We live in an era of huge corporations. There's no turning back.
Consider, now, the present crisis. The Big Three, the banks, etc once again are said to be too big to fail. From our approach, however, the multi-billion dollar losses represent miscalculations of the past. Mistakes. Our profit and loss system is just that, a profit *and* loss system. Prices don't coordinate only the profitable firms. Profit *and* loss coordinate economic activities. Losses correct for a firm's mistakes, whether the firm is large or small, a hundred billion dollar enterprise or Mom and Pop's Dingle Dangle Candy Shop. In the present situation we have systemic mistakes, and those mistakes require systemic correction through active market processes. I don't have to convince our readers of that.
Let's, however, apply the too big to fail logic to other cases. Madoff, for example. Wasn't he too big to fail? After all, his investors saw $170 billion disappear over night.
It's like Madoff rolled up the cash and smoked it.
His investors are probably right to sue. But they'll only get a small portion of that cash back. Imagine the ripple effects (the Keynesian multiplier process) from the billions that have gone up in smoke.
The ripple effects. If banks are too big to fail, then so, too, are Madoff's investors. Why not bail them out?
Or take the investments of the nation's top income earners. Imagine the multiplier effects of their wealth having disappeared, too. Surely they're too big to fail, no?
Let's not forget the workingman -- the backbone of our nation. Isn't he too big to fail? Imagine all of the hard-working iron miners, tool and die makers, foundry workers, ship builders, electricians, pipe fitters... the list goes on to even include college professors. As a group, aren't we also too big to fail? Our pension programs have collapsed nearly fifty percent. Where's my cash bailout?
Why, Washington, stop with the highly-identifiable few, while relegating the restless many to fight over sloppy seconds on main street? Where's your logic?
Robert Reich offers a different argument: If They're Too Big to Fail, They're Too Big, Period. At least he seems to pursue his logic to the end. Bust up large corporations, and tax the hell out of the rich. At least in this way, nobody will be too big to fail. Terrific. Cut down the mighty oak trees so that we could all enjoy living from the perspective of mosses and lichens.
Me? I'm in favor of ecological diversity.