Bailouts are F*cked
Bailouts ruin the entire justification for extracting profit in capitalism.
The justification normally goes: “I have put my own capital into this venture and risk losing some or all of it. In exchange for the risk I am taking, I am justified in taking profit from this venture.”
You no longer have that justification when every single time a risk actually happens, you go running to Big Daddy Government and receive a bailout. If you aren’t taking risk, you don’t deserve to take any profit. Simple as that. This isn’t “corporate socialism”, but it certainly is f*cked.
If your company is “Too Big to Fail” then it is also “Too Big to Exist”. Markets only begin to approximate their proper functioning when there is sufficient competition. Something being “Too Big to Fail” immediately precludes that. If a company is “Too Big to Fail”, then it needs to be broken up. Trust-Busting time, baby. The government can (and should) act as a kind of immune system against corporations that would distort the proper functioning of the marketplace. Adopting laissez-faire policies in hopes the market will “fix itself” is the equivalent of “treating” cancer with acupuncture and supplements.
And no, you can’t say that the pandemic was a “black swan” or some other such nonsense. Pandemics have been a common historical occurrence and they will continue to happen long into the future (transhumanists be damned). How are you going to deal with superbugs? If your risk department doesn’t properly account for all the risks involved in a venture, that’s on you buddy.
So how do we resolve this?
Now, I do understand the importance of government supporting small businesses to maintain health in the market. Small businesses rarely have risk departments, and a large number of small businesses helps maintain the health of the market and economy. So, let’s say that moving forward we continue to provide grants/forgivable loans to small businesses, in the event of crises. So, in the event of COVID lockdowns, small businesses would still pay for their employees wages + insurance and this would be 100% covered by the government. Defining a small business might be “Anything that makes under $50mln in revenue a year” and then there would be a sliding scale of coverage down to 0% at some larger number (maybe $500mln or $1bln in revenue per year).
But for those larger businesses, the change is simple: Either you pay it yourself out of your own savings, or you sell equity to the government in exchange for money. The government can resell that equity or use it to fund itself (or make Social Security solvent again, woohoo). Ultimately, you need a serious disincentive against companies refusing to save money in exchange for propping up their share prices (and therefore executive compensation) with share buybacks and dividends. No shareholder wants to see their equity diluted, so businesses will continue to be pressured to have ample savings for crises. So when COVID struck, large companies should have been forced to continue to cover their workers salaries and insurance, and if they didn’t have sufficient savings, they would have to sell equity to the government in exchange for cash.
Ultimately, bailouts present a massive disincentive to properly running a company, and only intensify the financialization of the economy and the concentration of wealth in the hands of owners of capital. If a business doesn’t have their own rainy day fund, tough shit. They’re f*cked, and they deserve to go out of business. That’s the game. This shouldn’t be a very controversial idea, but alas it is. Hopefully conservatives will stop being laissez-faire idiots and democrats will stop sucking up to Wall Street and Big Tech. Until then, enjoy the wreckage of our once healthy economy.