The United States Rewards Failure…
We’ll never know what would have happened without the bailouts. The airlines say the government grants were crucial: As American Airlines put it, they “saved thousands of airline jobs, preserved the livelihoods of our hard-working team members and helped position the industry to play a central role in the nation’s recovery.”
- The High Costs of the Airline Bailouts – NY Times
By JM Hamilton (3-20-2021)
The United States has many problems, after suffering under four decades of failed neoliberalism, but its monopoly dominated economy and epic business failures – and subsequent bailouts – really standout.
By now, we’ve all seen the playbook, repeatedly. Industries, throughout the US economy, concentrate, becoming Too Big to Fail (TBTF) institutions. Greedy boardrooms and C-suites – in the interests of meeting shareholder demands – loot the company’s credit lines, paying themselves unearned dividends and pumping up stocks with financed buybacks & cheap central bank cash… and then, when the inevitable crisis comes along, Congress bails out rogue management teams with no strings attached welfare. This is often done in the interest/political cover of preserving jobs… the same jobs that no one in power blinks an eye at losing, when job cuts are used to pay for the aforementioned financed buybacks & financed dividends or in order to sustain mountains of corporate debt. Our stock trading Congress benefits too, in that they can front run an industry bailout by loading up on the stock that is about to become the recipient of billions in taxpayer funded welfare.
We saw this scenario play out with Wall Street in 2008 and again, in a pre-emptive bailout for Wall Street, last March, with the passage of the CARES Act. To the tune of 4.4 trillion dollars.
And as reported in the NY Times, this week, we’ve seen it with the American airlines industry. The airlines grossly impaired their balance sheets with dividends and stock buybacks, and then when trouble came calling, in the name of a formidable & entirely foreseeable virus, these failed management teams went crying to Congress for free money; and Congress – rather than do their job – was only too happy to oblige with $50 billion in welfare and counting. The NY Times, in the aforementioned article, asked the rhetorical question or posed the following statement: “We’ll never know what would have happened without the bailouts.”
But we do know what would have happened, because business failures, particularly in the United States, happen, apparently, at record numbers all the time.
The shareholders would have likely been liquidated. The management team sacked. The bondholders would have become the new owners, in exchange for debt relief.
And via the magic of bankruptcy courts a less encumbered airline – with possibly, a new management team & ownership – would have come out on the other side. The airlines still need their employees to keep those planes aloft, and once the pandemic is over, employees would be put back to work.
Congress, too, might have been forced to do their jobs, and investigate how an entire industry had been allowed to become so concentrated to such a large degree; Congress might also feel the pressure from the public to dig into why the airline management teams have been allowed to leverage up their companies, so at the first hint of change or trouble… the entire industry was crying out for taxpayer funded welfare.
You see, the moral hazard surrounding chronic US business failures, and bailouts, is symbiotic. Not only did Congress bailout the airline execs… but Congress also bailed out its own failure to provide oversight over our monopoly dominated economy, and the financial engineering that has turned one in five publicly traded companies into zombies.
Nobody, in power, seemingly bats an eye at the rewarding of corporate failure, with trillions and trillions of taxpayer dollars… but the second a new administration wants to help ordinary Americans, the debt scolds, the inflationistas, and the Larry Summers of the world, as if on cue, appear to bang the gong of doom (amplified by the MSM). The costs of bailing out commercial failure, neoliberalism, and America’s one percent, however, has very serious repercussions for the one in five (is it now, one in four?) children, who live in poverty.
And the US news is replete with story after story of similar failures. Sticking with the aircraft theme, the NY Times also did an editorial on Lockheed’s F-35 (the biggest waste of taxpayer cash the military industrial complex has ever attached wings to). Another monopoly, Boeing, and its 737 MAX and the Dreamliner aircrafts have faced groundings and notable failures (in the case of the MAX with substantial loss of life). Both these defense contractors, Boeing & Lockheed, are on the public dole and are also - surprise, surprise – TBTF.
All because Congress looked the other way, while industry after industry was allowed to concentrate into collusive cartels, or the ultimate in collusion, monopolies and utilities.
Of course, this is easy enough to turnaround… monopolies are made to be broken up, management teams are hired to be sacked, and bankruptcy court is almost always preferable to no strings attached welfare for stockholders and management teams.
As a taxpayer, I’m tired of it… and I know my fellow Americans must be sick of it, too:
The rewarding of failure and the insiders that do their best to undermine a fully functioning US economy & labor market every day… the very same cadre that sells America short. The management & ownership, who view a company as a vehicle to loot, rather than an instrument to produce a superior product or service.
And we wonder why younger Americans are ready to commit to socialism, instead of all the lies surrounding rugged individualism and bootstraps capitalism. Young Americans know neoliberalism, like trickle-down, is a fraud, and they want what Northern Europe has… a world class mixed economy, with a strong social safety net.
Laissez-faire or neoliberalism, the result is the same: the US is rapidly turning into a second-rate power, with half of Americans living at the subsistence level. It’s a disgrace and an embarrassment… all so that the Washington duopoly can continue to tilt the scales in the oligarchy’s favor.
As America and its empire continue to decline, remember it’s because the United States rewards failure in the C-suites and Boardrooms. See our national debt ticking ever higher, as the bailouts and corporate welfare grow ever larger.
Copyright JM Hamilton Publishing 2021
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