A Philosopher's Blog

Should the Government Bail Out Businesses?

Posted in Business, Ethics, Politics by Michael LaBossiere on November 20, 2008

There is a great deal of debate about what the government should be doing about the economic crisis. Coincidentally, in my ethics class we’ve been discussing the legitimate role of the state.

Most thinkers take the minimal obligations of the state to be protecting the citizens and enforcing the laws. Most states take on a multitude of other tasks, but those are the most basic. Naturally, people disagree about what else the state should be doing.

Classic Conservatives hold that the state should be minimally involved in the free market. This includes both regulating it and bailing out businesses that get into trouble. The purest form of this approach is that laid out by Adam Smith. Of course, experience shows what happens in such “pure” economies (the Great Depression, for example). Hence, even conservative thinkers tend to see a role for the state in regulating and perhaps even bailing out businesses.

The “new” conservatives (aka “Bush Conservatives”) hold that the state should be minimally involved in regulation but should support business financially and bail them out. This can be seen as a form of socialism in which the state funnels tax revenue (and loans) to certain businesses. As the economic disaster of today indicates, this approach does not work that well.

The liberal view has been that the state should regulate business but should not be significantly involved in supporting businesses (except certain ones-such as those owned by women or minorities). This is the sort of view often atributed to Democrats. In reality, they seem happy to support businesses that donate to their campaigns, that they have a stake in, and those that are owned by friends.

I believe that government should regulate business for the same reason that I believe that government should regulate other aspects of our behavior: regulation is needed to prevent people from doing harm to others. While most people would probably still behave decently without being compelled, the fact that a significant number of people are willing to behave very badly even in the face of compulsion indicates that a lack of regulation would be bad. If this is true of human behavior outside of business, then it would certainly seem to apply within business as well. After all, why would a selfish and evil person stop being that way simply because he became a businessman?

As far as bailing out companies, I have mixed thoughts. On one hand, this could be justified in terms of the protective role of the state. For example, it could be argued that by bailing out failing banks, the state is protecting the citizens from the harm of financial disaster. Of course, this certainly opens the door to a rather broad interpretation of this role and this might prove problematic. For example, every failing business harms someone-does that mean the state should try to bail them all out?

On the other hand, I consider responsibility to be rather important. If I make a bad choice and suffer because of it, that is my own doing and hence it is not the duty of the state to save me. The evidence is that the economic mess is largely a product of greed, poor decision making, failure in leadership, and various moral failures. Hence, the failed companies should accept responsibility for the failures and expect to be allowed to die semi-honorable deaths.

That said, it could be argued that the companies should be bailed out because their failure would hurt those not responsible for their failure. To use an analogy, if the parents make bad choices and a family is destitute, then the state should help the young children. After all, they were not at fault and are in such straights due to bad luck and not bad judgment.

In reply to this, perhaps it is the people who should be helped out directly. The failing companies could be allowed to fail (or survive) and then new ones could arise-hopefully lead by better people who will make better choices. Realistically, I think we can (sadly enough) expect the same scoundrels back at the helm again, ready to steer onto the rocks in search

One Response

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  1. kernunos said, on November 20, 2008 at 10:45 pm

    I find it funny when people put Conservative and Bush together. He may actually be Conservative but us Conservatives would not know because the last eight years have been nothing but compromising and giving into most Democrats’ agendas just to get the money needed to fund our troops. In fact, other than his opposition to certain types of stem cell research I am not sure what Conservative legacy he will leave behind.

    As a Conservative I will tell you how one feels about “regulation” and business. First I will call regulations laws. Secondly I will tell you idealistically how it should be for a Conservative. A Conservative believes that there should be enough laws in place(or strong enough laws) to protect all entities involved with the operations or a business but not too many as to interfere with the free-enterprise process. Everyone should have protection but nobody should be burdened. It is as simple as that. Of course practice is often more complicated than theory.

    The Left so often accuses Conservatives of wanting some business world devoid of any laws curtailing business whatsoever. This of course would be silly.

    This mortgage crisis is nothing short of a failure of “de-regulation”(I know I said I would not say that word anymore) by Democrats stemming all the way back to the Jimmy Carter years. Banks were threatened that if they did not stop descriminated against people with problems such as bad credit(how evil of those banks) then the government would make their lives very difficult. By government I mean the Democratically controlled Senate, House and Presidency at the time. Doing such an irresponsible thing was only a cocktail for disaster just waiting for the right variables or perfect storm of economic conditions to unleash an economic catastrophy that has not been seen since the Great Depr…..whoops I mean Jimmy Carter administration. What a genius he was. Many people including the not so Conservative George Bush and John McCain have called for reforms and have been warning about potential problems with Fanny Mae and Freddie Mac for at least two years. Problems go all the way back to 2001. People such as Barney Frank, who is on the oversite commitee dealing with the affairs of these mortgage firms, has argued all along until they collapsed that there was no problems with these companies. He should have known better.

    I will tell you without a doubt that a Conservative feels that a person with bad credit or any other discriminatings factors that would make that person unable to pay for a home should not try to get a loan to buy that house. A Conservative person also feels that any bank, no matter how much pressure they get from the government to do so, should not lend to that individual.

    I, unlike Liberals, am not confused on Conservatism. You can take that to the bank.

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