Bailout

This sign employs a nice play on words, and if the milk is not legendary, at least January of '09 will be. This farm needs a bailout.
The word bailout has become part of every one's vocabulary in the last few months. Its origins are in the world of boating and speaks of removing something that should not be there, namely the water that is sinking the boat. But today it has become a fiscal strategy to put something into a business when it is sinking, namely money. Businesses can fail for a variety of reasons, as they can succeed for a variety of reasons. If a business is under-capitalized in a growing economy, an infusion of cash via share offerings or a line of credit with a bank would be a good strategy. This is not generally done by government because it is not the role of government in a free market society. The main reasons why a business fails are because of poor management, over leveraging (high debt), or a dried up market. The first two reasons can be dealt with and rectified. The third is a little tricky because there are various reasons why a market dries up. If you have a product or service that the public no longer requires, needs or wants, you are in trouble. If it IS a product or service that is needed, but people are holding back on spending, there is not much you can do except to weather it out and hope money will be freed up in the future and your business will pick up.
We have governments on both sides of the border bailing out businesses that should be allowed to go 'under'. For example, if nobody is buying new cars anymore, how is throwing billions at the auto industry going to improve business. In our province, the lumber industry is big but it is in the dumps right now because nobody is buying lumber because nobody is building houses, because nobody is buying houses because the prices are falling and those in the market are waiting for the best deal. How is throwing money at the lumber industry going to save it?

If bailouts are about saving businesses, it is doomed to failure. If bailouts are about keeping people afloat financially, why not give the money directly to the people? In a free market economy, business has the opportunity to both succeed or fail. When it succeeds it does not want to be penalized. It should neither want help when it does not succeed. If the opportunity to fail does not accompany the opportunity succeed, then government intervention is nothing but welfare for the rich. Our nations are willing to mortgage the future generations with massive debts instead of letting the market run its natural course and weed out the businesses that do poorly in hard economic times. This always get rectified with time. It is a bitter pill to swallow, but the medicine tastes terrible and works quickly. The way things are going now, the poor patient is on life support and will be for many years to come.