Monday, April 6, 2009

Makes you go hmmm..

My sister sent this quote to me a while ago, and it keeps coming up in conversations.

Owners of capital will stimulate working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and State will have to take the road which will eventually lead to communism. — Karl Marx, 1867

It's really stuck in my brain. I wish I knew what I could do something about the situation it describes. Scary that Karl Marx, father of communism, laid out (simplistically) the financial and political situation we are in now. Scary this was in the making 150 years ago. Scary nothing was done. Scary that there seems to be no suggestions to rectify the financial situation without exacerbating the political situation. I like Obama for many reasons. My main concern with him is his socialist leanings. Throwing money at major bankrupt corporations and then requiring government ownership even in a small part is just to close to communism for me. It gets us much farther down that slippery slope than we should be. As for saying it's temporary, yeah right. So was the federal income tax after WWII. It was supposed to go away as soon as the financial situation at the time was resolved, which was our war debt.

As bad as it might make things for many people, I really think that we should let the market correct this. Let capitalism do it's job. Let those companies die and new healthy companies grow from the ashes. The majority of workers would find new jobs with the new companies. The time between would be awful for everyone, but in the long run I think that time would be shorter. A healthy company will be able to overcome the situation better than a sick company that must be propped up for years before any real improvement is seen. Just give the money we would use to bail out old decrepit companies to new, more vital companies.

This is too fearsome of a possibility for many people, so perhaps we can find a middle ground. Only give certain of those companies seeking bailouts a small loan, enough to pay the very basics for a short amount of time. If they can make changes in that time, maybe give them one more small loan. If not, bye-bye. You had your chance.

What kind of criteria should we have for choosing which corporations get this loan? The willingness of the VIP's or high paid employees give up bonuses and luxury benefits should be one. Maybe a bonus could be offered once the company was back in the black for those employees that that stayed with the company through the bad times. Would those same people consider a deduction in salary? What kind of changes at what cost would be necessary to make the corporation a viable business again? How vital is this company and are there other corporations in the same industry being evaluated? If so, how does it compare? Let's take the auto manufacturers for example. If GM agrees to restructure their employee compensations by eliminating bonuses in excess of say $10,000 (this would not penalize the average worker), bring the benefit package for the top earners to the same level as the rest of the employees packages, as well reduce the salaries of those individuals, as well as make necessary changes to their business model, then that is the company we should help out. If Chrysler makes only token concessions in reducing the exorbitant compensation packages of high earners and instead fires half the admin and manufacturing employees, then maybe they aren't the company to back. Government has to look at this as an investor would. What company is most likely to succeed the soonest. Unlike an investor, it should not become a part owner, it should not own stock, or in any way become a part of that company. Perhaps that company could be taxed at a higher rate to repay the loan once a certain milestone is passed (ie-a number of profitable quarters, a certain amount of time), or simply a re-payment of the loan. Will people be hurt if the company not bailed out fails? Of course. But how many will be hurt when we find ourselves in 20 or 30 years with major industries owned by the government? We know how that works out. Government cannot run a business, the methods are all wrong.

Another thing I find scary is the potential for abuse by so called "civil servants" of the congressional kind. How many Congressmen and Senators will buy up shares of a company that the government has a stake in, and then use the combined power of both shareholder and legislative body to make a gazillion dollars? Or blackball other advances and competitors? How will that affect the affordability and availability of fuel efficient vehicles? On corporate pollution? On other evironmental considerations? On any other progress?

The possiblility (I believe certainty) that abuses will occur out way any benifit we would see in the next few years. We would be selling our national soul to the devil.


Anonymous said...

That supposed Marx quote is an Internet hoax that has been repeatedly debunked. See:

The Atlantic

International Herald Tribune

Audra said...

Nice to know, thanks. Doesn't really change how I feel tho. I will pass that on to my sis

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