Have you heard of the FDIC?
Or are you asking if even that is too much for some people? I wouldn’t consider that a bailout, though, unless you consider unemployment insurance a bailout for the auto workers. It’s apples and oranges.
What about company’s like General Electric or Proctor & Gamble which are really hundreds of smaller companies and brands?
And some companies are big because they need to be. Mass production automobile assembly isn’t exactly a cottage industry.
The problem is not as simple as letting the free markets run their course. Large company’s are integrated with the communities where they do business. What happens to Detroit after tens of thousands of employees lose their jobs and businesses that depend on automakers, both directly and indirectly also suffer? What does that cost the taxpayers in welfare, unemployment insurance, increased crime, worse health and blighted communities?
Balanced against - what does it cost the economy to take a whole lot of our productive capacity and turn it towards propping up an industry that is not competitive on world markets or even at home? What is the cost of creating a large industrial city that will be wholly controlled and subsidized by the federal government?
What is the cost to all the companies that could do the job better and more efficiently, but who are kept from entering the market because the government protects the existing players? What is the cost to the people who will not have that company’s superior products to buy?
Capitalism is creative destruction. Nothing lasts forever in a capitalist country, because the industry that exists is nothing more or less than the industrial expression of that current society’s needs and desires. The world changes. And when it does, industry must adapt or die. It’s best for all of us. It frees up capital and resources currently making things people no longer want or can afford, and turns it to the new demands of the changing world.
Granted, right now a confluence of events have made things pretty bad. We hit the trifecta of badness in the 2000’s - terrorism and war, serious demographic pressure from an aging population, and out of control government spending. Then you have the added shock of the financial market collapse on top of that, plus a business cycle that was probably nearing its peak anyway. So things are going to get pretty bad.
But it has to happen. This recession is not a business cycle recession. It’s a correction to a giant balance sheet problem. It needs to happen. We need to write down what debt needs to be written down, so that people can start properly valuing things again. For that to happen, we really need to stop the government from continually meddling and tinkering with it. This creates a difficult business environment to invest in and build companies in. No one knows what things are worth, because no one knows where the next big distortionary load of taxpayer money is going to be dropped, or which regulations are going to be instituted to ‘manage’ the economy.
And for the next 20 years, a whole bunch of people are going to leave the work force as they retire, and go from being a net provider to a net drain on the economy. We might find we have a pretty good use for that 700 billion dollars right around 2015.
This. We don’t burn bankrupt people’s assets. Capitalism Recycles! 
BJMoose, you really think the government has the right to step in (and should!) against a company just because it has grown too large? “Sorry guys, you succeeded too well. Time to chop you up.” I don’t understand this mentality at all.
Valete,
Vox Imperatoris
What capitalism do you defend? Is that the market control capitalism we have or is it the competitive capitalism which has never existed. We got into trusts as soon as the big business revolution made it possible. Controlling prices and competition is in the interest of business. It is antithetical to the interests of the consumer. If you can guarantee your chunk of the market,keep from actually having to compete and take risks while guaranteeing profits,why not do it.
One function of our government is too keep a company from controlling too much of the market. Once they get too big a share they can control prices, eliminate competition and have no reason innovate. They have done it over and over. It is not to stifle their success. It is to keep them from unfairly killing or controlling the rest of the market. I am sure we all know monopolies are bad for competition and the consumer. It is not about size.
If you think competitive capitalism has never existed, I suggest you stop what you’re doing, and look around whatever room you are in. Think of the myriad of products within your sight - products of high quality, which do what they are supposed to do, which generally work well. Think about the computer sitting beside you, and the incredible amount of complexity that went into the huge chain of components, all built by different companies, that went into its manufacture.
Now think of all the companies it took to make those components, and to make the machines that went into the factories that made those components, and the raw materials that went into the machines that went into the factories that make those components. Millions of people were involved - all seeking their own benefit, trying to maximize their own profits and improve their own lives. And to do it, they had to work together to put a computer next to you that is more powerful than all the computers that existed on the planet 50 years ago.
That’s competitive capitalism in action. It achieves things daily that government couldn’t hope to accomplish with all the taxpayer money in the world.
Whatever we do to get through this downturn, we have to make sure that the actions we take do not damage that system. There should be a form of hippocratic oath for politicians - first, do no harm.
The current crop of idiots are contemplating actions that will do plenty of harm.
No, they can’t. Except with natural resources (which are a special case), someone can always come into the market if there is demand for it. If Microsoft gained control of the entire OS market and got rid of Linux and Apple, someone could come out with a new OS the next month. Sure, they might have trouble getting it off the ground at first, but if it offers a competitive competitive advantage over Microsoft’s product, then it will find buyers (and if it offers no advantages, why, again, are we wanting it to succeed?). And if they do, then there is nothing Microsoft can do about it, short of violence and intimidation, which are already quite illegal under the laws that govern “normal” people’s actions.
And this doesn’t just apply to software. If Coke somehow convinced every other soft drink company to sell all their plants and burned the recipes of every variety of drink besides the basic cola, then it would not be the end of all competition in the soft drink industry. If an entrepreneur gathered support for a company that would produce orange soda, then he could build an orange soda bottling plant, and Coke no longer has a monopoly. But Coke is within their rights to launch an advertising campaign against orange soda, and there is absolutely no reason why, if the campaign succeeds and the plant closes (even if it is putting hundreds of workers out of a job), the government should step in and bail out the orange soda company, which is making a product no one wants to buy. Same thing with the American automakers: there are too many plants making too many cars with too many workers in the industry, and people would rather buy better, Japanese or European cars (or no car at all) than American ones, and so the market is making a natural adjustment.
And guess what excessive regulations do? (Say, on the amount the entrepreneur can take out on loan from the bank or where he is allowed to build the bottling plant.) They hinder this process.
Plus, government regulations on the size of companies put artificial disincentives in the cost/benefit equation. If I am the manager of AT&T, and I know that I can make a lot of money by buying one of my major competitors and using the profits to expand the cell network, am I going to do it if I know the government will jump in with a hacksaw and split me up again?
Valete,
Vox Imperatoris
Coming out with a new operating system next month is a tiny bit of the problem solved. You have to sell it. When every machine made includes Windows ,how do you break in? When Microsoft will take your ideas and sic the best lawyers in the country if you object ,how is that competitive?
You guys are witness to America and the world being remade. It will be a different world in 10 years. Wages will drop . Profits will be kept to the few. Politicians and financial power players will be the international corporations . They will not seek competition. They will just loot away and payoff whoever they need to.
You guys must know the larger the corporation ,the less efficient it becomes. That is a fundamental truth of economics. More layers and more fingers in pies,is stifling to new ideas .
Cite?
How do you break into the OS market with no marketing budget? You convince a small, dedicated following that your product is superior and use them to spread the word of how great your product is. And if Microsoft buys you out and steals your idea, then a new product has still been created. You also don’t live in a society with countless regulations with lawyers waiting to sue you for breaking one because that is not the free market.
Valete,
Vox Imperatoris
the problem with this idea, as i think we have seen in the past year or two, is that it doesn’t become clear that the regulations are being abused until the damage has been done. the regulations put in place over the past century and especially in the last two or three decades are part of what allowed financial institutions to create the housing bubble and the current financial situation in general.
the moment a company is propped up in any way, it is less likely to shrink naturally and more likely to fail catastrophically. if we put off the necessary shrinking, we also contribute to the instability of that particular company or industry. it made moves that didn’t work and did not experience the necessary consequences. now, when it relies on that knowledge to grow, the consequences of its failure become even more dire.
Actually several people did warn about problems in sub-prime lending before the crisis and many have warned about the potential problems from opaque derivatives products. Part of the problem was that there was serious political pressure from the finance industry on the politicians to look the other way and avoid any serious regulation. There was a good article in the NYT a couple of days back about Schumer and how closely tied he was to the finance industry.
Let’s also not forget that the current problems are small compared to the Great Depression and likely to remain that way. A major reason for this is the regulation that still survives notably deposit insurance which has helped avoid the kind of bank panic which helped create the Depression.
The point isn’t simply to create new product for the sake of it but to create a viable competitor to the existing giant which will spur innovation and keep prices low. Purely market forces don’t really work in much of the IT sector because of very high barriers to entry, increasing returns and network externalities (e.g. the more people use an OS the more software gets written for it). That’s why antitrust is needed to keep the existing giants honest. I don’t think it’s a coincidence that the big antitrust case against Microsoft was followed by a period of revival for Apple and the emergence of a new giant like Google. If there was no antitrust at all, Microsoft could well have crushed Apple in the 90’s and crushed Google the moment it appeared a serious threat. In fact without antitrust we could well be living in a world without Microsoft itself and which was dominated by IBM.