Socialising Corporate Losses: A Moral Issue

Today we're going to talk about a concept that's near and dear to my heart - socialising corporate losses.

Now, before you switch off, let me tell you that this is not going to be a boring discussion about economics. No, no, no. We're going to talk about something that affects all of us - taxpayers bailing out banks and companies.

Yes, you heard me right. Taxpayers. Bailing out. Banks. And companies. It's a concept that's been around for a while, and it's one that makes me absolutely furious. Why, you ask? Well, because it's one of the biggest examples of how the rich get richer while the poor get poorer. It is the most base and insidious characteristics of a form of non-stakeholder capitalism that only increases the divide between rich and poor and impoverishes the public purse for education, health, the environment, and roads, to name but a few. Public services are being run into the ground around the world because trillions after trillions of public money has been injected into big companies with no repayment whatsoever.

Let me explain. When a bank or a company fails, whether through malfeasanace or incompetence, who pays the price? Is it the CEO? The Board of Directors? The shareholders? No, of course not. It's the taxpayers who end up footing the bill. And what do we get in return? Nothing. Not a single penny.

It's the ultimate example of privatising profits while socialising losses. The bigwigs at the top get to enjoy all the benefits of their success - the bonuses, the stock options, the fancy cars, yachts, the private jets, the mansions - while we, the taxpayers, are left to pick up the pieces when everything comes crashing down.

And let me tell you, it's not just the banks and and huge multinationals that are guilty of this. It's happening all over the place. Look at the airline industry. In the wake of the COVID-19 pandemic, airlines around the world were struggling to stay afloat. Not through malfeasance or incompetence, generally. But, regardless of the cause, what did our governments do? They bailed them out, of course.

Now, you might be thinking, "Well, that's not so bad, right? We need airlines. They're essential for travel and commerce." And you'd be right. But here's the thing - when the government bailed out the airlines, did they get anything in return? Did they take ownership of the airlines? Did they get a stake in the companies? No, they didn't. The airlines got the bailout money, and the taxpayers got...what, exactly? A pat on the back and a "thanks for keeping the economy going"? It's outrageous.

And it's not just the airline industry, either. Look at the auto industry. Remember the financial crisis of 2008? The big three automakers - General Motors, Ford, and Chrysler - were all in trouble. So what did the government do? They bailed them out, to the tune of billions of dollars. And what did the taxpayers get in return? Nothing. Zilch. Nada. The automakers got the bailout money, and the taxpayers got the shaft.

Now, you might be thinking, "Well, at least the bailout saved jobs, right?" And you'd be partially right. Yes, the bailout did save jobs - temporarily. But here's the thing - the companies that got bailed out didn't fundamentally change anything. They didn't address the underlying problems that caused them to fail in the first place. I am not arguing that the private sector does not provide jobs, so they are worth saving. I say save them, but not for free. The jobs are proteccted still. Jobs is a null argument.

But the're "too big to fail", I hear you say? Yes, for sure. But we are not talking about forcing them into collapse. Qutie the opposite, we are throwing them a lifeline. We are talking about "public investment". They are never too big for the taxpayer to buy a share the same as any normal billionaire would. Would Bill Gates give $20 billion to a failing company to keep them afrloat and not expect equity? No chance at all. Indeed, most billionares would not bail out a failing comapny anyway; they are srich precisely because they generally don't put good money after bad.

And are they going to be in worse management than the ones that rant them aground? Of course not.

And so, a few years later, when the economy was back on its feet and things were looking up, what did those same companies do? Did they say, "Hey, thanks for bailing us out. We're going to use this opportunity to restructure and become more efficient, so we don't have to come crawling back to you in the future"? And "We will be able to pay you back, even if only with our executive bonuses".

No, of course not. They went right back to their old ways, raking in profits and ignoring the warning signs that another economic collapse was on the horizon. Ignoring malfeasance until it beggars them again. Ignoring incompetence until they are on the rocky shoal of administration again. And who do you think will be expected to bail them out when the next rather inevitable shoal holes their hull? That's right - us, the taxpayers.

This cycle of bailing out companies and banks without holding them accountable needs to end. It's time to start insisting that if the taxpayers are going to bail out a company or a bank, they should own a stake in it. It's only fair. If the company went into adminsirtation, do you think the administrators would have nothing to say about the firm being accountable for fixing the underlying issues? Of course not. But when the public steps in?

Think about it. If you're going to lend money to someone, wouldn't you want some sort of collateral to make sure you're not just throwing your money away? With tiny companies it is this way. If you start a stratup and someone invests, they are buying a stake, not donating to charity. The investor has rationalised that your business is worth keeping afloat, should not fail, but will own a fair share for that investment and faith. Why is this any different? The same principle applies here. If we're going to just give billions of dollars to a company or a bank, we should get something in return. And what better thing to get than ownership?

Now, I know what some of you are thinking. "But Brian, we're not experts in running a bank or a company. How could we possibly own one?" And that's a valid concern. But here's the thing - we don't have to run the company. Owning equity is not about running a company. We just have to have a say in how it's run, and do our best to make sure the same incompetence or malfeasance does not circle back around.

We could certainly take steps - perfectly reasonable and necessary governnance steps, that probably should have been take from the start - to appoint a Board of Directors to oversee the company, with representatives from the government and the taxpayers. We could insist that the company operates in a way that benefits both its shareholders and the public. We can be presdent at all shareholder meetings to vote for the public interest. We could ensure that the company pays its fair share of taxes and doesn't engage in shady business practices. If you want to avoid corporate tax avoidance, a public shareholder is a great way to do it; rightfully boosting the public purse exponentially.

And here's the thing - if the company is successful, we all benefit. The profits could be used to fund public services, to pay down the national debt, equip schools, provide healthcare, build bridgees, forgive student loans, or to provide tax breaks for working families. We would finally be able to socialise gains fairly purchased by the public.

When we take this public ownership step, and if the company fails, again, we'll be in a much better position to deal with it. We'll already have a stake in the company, which means we won't be throwing good money after bad. We'll be able to step in and make the necessary changes to ensure that the company can survive in the long run.

The big end of town will 100% oppose this. If there is one thing the rich don't do it is give anything away. But, regardless of their opposition, this approach has already been tried in other countries with considerable success. In Sweden, for example, the government took over failing banks in the early 1990s and held onto them until they were able to be sold back to private investors at a profit. In Germany, the government has taken stakes in struggling companies like Deutsche Bank and Lufthansa in exchange for bailouts.

Now, I know that some of you with ingrained laissez faire economic views will still be skeptical. You might be thinking that this is "just socialism" in disguise. But here's the thing - we already have a form of socialism in the vast majority of democracies. It's just that it's socialism for the rich and capitalism for the poor. We've been socialising the losses of big corporations and banks for decades now, and it's time to put an end to it. It's time to start demanding accountability from the companies that we bail out. It's time to start insisting that if we're going to use taxpayer money to prop up a failing company, we should get something in return. The public piggy bank should be filling at roughly the same rate as the CEO's.

The concept of the public buying equity in return for helping a failed company, if they are genuinely considered too big to fail, is one that we need to take seriously. It's not just an economic issue - it's a moral one. We can't keep bailing out big corporations and banks without holding them accountable. It's time to start insisting that if we're going to bail them out, we should own a stake in them. It's time to start socialising the gains if we are going to socialise the losses.

#SocialiseGains #TaxpayerAccountability #PrivatisedProfits #PublicInvestment