IMF, Bailouts, Capitalism
The business pages are full of stories about people’s socialism (taxpayers) coming to the rescue of imploding corporate capitalism. Stock markets in Asia and North America go up when government ministers and potentates at the International Monetary Fund (IMF) indicate taxpayer bailouts are on the way. Just in the past three weeks, the Japanese government indicated likely bailouts of some tanking banks, the U.S. Treasury provided a 3 billion exchange stabilization assistance to Indonesia whose corporations overextended and the IMF is preparing a $55 billion package of assistance to South Korea whose giant conglomerates (the Chaebols) are in trouble.
Just as my Daddy said many years ago, “Capitalism will always survive so long as socialism is called upon to save it.” That is, if big business is in trouble, it goes to governments for the cash and credit to stabilize the speculation, mismanagement, corruption and crimes of these giants. But small business in trouble is entirely free to let the market rule and go bankrupt, thank you.
What is wrong with such taxpayer rescues? First they are mostly indiscriminate. Whether the causes of the business giants’ downfall are greedy bosses, crime, speculation, bad luck, natural disasters- the bailout comes. This absence of bailout judgment simply encourages repeat performances. Savvy investors will pick the big guys because governments will never allow then to fail. They, like a Citicorp eight years ago or a future troubled Boeing company, are simply too big to be allowed to fail.
This is a discrimination against smaller companies and any kind of deterrence strategy against reckless or unlawful business practices. It invites campaign cash for politicians and shields such Big Guy misbehavior from the legitimate discipline of marketplace sanctions. It assures repeat performances because corporate imprudence knows the taxpayers will be their free insurance policy. Moreover, when the bailout takes the form of tax forgiveness or abatements, the weight of government budgets falls more heavily on millions of smaller taxpayers, who, of course, have no real voice directly or indirectly.
Second these bailouts are increasingly decided by bureaucrats in closed door sessions. Very un-democratic. The IMF is virtually a secret society of governments serving the interests of multinational financial corporations. The Mexican and Indonesian bailouts were decided by U.S. executive branch officials without any public reviews or hearings, much less any open Congressional deliberations.
It is only when the bills come due that Congress is expected to steer your tax dollars into the replenished business bailout coffers via the Treasury Department and the IMF. For example, in a few weeks Congress will appropriate $13.5 billion requested by Clinton to be transferred to the IMF. There will not be any debate as to where this money could be better spent here at home (schools, clinics, drinking water system repairs, mass transit) or abroad preventing deadly infectious disease like tuberculosis or malaria which claim over five million lives a year.
Third – there is almost never any pay back or reciprocity. The Savings and Loan industry was bailed out by you taxpayers a few years ago (costing, in principal and interest, half a trillion dollars spread out until the year 2020). The Savings and Loans are now making record profits – why not pay some of those profits back to the taxpayer? Why shouldn’t other saved commercial banks be required to meet certain consumer protection facilities and standards? Except for the Chrysler stock warrants that the government sold at a profit after that company’s Washington bailout, rescues by taxpayers have been one way streets with the corporate welfare freeloaders laughing all the way to the bank.
Lastly, these bailouts are increasingly going global as GATT and other trade agreements make economies more unnecessarily interdependent. Imagine you the taxpayers bailing out the dictatorial regimes of Mexico, Indonesia and their mega-billionaire oligarchs who brutally repress their people and workers. Is Uncle Sam becoming the world’s all purpose guarantor? Did anyone ask you?
Until taxpayers are organized to have a say, they will pay, pay and pay. How about a voluntary check off on your 1040 tax return inviting you to join with others a national taxpayers association to be the ultimate watchdog over the public treasury? If you’re interested in this idea, suggest it to your Senators or Representatives and send us a copy of your letter to Taxpayers Aroused, PO Box 19312, Washington, DC 20036.