WHAT CAN BE DONE TO FIX THINGS?

Not the government I fear. Administration after administration have chosen their economic advisers from the same monolithic pool of economists and wall street investors. In short every administration has placed the foxes in charge of guarding the hen house!

Nor will new laws fix things. There are plenty of laws already on the books but they are conveniently ignored when cherished beliefs or certain interests are threatened. For example the housing bubble could have easily been avoided but the regulators chose to ignore the warning signals several of which were quite explicit.

I think that the only way to correct the economic system is to restore some responsibility into the system. One way to do this is when an enterprise fails then let it fail! Don’t bail it out. This will send a message to the remaining enterprises that there is no free lunch and the had better get their act together. We don’t need additional laws that are conveniently ignored.

We need some way to impose some real consequences on those who are responsible for these failures and the prospect of complete and utter failure is one way to achieve this goal. If Bear Sterns had been allowed to just fail instead of being bailed out probably the whole bailout mess could have been avoided. Unfortunately the net result of that bailout is an ever growing list of bailouts further driving the economy into ruin.

Regrettably it is now true that some government backed enterprises such as Fannie May and Freddy MAC are simply too large. They are subject to the twin dangers of bigness and political pressure. This should as a warning for all government backed enterprises on the dangers of “bigness”. It should also serve as a warning on big privatization as the ENRON fiasco should have done.

Okay then, what specifically should be done. Well, there are two immediate steps that can be taken:

1. Break up the corporate giants so that no one enterprise controls more than say 10% of any given market. Then when management happens to run the corporation into the ground don’t bail it out. LET IT FAIL! If the stockholders are so irresponsible that they don’t become involved in electing a prudent board of directors but rather continue letting the executives plunder the corporation then they have to take the consequences like everyone else.
2. If governments continue to appoint regulators that lack competence or integrity then vote the rascals out and keep voting them out until things change. We don’t need new laws we need people with competence and integrity in charge.

I know there are many out there that disagree with me but then I’m not called Grandpa Oddball for no reason.

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Tags: Economics, politics

This entry was posted on Friday, May 14th, 2010 at 2:50 pm and is filed under Economics, Politics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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