Recessions such as the present one caused by the pandemic affect both individuals and businesses, with the former losing jobs and income and facing hunger and uncertainty while the latter teeter at the edge of collapse and bankruptcy. And then the governments step in. In the earlier times governments rushed to the aid of larger corporations with the theory that at least some of them were too big to fail. After the bluff was called out, the excuse to bail out businesses now is that their failure would affect the economy and cause job losses and hardship for their employees.
Businesses as per market capitalism are risk prone ventures. They face all types of risk and consequently must prudently insure themselves against all eventualities. When in the name of saving the economy billions and trillions are used to bail out businesses, the taxpayer money is being used to underwrite major business risks. This is neither capitalism nor prudent use of taxpayers’ money. Further such underwriting incentivises risk taking for large corporations that enables them to unfairly dominate the markets. Allowing exposed and extensively leveraged businesses to fail in effect acts similar to the periodical mass extinctions of living creatures on earth. There will emerge a new and better suited crop of businesses on the other side. This will also prevent monopolies growing too big such as the billion and trillion dollar behemoths dominating the world today.
When businesses expect to be bailed out, they happily enrich their shareholders and top managers through mega dividends, stock options and share buybacks in the good times. Thus they directly contribute to the creation of privileged classes and widening of inequality in society. Further, once bailed out, the corporations quickly revert to large payouts when they return to normality. The employees of the same companies who have lost their jobs face a long period of starvation and suffering before they are able to get re-employed and regain their last income level. This makes a mockery of equal opportunity and fairness in the system.
The biggest fallout of the failure of businesses including giant corporations is the widespread job losses both in the business as well as all along the supply chain. The money used to bailout business is more than adequate to support all the ensuing jobless millions with a decent living wage till new businesses appear and re-employ them. This ensures that the top management is betting on its own huge payouts to keep the company solvent. When a company fails, all including the CEO end up on dole! This, my dear reader, is the ultimate equal opportunity economy!
Born in the rich culture of South India and educated in English, I have been exposed to two opposing world views enabling me to achieve synergy and realize true harmony. I belong to linguistic community “Saurashtra” who were silk weavers patronised by kings of yore. Our ancestors are said to have migrated from Western part of India to Tamil Nadu in the South several centuries ago. Growing up in the country as India underwent its pangs of Westernisation, I was able to synthesise the self oriented Western perspective with the community oriented native one to arrive at a wholesome concept of self after considerable efforts and experimentation. My forthcoming book “Searching for Self – In Pursuit of Inner Peace” is the culmination of this labour.