As I follow the unfolding story about the AIG bonus loophole, I find the emotional mix that results to be most alarming. The giant company that “could never fail” has failed not once but twice now, and after now being 80% owned by the public ends up paying $160M in bonuses to the same employees that landed the company in its current mess.
Beyond the possible prevention of a predicted cataclysm, what reasons does a capitalist society have for purchasing private companies with public money? All I hear is “they can’t fail, it would be catastrophic to our society”. How about the loss of $1.6 trillion from the public coffers? How detremental is that in terms of cutbacks to our much needed services? Are we going to see necessary expansion to our police and education budgets? How about the roadworks, infrastructure upgrades, public transport initiatives? All I hear there is that bridges are close to crumbling and police are having to triage 911 calls due to overwhelming demand and underwhelming numbers. Are those not equally catastrophic to our society.
As a worker and U.S. taxpayer, I expect part of the money we all collectively pay to our government each year in order to improve our public services and our communities, not to go into the pockets of another unethical twathole responsible for our current plight.
Furthermore, what about AIG’s competitors? What do they get from this deal? When they ran into hard times because people like AIG used their size to force them out of the market, there wasn’t any deal for them. They are trying to compete in a ruthless market by making smarter business decisions and providing better services yet when their competitors finally do fail due to horrible mismanagement, the government comes in and props them up. If I was in the insurance business right now I’d tell every single one of my employees to go home, close my doors, and just get out of the business. You can’t compete in a market that gives $170B to your competitors every time they make mistakes.
The same goes for the auto industry. Why do we have absolutely no diversity in the car manufacturing market? Because establishing a new auto manufacturing company in this day and age is unbelievably difficult to do. The big automakers can push you out of the market so fast you won’t even get your logo on your first plant before you’re shut down. How must those same fledgling business feel now, watching their competitors (who have made disasterous decisions over the last few decades) getting propped up by government funds. The fledgling business can’t ever survive when their competitors monumentally fail. Just quit the business and let the government run the lot.