02 February 2009

Subsidise silence

The next target for a bailout should surely be our old friends at the Eye Pee Yay. Their product is rubbish, their managers are fools, their title-encrusted minions are too many and yet inadequate - poorly monitored for quality or relevance of output.

First we had Stephen Kirchner warn us in the AFR last week that all this bailing out would transfer risk from the private sector to the public. Yep, that was the whole idea Stephen. Now we have Chris Berg, who starts with pop psychology and then veers into voodoo economics:
Presented with the biggest economic crisis in 50 years, the Federal Government first tried to ignore it and then angrily blamed it on greedy capitalists.

As opposed to whom, Chris? Ben Lee? Brett Lee? Bruce Lee? I blame Tom Switzer. Come on, we must be told.
Deputy Prime Minister Julia Gillard appears to have spent the past few months moonlighting as the liquidator for a chain of child-care centres.

I thought she was trying to ensure that parents were able to participate in the workforce by having their kids looked after, Chris. I'd rather Eddy Groves not receive another cent myself, but if the Eye Pee Yay has any ideas of achieving the same result without ... stop that laughter at once! With so many Research Fellows, surely the Eye Pee Yay would actually have a clue? A set of policy alternatives that ... what do you mean, no?
Collectively, the NSW Government is far worse than the most reckless, hard-partying, due-diligence-ignoring Wall Street CEO. When NSW inevitably goes into receivership, its citizen-shareholders will wish they could sue.

The NSW government has achieved the gold-standard of all economic rationalists, Chris - the AAA rating, which is more than anyone on Wall Street could expect. Everyone thinks they're a disaster except the economic rationalists, so you should be the last person using them as a punchline.
None of the traditional policy justifications for propping up failing companies ... seem to apply to our great bail-out bonanza.

For example, child-care organisations ... Car dealers ... the decision about which companies deserve a bail-out — and which companies should join whale oil merchants and abacus makers in the cemetery of dead businesses — is entirely arbitrary, dependent only on the political winds in Canberra.

Whale oil merchants were rendered redundant by technological change. Abacuses are still being made and sold, but as toys rather than commercial tools - again, technology. You haven't made the case that technology has rendered child care redundant. A bit of silliness in rating high-risk products as low risk is not the same as the march of economic history.

There is a critique to be made about propping up doomed industries like coal-powered electricity, if you can get it past your stablemate Tom Switzer. That's the point you should be making here, not confusing hysterical irrationality of risk assessors, spreadsheet jockeys and other mendicants with the March of Progress.
Shareholder capitalism should be pretty simple. People bet their money in the market on businesses that they think might be a good thing. They profit when they are correct and lose when they aren't. The companies that make bad decisions, or make products that no one wants to buy, fail. And the good ones survive.

And there's plenty of money to be made in the gap between "should be" and "is". Plenty of excellence goes down the toilet just because some doofus from the Club for Growth can't distinguish between a mortgage in Cincinatti and one in Carlingford, not because Progress is Marching On. ABC Learning didn't fail because children weren't adequately cared for. The Peter Ruehl routine is all very well, but if you've missed the point then your column is a waste of space. Look at all that luverly advertising clustered around your piece, Chris, and know that the advertiser's money was wasted (which may make them eligible for a bail-out!).
Bail-outs mean that people aren't financially punished for their bad financial decisions.

Financial decisions are not the only decisions to be made, Chris. Those who make financial decisions aren't competent to make them. That's the point, and you've missed it.
They keep companies afloat that probably should sink — if your business model isn't working, do something else with your time.

"Probably"? What pissweak analysis that is. It either does or it doesn't.
Bail-outs are paid for by everybody, but they're not available to everybody.

Considering the limitations that come with public funds - all that soul-destroying red tape, Chris, all those taxeater fetters - thank God we free men are spared.
Does anybody doubt that if the Government was presented with the imminent collapse of Ansett that it would have quickly ponied up the cash? At the time, the Howard government resisted the howls of Ansett executives and the unions and let Ansett die the death it deserved.

Ansett was one of the few dud companies of that time which did not feature John Howard's brother Stan on the board. Remember all those bail-outs Stan was able to pull, Chris? Do some research, fellow.
If anything deserves that title, it was the asset bubble that was burst in the crash last year.

All the downsizing and unemployment that we face over the next year is not the crisis, it is the correction.

You can't know if it is a "correction" until after the event, and it is not "correct" that productive businesses should fail and that non-shareholders should be punished financially merely because financiers have taken leave of their senses.
Things fail ... Baz Luhrmann's Australia failed to be the next Titanic.

Luhrmann aside, Australia is still afloat and the Titanic is not. The sense of enjoying oneself in the face of impending doom is a little exciting, actually, but is only so if we can be sure that economic stabilisers have kicked in and not left us to the mercy of hysterical clowns who can't tell a good risk from a bad one. Those automatic stabilisers are worth paying for, worth a change of government, and the fact that the government is ignoring geese like Chris Berg is a matter of no small satisfaction, if not pride.

Andrew Elder is researcher, editor, fundraiser and ambassador for mendicant industries at the Politically Homeless Institute.

Update: here's someone who knows more about economics than Chris Berg, if you can imagine that.

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