Futures and Options

Just another town along the road.

Wednesday, April 8, 2009

On survival, or, They shoot horses, don’t they?

“Pumpkin, that’s modern medicine. Advances that keep people alive who should have died a long time ago, back when they lost what made them people.” – Dr. Percival “Perry” Cox in the very first episode of “Scrubs”

Between yesterday’s article about the reduced health care costs of smokers and the near-continuous stream of news pieces about the economy I’ve started to think that maybe there’s some common ground between the two.  Not in any causal or correlative way, but in overall philosophy.  Modern medicine has given us many great things; it has eradicated diseases like polio and has all but eliminated diseases like tuberculosis.  On the other hand, it creates situations where people can linger for years, sometimes decades, connected to “life” support machinery but unconscious and otherwise devoid of everything that makes us truly “human” and “alive”.  It seems to me that we’re now extending this same practice to corporations.

Dolling out government funds to corporations just to keep them afloat makes them artificially viable.  Remove the infusions of government cash and the companies go into bankruptcy and are forced to re-organize, at which point they may either return to the marketplace as revitalized entities or they may fail entirely, but they do so on their own inherent viability not from a continuous infusion of taxpayers’ dollars.  There comes a time when we either pull the plug or waste time, effort, and money in a futile attempt to postpone the inevitable.

Those who support bailouts may point to the Chrysler example of the early 1980’s.  They may say that Chrysler’s government loans allowed the company to claw its way back and revitalize itself; that the 1980’s were a fantastic time for Chrysler’s profitability.  They would be wrong. The government gave Chrysler no money at all back in 1979; they merely co-signed Chrysler’s loan applications.  Taxpayer dollars, while at risk, were not actually spent.  Also, that co-signing came with strings attached.  Chrysler of 1979 went bankrupt in every real way save actually calling it Chapter 11.  In every functional aspect, it was a bankruptcy.  Chrysler’s creditors were forced to settle for 30 cents on the dollar or were paid off in shares of stock that were effectively worthless except as toilet paper.  Chrysler’s workers were forced to accept pay reductions and over 40% of the hourly workers were laid off.  Chrysler went through a Chapter 11 Bankruptcy in everything except the name.

If anything, Chrysler’s previous “bailout” in 1979 is proof that the Chapter 11 Bankruptcy process works.  It’s time to take the “patients” off of life support and let them live or die on their own merits.

posted by Zenmervolt at 10:18  

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