To big to fail?

[Aero]

A lot of people here complain about regulations restricting capitalism as well as government using tax payer money to bail out companies in trouble.

Which is better, unrestricted capitalism allowing companies to grow so large that their failure would cause prohibitive damage to our national economy, and thereby giving them direct access to the national treasury in the form of bail-outs; or regulating company size so that their remains multiple other viable players when the largest go bankrupt?

Note that in the extreme example regulation has no control over the powers that be within the large companies. Having access to the national treasury, they could simply milk their own company until they need a bail out, then, without regulation, continue to milk it.

[KitemanSA]

Which is better, unrestricted capitalism allowing companies to grow so large that their failure would cause prohibitive damage to our national economy, and thereby giving them direct access to the national treasury in the form of bail-outs; or regulating company size so that their remains multiple other viable players when the largest go bankrupt?

This seems to be a variation of the standard "alternative strawmen" argument, nudging the dupes to pick the lesser of two evils. The thing missing here is an understanding of the distinction between "capitalism" and "corporatism". The two are NOT the same. The problems we see today are not due to capitalism, but the other ism mentioned. The "better" choice is capitalist partnerships. At least then the investors can be held fully responsible for any anit-social behavior by their company.

[Aero]

Which is better, unrestricted capitalism allowing companies to grow so large that their failure would cause prohibitive damage to our national economy, and thereby giving them direct access to the national treasury in the form of bail-outs; or regulating company size so that their remains multiple other viable players when the largest go bankrupt?

This seems to be a variation of the standard "alternative strawmen" argument, nudging the dupes to pick the lesser of two evils. The thing missing here is an understanding of the distinction between "capitalism" and "corporatism". The two are NOT the same. The problems we see today are not due to capitalism, but the other ism mentioned. The "better" choice is capitalist partnerships. At least then the investors can be held fully responsible for any anit-social behavior by their company.

I need for you to explain that in a little more detail in order to understand your point. I am pretty sure that the investors are not being held responsible when government tax dollars are used to bail out their investments as we are seeing now.

[KitemanSA]

What we have now in the US is capital-Corporatism, my term. Folks provide money (the fuel for business) to a corporation which exists for the sole purpose of divorcing them from any responsibility for bad decisions by management. All they can lose is what they have invested (unless they are playing the market like the east coast branch of Vegas Inc.) Thus is it any wonder when said management makes whoppers of bad decisions? It is not the manager's money, it is not the investors responsibility.
Partnerships on the other hand still amass capital via investments, but the investors are tied directly to the outcome. Thus they tend to keep a bit of a better eye on things. Not always, but usually.
The Mega-CORPORATIONS (note the term) are having problems that their training tells the to shift responsibility for. Partnerships tend not to get anywhere nears as big and thus have a much smaller and more specific damage pattern.

[MSimon]

What we have now in the US is capital-Corporatism, my term. Folks provide money (the fuel for business) to a corporation which exists for the sole purpose of divorcing them from any responsibility for bad decisions by management. All they can lose is what they have invested (unless they are playing the market like the east coast branch of Vegas Inc.) Thus is it any wonder when said management makes whoppers of bad decisions? It is not the manager's money, it is not the investors responsibility.
Partnerships on the other hand still amass capital via investments, but the investors are tied directly to the outcome. Thus they tend to keep a bit of a better eye on things. Not always, but usually.
The Mega-CORPORATIONS (note the term) are having problems that their training tells the to shift responsibility for. Partnerships tend not to get anywhere nears as big and thus have a much smaller and more specific damage pattern.

All true. And yet limited liability means more things are tried. By limiting risks more people are willing to invest. Even a Company like Lloyds where the members can get wiped out by an adverse run of events is limited liability in that the members need assume no more risk in a venture than is contracted for. If a venture loses a Billion and Lloyds only contracted for a million all it can lose is a million.

There is no perfect system. The one we have works pretty well and better than anything else in its overall performance.

[MSimon]

I know of no partnership capable of building a 747-400.

[KitemanSA]

Why would anyone create one if they are bribed into irresponsibility by corporate status?

[MSimon]

Why would anyone create one if they are bribed into irresponsibility by corporate status?

But irresponsible corporate status is what created the 747-400.

Can you name a partnership that has done anything comparable?

BTW the people in corporations have interests: keeping their jobs being a prime motivator.

[KitemanSA]

I explained myself poorly.
No potential partnership large enough to build a 747 would survive the pressure in the country to become a corporation, with all that entails. If there were no option to become a corporation, I suspect desired technology would still be developed.
Since this is of course, just opinion, there is no real use arguing about it!

[MSimon]

I explained myself poorly.
No potential partnership large enough to build a 747 would survive the pressure in the country to become a corporation, with all that entails. If there were no option to become a corporation, I suspect desired technology would still be developed.
Since this is of course, just opinion, there is no real use arguing about it!

OK. There are countries without corporation law. Has any of them developed a 747-400 or equivalent?

[kurt9]

A lot of people here complain about regulations restricting capitalism as well as government using tax payer money to bail out companies in trouble.

Which is better, unrestricted capitalism allowing companies to grow so large that their failure would cause prohibitive damage to our national economy, and thereby giving them direct access to the national treasury in the form of bail-outs; or regulating company size so that their remains multiple other viable players when the largest go bankrupt?

Note that in the extreme example regulation has no control over the powers that be within the large companies. Having access to the national treasury, they could simply milk their own company until they need a bail out, then, without regulation, continue to milk it.

Any institution that is deemed to be "too big to fail" should be subject to anti-trust regulation and broken up.

[Aero]

I wrote, "to big to fail," I hope all understand that I mean, "to big to be allowed to fail" because of the overwhelming negative impact on our economy and unemployment numbers if it fails. That is, GM and the other bailed out businesses.

I happen to be of similar mind set as Kurt9. As things are, for example, there are only two companies in the U.S. that can make a 747, Boeing and Lockheed. And they are both to big to fail. But the time to solve that problem is passed. Now, if either of them ever get into financial straights, they have the right, by precedent, to access the national purse. There are many more examples I'm sure.

But just because we have allowed several businesses to grow to big to fail, mostly through buy-outs and mergers, doesn't mean we must allow the same to happen in the future. Unfettered capitalism (corporatism) will allow that to happen. Its time for some fetters IMO.

[MSimon]

A lot of people here complain about regulations restricting capitalism as well as government using tax payer money to bail out companies in trouble.

Which is better, unrestricted capitalism allowing companies to grow so large that their failure would cause prohibitive damage to our national economy, and thereby giving them direct access to the national treasury in the form of bail-outs; or regulating company size so that their remains multiple other viable players when the largest go bankrupt?

Note that in the extreme example regulation has no control over the powers that be within the large companies. Having access to the national treasury, they could simply milk their own company until they need a bail out, then, without regulation, continue to milk it.

Any institution that is deemed to be "too big to fail" should be subject to anti-trust regulation and broken up.

Then who will make our 767? 787? With Aerospatiale the only game in town you get monopoly pricing.

In any case as in the auto industry the first thing a failing company does is shed jobs. For decades. Then competitors move in. Finally the failure is more one of nostalgia rather than too big.

"Graceful" failure over time beats taking a hammer to a working company.

[Aero]

A lot of people here complain about regulations restricting capitalism as well as government using tax payer money to bail out companies in trouble.

Which is better, unrestricted capitalism allowing companies to grow so large that their failure would cause prohibitive damage to our national economy, and thereby giving them direct access to the national treasury in the form of bail-outs; or regulating company size so that their remains multiple other viable players when the largest go bankrupt?

Note that in the extreme example regulation has no control over the powers that be within the large companies. Having access to the national treasury, they could simply milk their own company until they need a bail out, then, without regulation, continue to milk it.

Any institution that is deemed to be "too big to fail" should be subject to anti-trust regulation and broken up.

Then who will make our 767? 787? With Aerospatiale the only game in town you get monopoly pricing.

In any case as in the auto industry the first thing a failing company does is shed jobs. For decades. Then competitors move in. Finally the failure is more one of nostalgia rather than too big.

"Graceful" failure over time beats taking a hammer to a working company.

Changing the fundamental corporate laws and regulations to control size after the fact and then applying it wholesale to already existing mega-corporations seems heavy handed, yet to not do so seems unfair to new business to whom the new laws apply. It is a conundrum, but to do nothing makes our nation captive to the mega-corporation that can dip into the national treasury any time they want. Now where do you think they will end up on the competitiveness scale? And therefore, how often will they need to dip in? Maybe such "dippers" should be split up into specialty units and in the end, made "not to big to fail."

I stipulated above that Boeing and Lockheed are already to big to fail, and I concur that when times are tight, companies shed the undesirable employees. BUT this shedding is based as much on who do we like as on economic productivity. (Before a plant closes, disliked employees, whistle blowers and such are transferred to it, then the plant closes, employee names are put on a list, then selected employees from that list are offered jobs elsewhere. The propaganda is that everyone will be offered jobs but of course that never happens.) This is bad, but off topic.

ON topic, I disagree with you Simon, failure is not a graceful thing taking years to happen, it happens within a year, and the second thing the "to big to fail" companies do is crawl into their corporate jets and fly to Washington D.C., hat in hand. (Well, maybe they won't be using their corporate jets so much in the future.) Maybe severe punishment for failure, such as executives working one year for $1, will be enough, but I don't see that as making management any smarter or the company any more manageable. Breaking the company into operating units as part of the bail-out might work, then the next time the executives come hat in hand, maybe they won't be "to big to fail."

[kurt9]

A lot of people here complain about regulations restricting capitalism as well as government using tax payer money to bail out companies in trouble.

Which is better, unrestricted capitalism allowing companies to grow so large that their failure would cause prohibitive damage to our national economy, and thereby giving them direct access to the national treasury in the form of bail-outs; or regulating company size so that their remains multiple other viable players when the largest go bankrupt?

Note that in the extreme example regulation has no control over the powers that be within the large companies. Having access to the national treasury, they could simply milk their own company until they need a bail out, then, without regulation, continue to milk it.

Any institution that is deemed to be "too big to fail" should be subject to anti-trust regulation and broken up.

Then who will make our 767? 787? With Aerospatiale the only game in town you get monopoly pricing.

There are start-up companies making small jets. Eclipse Aviation is one. There are 5 or 6 others. A jet airplane is at least as complex as a car, in terms of the number of parts and supply chain. So, it is not inconceivable that there could be new car manufacturing starts up.

Same with airliners. There is not that much difference between a small jet and a large jet. Most of the cost of manufacturing a car or jet plane is the engineering cost, which have dropped dramatically due to improved computer technology. There are small plane manufacturers moving into the airliner market. Embriar (in Brazil) is one.

Also, consider that 80% of the parts going into the current 737 as well as the new 787 are made by Japanese and Chinese companies. More significantly, the composite fuselages for the 787 will be made by a Chinese company. Like the car manufacturers, the airliner manufacturers have become assemblers. Vertical integration is a thing of the past.