Bailouts for Bozos

Up until now I have kept my mouth shut about massive government intervention in the marketplace through a practice now generally referred to as “stimulus”. I have kept quiet thinking that I must be wrong about the serious error that is being made here. After all so many economists, bankers, large corporate CEOs, and political commentators have been urging governments to do more, spend more, gift more to companies and financial institutions that have failed during what is arguably one of the best economic cycles in global history.

I understand the politics of the situation. I held elected office for over ten years and amongst other roles and duties, served as Finance Minister for the province of British Columbia. Yes, I understand the need for politicians to be seen to be responding to constituencies, especially the individual women and men, who are suffering as a result of the sudden downturn in our economy. Indeed it was the sudden nature of this economic crisis that caused such a quick and costly response from government.

Like a giant tsunami that came ashore causing untold amounts of suffering, governments leaped into action writing billions of dollars worth of cheques designed to “stimulate” the economy. Unlike a tsunami, however, this crisis was of our own making, and regrettably the billions that have been doled out have gone, in large measure, to the very same people who caused the problem in the first place.

The automotive industry has become a “symbol of the success of North American free enterprise”, one noted American economists claimed. “The American government cannot stand by and let it fail.” Am I alone in seeing the absurd contradiction in this statement? The American automotive industry is not the symbol of success; it is an example of the failure of the large American corporate culture so steeped in top heavy management, greed, and incompetence that those managers, and those managers alone, have brought their companies to the brink of bankruptcy.

Worse still, those managers have not only convinced the government to funnel billions of dollars out of the public coffers into their private bank holdings, on top of that they have placed the cost of management incompetence on the backs of the workers through enforced and unprecedented breaking of contracts and removal of negotiated benefits. Want to help Mr. /Ms. Politician? Well then do something about the unfairness and limited term of unemployment benefits so that those affected can survive until new opportunities are created.

Until now I, like so many, have sat back quietly and watch as governments rush headlong into unsustainable spending and record deficits that will take generations to pay down let alone pay off. Some countries, including Canada, had finally managed to get government spending under control and move toward annualized balanced budgets.

I own a beautiful fifty-seven foot wooden seine boat built in Steveston, British Columbia in 1929. Like the North American economy, my wooden boat requires constant  attention and work to stop rot from setting in. If you only pay attention to the wood above the waterline, or the obvious economic indicators, you will have a rude awakening one day when you discover that the rot below the waterline was left unattended for so long that it will sink the boat entirely the minute you untie from the dock. The solution is to cut out the rot, not to try to patch it over with quick fixes, paints or polymers.

In other words failing companies should be allowed to fail, thus we cut out the rot. New, innovative, progressive companies will start up and will develop new products that more accurately reflect the needs of a modern society, and that understand the need to get off a fossil-fuel based economy. The new companies will understand that we need to practice real limits–to-growth economics that maintain our environmental integrity and do not pretend to manage “sustainable growth”.

Out of politics now, I am Chairman of the Board of an up and coming software company that has developed a revolutionary suite of software designed to migrate and rescue data from failed computers. We have built this company over the last five years through private capital that has taken huge risk to get us to where we are today.

Yes, as a former politician, I understand the politics of what is going on, but as a business person I think the strategy to bail out failing companies is deplorable. The rest of us are all going to be saddled with huge debt, which is an unfair application of public funds to many who don’t deserve them, and will leave a patchwork economy that will not be sustainable in the long run.