It’s pretty telling that any discussion of ‘savings’ culture rapidly comes up with excuses for why corporations and businesses in general should not participate. The actual corporate savings plan adopted by the airlines appears to be to spend as much as possible in ways that boost CEO profit (not even corporate profit), then ask for a bailout if anything goes wrong. I don’t actually expect major corporations to behave responsibly, but expecting them to actually be capable of handling ‘rainy days’ without a massive handout is not unreasonable, and I don’t understand people putting in so much effort to defend the idea that rich people should get government handouts to compensate for poor planning, but poor people should join ‘savings culture’.
I’m seeing this as two separate issues. I have no problems with holding corporate executives responsible for their mistakes. I’d be happy to see a law that enacts a special high tax rate on exorbitant executive salaries and another one that would require the management of any corporation that accepts public money as a bailout to lose their jobs as a condition of the agreement. Save the corporation and the low-level jobs; fire the people who caused the mess.
But then there’s the separate issue of ordinary economics. Investment in general is a good thing. It stimulates economic growth. The reason for wanting to encourage more savings is because it would increase the amount of investment capital in the pool. Requiring corporations to reduce their internal investments would be the opposite of this.
Corporate investment is based on RoI. If the RoI is less than what can be gotten from cash investments, cash is a better deal - or returning money to shareholders. Since the return on cash is so small, not being able to beat it with investments either means the company is not looking hard enough or it has reached cash cow status and is unlikely to grow.
What companies did do with their money recently was to put it in their own stock, which no doubt was sold based on eternal share price growth, but which really helped the execs. We’ve seen how that turned out. Basically, the companies spent their tax cut windfall on hookers and blow.
Regular savings has never kept up with inflation. If you had an account that paid 4.5%, I bet inflation was 6% at the time.
Thing is, real corporations don’t act like Econ 101. Yes, they could reinvest in the business, give workers raises, expand, drive other businesses with their own CAPEX, create more jobs while saving for a rainy day and generally be financially virtuous. But look at Boeing- they didn’t do any of that. They let the quality of their product slide to the point of mass casualties, all while blowing their income on stock buybacks, benefits of which have now vanished into the ether. Suddenly it is hard for them to borrow money! And they blew years of income! So now the taxpayer is asked to bail them out. Nationalizing would be better- bail them out, but now the people own the business, the people are issued stock in the company and the people get paid the dividends from now on.
Don’t bail out. Buy out.
Yeah I know it probably isn’t that simple. But these airlines especially don’t deserve support. They need to be taken over and their leaders fired.
It seems to me all the little people in the U.S. are expected to live by a purely capitalistic way of life they should of thought ahead and saved. While corporations want to live by socialism standards where they can fuck up and drive the company in the ground because they will get bailed out and give their CEO’s a raise at the same time. Fuck 'em, let them fail that’s the capitalist way right?
If you call it ‘mistakes’, you’re buying into and supporting their propaganda. Exectuives at large companies buying back corporate stock to increase their personal profit is not a ‘mistake’, it’s a deliberate decision to reduce the corporation’s ability to survive a ‘rainy day’ for personal profit. I would be happy with putting the lot of them to the guillotine (not hyperbole), but that’s not likely to happen anytime soon. Failing the appropriate punishment, they should at least be stripped of all of their assets to fund the bailout, not just fired. Again, not likely to happen, but ‘the people who caused the mess should be fired, probably invoking their golden parachute clauses and letting them keep their ill-gotten gains’ is not even a meaningful punishment.
Completely disagree, again. If individuals saving up ‘for a rainy day’ is something that should be encouraged, businesses (especially corporations) should be expected to do the same thing. Your position is just shaming poor people for being poor while absolving rich people of responsibility at all. If we expect regular people to be able to handle a crisis without a bailout, we should expect companies to also - period. The argument you’re making, that somehow individual savings are great because they function as investment capital, but business savings don’t falls apart because businesses can use the EXACT same saving mechanisms as individuals (and have other options). It also fails to explain how buying back stocks to increase the individual profits of shareholders increases investment capital, which sounds like a variant of the ‘job creators’ myth.
A large portion of Americans have no concept of what it means to live within your means. And this is not based upon income levels. Many people that have high incomes don’t live within their means. People feel that satisfying wants is just as important and in many cases more important than satisfying needs.
The American Dream and feeling that all people are entitled to it contributes in many ways to fiscal irresponsibility. When I say the American Dream, I’m not referring to “opportunity”, “fruits of hard work”, “blessings of liberty”, etc. I’m referring to the economic American Dream of a house, two cars, 60" flat screen TV, eating out 3 times a week, name brand clothing, all the trappings of appearing successful, etc. Keeping up with the Jones’s…This kind of behavior occurs across all income levels.
It’s not just low wage earners that can’t absorb an economic shock…something like 60-80% of the people in the US live paycheck to paycheck.
A less bloody and more effective method is to let their companies die.
The problem with beiling out the likes of American Airlines - well there are a lot of problems but this is the biggest one - is moral hazard. It is effectively paying them to keep doing the same thing. If given the $10-15 billion they want, they will simply do the same shit until the next disaster. It’s perfectly rational behaviour.
If the US government allows American to go belly up, and refuses to help other airlines weather a storm they should have been prepared for, then when someone buys their airplanes and hires most of the same people and starts up a new airline, they will save money for a rainy day because they’ll expect the government to lie them die if they don’t.
The free market works. You just have to make big corporations actually play by its rules.
Yeah bankruptcy doesn’t mean the planes all get scrapped. My stock shares do but that’s an assumed risk when purchased.
Not meaning to sound glib, but they are playing by the rules. The rules say that you can get legislatures to support you if you make large contributions to candidates campaigns. The rules say that if you get big enough, the government will bail you out because you are effectively a public utility. Those Econ 101 rules you are thinking of are great for passing a freshman level class, but they are not meaningful beyond that.
Those are, indeed, the rules of crony capitalism and fascism. Not what I was talking about, though.
When I lived in Switzerland, just about everyone had a postal savings account (okay, not everyone; I didn’t). Every bill I got was accompanied by a green card that you took to the nearest post office and paid and got a stamped tear-off receipt. If I had had an account I believe I could have filled in my account number, signed it and dropped it into a mailbox.
But of course if that were proposed in the US, the banks would scream and lobby like mad to defeat it. Switzerland does not have government by lobby. Actually, neither does Canada.
What happens when a really big corporation goes bankrupt? Tens of thousands of people are out of work. There’s a ripple effect through the whole economy and other companies that didn’t do anything wrong are also ruined. The entire economy takes a major wound.
And the executives who made the bad decisions retire to their country estate. Sure, they might not be as rich as they were before the fall but they’re still doing fine. Heck, with all the unemployment going round the cost of servants probably got cheaper.
Your system punishes everyone except the handful of people who actually made the mistakes.
The smarter decision would be for the government to step in and save the corporation. That avoids the economic hardships that letting it go bankrupt would have caused. And then, if they want, they can punish the individuals who caused the bankruptcy.
The money that would have spent at that company doesn’t vanish; it simply gets spent at other companies. The effect is to incentivize failure.
Large companies are NOT efficient creators of jobs relative to the bailout money they keep getting. You’d be much better of throwing the money out of airplanes over major cities.
How can well run businesses ever succeed if the shitty ones are constantly propped up with taxpayer money? Business would be totally dominated by failed enterprises, bloated and kept propped up by ordinary people, like a giant corporate Weekend at Bernie’s.
I think the current event the entire world is experiencing, and whatever financial fallout ensues, IS going to produce an entire generation of savers, no further ‘encouragement’ will be required, in my opinion.
Not typically. Bankrupt doesn’t mean vaporized. And even if it does, tens of thousands is nothing. Three and a half million people were quitting their jobs each month over the past year. Nearly another two million getting fired or laid off. Yet we were still creating hundreds of thousands of (net) new jobs each month.
Preserving failed companies for the sale of preserving employment at failed companies is bad policy.
We use to have that kind of economic policy. Let businesses fail and let the invisible hand take care of the results. Keep the government out of economics.
We also used to have a thing called Panics. They were economic crises. We had one in 1785, 1789, 1792, 1796, 1819, 1825, 1837, 1847, 1857, 1866, 1873, 1884, 1890, 1893, 1896, 1901, 1907, 1910, and 1930.
And then they stopped. We haven’t had a Panic since 1932. Which, not coincidentally, was when the government decided that maybe it was a good idea to intervene in economic crises.
I feel we should stick with what’s working.
You can intervene in the economy without bailing out individual businesses.