millionaire said, “btw, the snakes are fake, the darts are nerf darts, the acid is really water, the ninja is a scarecrow, and the bomb is a dud.” Would you react the same to the environment? Of course not, there would be no need for concern or care, you would merely romp around with frivolity to claim your prizes. No need for concern would result in no need to be careful

This is what the bailouts have ultimately led to. The federal government is essentially saying, “dont worry about being cautious and making wise choices with your money, whatever happens we got your back.” Business without accountability or responsibility is not good business at all.

Thus we are left with Lemon socialism. Where nothing can go wrong for big businesses because the people will get the bill. There is no possible way for a strong economy to exist under such standards. Strong economies are not made by the governments saving inefficient companies, but rather the opposite, by letting them fail.

Now for the banks that hold people’s life savings. If these companies failed and lost the money that their clients owned i would hold the executives of these companies both financially and criminally responsible. I would have no problem of stripping these people of every penny they owned to pay back the life savings of a hard worker that was lost due to inefficient and unwise moves. If this type of fear was on the executives of these companies they would probably make much wiser decisions.

I am by no means against big business or private wealth. But there needs to be accountability. Coming up, i will write about Bush’s and Obama’s complete failure when it comes to this bailout and the positive aspects of trickle down economics.

Comments

  • Ellie on February 4th, 2009

    The big corporations get bail outs and spend the money at Las Vegas to celebrate, while the small business’ are penelized by more taxes to bail out the government who bailed out the corporations!!!

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