Corporate Socialism: The Government Is Bailing Out Investors and Not You | Hacker News Reader

Corporate Socialism: The Government Is Bailing Out Investors and Not You

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157 pointsDVassallo101 comments

I wonder if people in the US realize that when they hear the number "two trillion" they should think "$10,000 per tax payer".

Most people in the US won't even know how many zeros a trillion has.

That’s how it should be discussed. That it’s not underscores the lapdog position of the media. All media.

That'd be misleading though. Much of that $2T is comprised of loans.

To who and at what interest rate?

That figure only goes up when large numbers of people drop off the tax rolls, whether because they succumb to COVID or knock-on effects.

On the Canadian side so I’m not sure how our recent legislation differs.

Up here the government is forcing businesses to close their doors 3-4 weeks if they’re non-essential. We can can weather 3 weeks and continue paying leave to the few employees we have. After that we’re out of money to rent, wages, & utilities without any government assistance.

Small business don’t exactly sit on warchests of cash, especially if they have business loans to pay off.

I might be biased here, but I’d prefer to maintain existing employees then lay them off and try hiring when this is over, but no one can even see if we’ll actually be able to reopen in 3 weeks. How long will this take? No one really knows. If this lasts 3 months and the economy is still at a halt, we’re in even worse shape as now we’re bled of cash and on top of that have a bunch more debt.

I do not see how most business get through this without accumulation of some serious debt in the form of unpaid bills.

It is really beautiful to see a thread consisting of 90% comments downvoted into gray.

https://imgur.com/a/wQBKp4f

Also at a small Canadian business, and I think the vagueness on timeline and 'stimulus/bailout' is intentional. It seems very likely (>50%) this will stretch out at least to June, and the government appears to be trying to avoid a huge rash of layoffs.

My take is that the government is trying to get businesses to take on debt and essentially fund stimulus spending. My advice is not to count on being back in business in three weeks.

Sorry for the dour view, but I hope you can make it through; this is going to be tough for a lot of us.

> On the Canadian side so I’m not sure how our recent legislation differs

The government is paying anyone who's income is impacted (even self-employed) $2k a month for four months... so individuals are getting monetary support.

https://www.surreynowleader.com/news/trudeau-unveils-new-200...

Why bailout? Why not nationalize it instead and hopefully privatize it back later down the road. Or if you don’t want the nationalization headache at least trade money for equity.

> Why bailout? Why not nationalize it instead and hopefully privatize it back later down the road.

That's not an alternative to a bailout, its a common bailout method: the government purchases equity of an ailing institution, thereby nationalizing it in whole or in part, puts it's own management in place, turns it around, and then sells the equity on the open market.

Thanks for explaining. I thought bailout meant just giving away money or some low interest credit to companies without getting equity in return.

I used to think the same. Good article here with a bit more detail!

https://www.peoplespolicyproject.org/2020/03/23/how-to-think...

Also worth noting the equity they get dilutes existing equity meaning it tends to screw the shareholders (but not as bad as insolvency). This is a good thing when you bail out companies that messed up. If you have a stake in a company you shouldn't ever want a bailout.

I really think that the government should be taking a majority stake in Boeing. They have institutional problems in addition to money problems.

In fact Boeing seems to be balking at govt requiring equity in exchange for loans: https://www.fool.com/investing/2020/03/24/boeing-ceo-rejects...

Which, to me, sounds like Boeing doesn't need a bailout all that much.

> That's not an alternative to a bailout, its a common bailout method

When and where has a government made a large equity investment in a company and recouped its investment plus a reasonable insurance premium?

Here are some examples where it has not:

Penn Central Railroad 1970

Savings and Loan Crisis 1989

California Energy Sector 2000

Airline Industry 2001

Banking Sector 2008

Auto Sector 2008

If you want a non-comprehensive primer, see [1].

[1] https://www.propublica.org/article/government-bailouts

Workers are being helped here, they are getting 600 per week + whatever the state program gives them. In Florida, that would be around 1K per week which is unprecedented. I think where the legislation falls short is help to states. There should be around 1 or 2K per capita in direct aid to state governments experiencing revenue short falls and increased demand for services with no state 'FED' to issue money for them.

https://www.jacobinmag.com/2020/03/coronavirus-recession-glo...

Haven't seen many people complaining about all the homeless people on social media much in the past two weeks.

That's because people with computers are at hunkered at home and social distancing.

No morning commute, no stepping over human poo, no one trying to sell you drugs in the Tenderloin, etc. when you're at home.

Or, alternatively, not in San Francisco,CA. USA, as many people aren't.

The real question is why/when restructuring through bankruptcy became seen as something society should avoid rather then embrace?

There is a huge argument to be said for the government acting like an buyer of last resort for critical assets/activities belonging to organization under bankruptcy, rather then acting as an lender of last resort for companies trying to stay out of bankruptcy court.

Lets keep in mind that bankruptcy under almost all western legal systems allow for the continuation of viable economic activity and resale of valuable assets, i.e. in a lot of cases most salaried employees keeps their jobs even after the parent company goes bankrupt.

From an market theory and moral perspective we need an functional system of restructuring through bankruptcy for any free market based system to starve off the (according to Marx inevitable) decline back towards aristocratic mercantilism.

The general answer is that governments (i.e., bureaucrats) are not thought to be very good at stepping in and running corporations. In addition, presumably all of those bureaucrats already have things to do and don't need the headache.

Is that empirical based knowledge or theological doctrine?

The idea that an service cannot be efficiently provided by government is an idea that tend to be thrown around a lot in US politics despite evidence from Europe that on public utilities government/state/city owned/controlled utilities is cheaper/better then private companies when allowed to compete directly side by with private enterprise.

It's one thing to have the government provide a service as part of a carefully planned operation. It's another thing entirely to put a bunch of government workers suddenly in charge of a large corporation.

Hey Joe and Jane in GSA, GM just went bankrupt. Could you please drop your other responsibilities and run it from now on?

So what your saying is that the common corporate practice of lifting CEO's across sectors into companies they have no experience with directly is an recipe for disaster?

The government have exactly the same options to hire experienced people as any company in existence, so if the government cant replace bad manage neither can the private sector.

Once you have a bailout you have by definition incompetent owners and an/or management team that cant do their job properly, bankruptcy forces that to become clear by forcing the incumbent owners to face losses, bailout on the other hand keeps the rot in place.

If I'm an investor, which I am, they are indeed bailing me out too. 55% of Americans hold equity. So 55% of Americans are being bailed out. Let's get that number to 100%, so we can move on to other issues.

My rough estimate is 10% of $6T US bailout goes to people Vs corporations by end of May.

Your estimates? Is it true that Banks encashed $1T at 0% the Sunday before? Why did Mortgage rates go up?

Mortgage rates went up because 10 and 30 yr bond yields have spiked. Also, during the yield collapse a few weeks ago, banks got flooded by refi requests and it exhausted banks’ supply of available dollars for mortgages.

So... a run on the banks?

Banks have an practically infinite supply of money. They just issue it when they create loans. What they lack is the capacity to process the loans, not the funding.

The whole point of capitalism is that owners are rewarded and everyone else get's fucked. That's really fucking obvious. The key to living under capitalism is to become an owner (of capital) as soon as you can and stop being a worker. Anyone talking about any other strategy is talking nonsense. The proletariat will not rise up any time soon and capitalism is not going anywhere.

So everyone's best bet is to stop moaning and get with the program. We can't beat them, join them.

Fair characterization of industrial capitalism, perhaps. How about network capitalism of the type described by Yochai Benkler? https://www.benkler.org/

I'm not aware of Benkler, I'll take a look. That said, unless it's a very different form of capitalism that we currently practise...

I think fundamentally humans want to compete instead of cooperate and that a tiger can't change its stripes.

Capitalism !== markets. Markets are much older than capitalism and will be around long after capitalism has come and went.

Capitalism is merely a mode of production based on exploitation by control of capital.

Honest question, given the tens of thousands of years of humans cooperating to form groups of increasingly large size and interdependence, what makes you think there is more competition than cooperation happening?

Because after tens of thousands of years we are no closer to the utopian ideal as the cavemen were. Also because you can't cooperate for a mate.

In caveman times you were _far_ more likely to be killed via violent encounter, starve to death, or die from minor accidents or infections, etc. The average life expectancy was about 20 years, and a painful death was highly likely. And while you can't cooperate for a mate, there is no shortage of mate's to go around and likely millions of suitable matches for any particular person today. So however far from utopia we might be now, we are certainly _far_ closer than caveman times.

I'd caution anyone on this ideological path that I can see you're on. I had a friend who used to say things exactly like this who is now terribly anti-Semitic. It's important to remember that many of these very wealthy, influential people and groups in media, finance, etc are there by merit and what may seem like nepotism to us is merely a coping mechanism by a historically persecuted and oppressed people.

If it helps, you may consider this the (much) lesser of two evils.

I really wish both sides would stop naming everything capitalism.

Whatever it is we're now experiencing, it's not capitalism.

Good, and we've never actually had communism, socialism, or hell even a proper monarchy before and any empirical criticism thereof is obviously unfounded.

Productive discourse about "socialism", for instance, can be had once all parties agree upon a definition.

Failing that, it's all just blather.

As for "capitalism", most people, pro and con, are talking about corporatism (laissez faire), which is antithetical to capitalism.

So the goal would be that everybody is an "investor", but nobody works and produces any actual value?

That doesn't even pass the smell test, and is just an excuse for people to not seek justice, as is calling that "moaning".

There is no such thing as corporate socialism, its called oligarchy. How long must the rest of the world suffer before the Americans open a dictionary?

That's not as rhetorically powerful.

I love Taleb; he's a certified creative genius, better-than-chance-would-allow prophet and a regular guy with Good Judgment, all three at once- a rarity. I think he is wrong on this one however.

Wrongest observation in the article:

"For the very fact that we are saving airlines indicates their role as utility"

An industry can be essential to society and still not be a utility, and that's a feature, not a bug. Nationalizing an industry implies the State has the knowledge to run it. But an entire industry of experts is already dedicated to doing just that. Nationalizing it implies the State would pay those same people or their equivalent to do what it is they already do. Why would it do that ?

This is true of critical and non-critical industries. The government does not possess the knowledge to run specialized industries. That's exactly why Socialism always fails, and yes, it does always fail.

In America at least, even "utilities" are not State owned, at most they are regulated, and the constant object of regulatory capture because of it.

His other main point, that this is not a Black Swan, it's a White Swan (a disaster they should have seen coming and planned for) is stronger. However the exact scope and duration of this event is itself something of a Black Swan, no? The entire world is in lockdown for an unknown duration. Did you want that priced into every airline ticket you buy? It's not a rhetorical question, you have to decide if this is something you yourself would have wanted, back in the beforetime.

For that matter, how does a nationalized airline industry raising your taxes to pay for Black Swans sound to you? Think that's where the money would ultimately really go? How's your Social Security lockbox doing?

The reason we stem the bleeding in our industries like airlines isn't because their lobbyists incite Congressfolk to sin or even because they're utilities in all but name. Life could go on if the major airlines all failed all at once. After some time, there would be new airlines and until then charter planes for critical things and telecommute, like now.

The reason we bail them out is because the net downstream cost of not doing so is many times the net cost of doing so. People have to have jobs to go back to after this is over. There has to be an economy. There has to be industries with jobs to go to.

The demand for air travel will certainly be there, air travel is not a new invention waiting to catch on, is it? So the question to be answered is: is it wiser to birth a new airline industry or treat the wounds of the one you have? Here I define wiser to mean: less costly to the government and less ruinous of people's lives.

In the US at least, everyone is getting hard cash presently to see them through, #masshole not withstanding. Many industries and even banks(!) are stepping up in all sorts of creative and genuinely helpful ways. This will pass; we will survive thanks to people's willingness to endure #lockdown for the sake of others. Everything else beyond that is gravy from historical and biological perspectives.

Without businesses there are no jobs. I don't understand why people are so outraged about small business and corporate stimulas during this crisis. What exactly is their counter plan?

Rather than bailout the corporations, bailout the workers who lost their jobs.

This isn't an argument. It's a bumper sticker.

I don't even understand this rhetoric. You can't 'bailout' workers. You can send workers cash, which the government does, but you also should help businesses, because that's where people go to work in the first place.

I'm not really sure what the purpose of this antagonism is, as if protecting employment isn't in the interest of workers, or as if helping businesses and workers is mutually exclusive.

Where do you think workers spend their money?

We need to stop propping up companies incapable of weathering a rainy day.

This moral hazard madness needs to end.

So do we just keep sending them the same benefits when they can’t find work because the businesses failed?

Cross that bridge if we get to it.

In that scenario the money sent to them still gets spent locally. They’ll still need to pay rent or mortgage, buy groceries, etc etc. They’re not going to sit on it like corporations do.

Corporations reinvest it and create jobs, the better idea would be to bail out companies but ban stock buybacks. You need businesses, or else jobs won’t exists.

People last longer than corporations. The entrepreneurs on this site often create multiple corporations.

Corporations only "reinvest and create jobs" if they have now choice i.e. the only add more waiters if they have too many customers.

TED Talk: Nick Hanauer "Rich people don't create jobs" https://www.youtube.com/watch?v=CKCvf8E7V1g

As you noted, the spend and windfall on buybacks or maybe automation.

https://arstechnica.com/tech-policy/2019/05/att-promised-700...

Scott Galloway on Recode's Pivot podcast made an excellent point:

Government intervention to corporations should only be loans, convertible to equity.

Galloway observes that USA taxpayers actually made money from the 2008-2009 bailouts to corporations.

I'm pretty sure I agree with this policy. I'd like to learn more.

Along with prohibitions on stock buybacks, bonuses for execs, and all the other clever ways people exfiltrate cash from corporations.

When the workers lose their jobs, a portion of them will start new businesses, and some of them will succeed, creating the next uptrend.

That is, unless they're starving and homeless.

The absolutely worst mistake to do is to pay support to large corporations.

The potential downside and risk is that more people become permanently unemployed than entrepreneurs.

What is a company supposed to do with the money currently? Hoarding cash is the only sensible option currently and this doesn't help the economy.

Avoid bankruptcy with the requisite layoff of employees, and / or remain open to rehire employees when people are allowed to work again.

You can freeze all loans temporarily. You can freeze all rents temporarily-- and even if you disagree with it, many, myself included will simply not pay it come April 1st and we will outnumber the police. The government can exchange cash for equity, then instead of selling it back or selling it on the open market, the government can give or sell it directly to the workers over time.

One solution I find interesting is that the government exchange equity for the bailout and hand it over to the American workers.

There is a article about that here:

https://www.peoplespolicyproject.org/2020/03/23/how-to-think...

They could hold onto the equity themselves, which is giving it to all Americans.

I disagree. It would be much worse from the perspective of allowing workers ownership of the means of production. When the government owns something, the people do not

Yes. It seems that innovating accounting technology to be able to diffuse ownership more flexibly across networks can be productive.

My family and friends who lost their jobs or got furloughed can't pay their rent with equity.

When I suggested equity for bailout, I mean the the government would provide cash. Instead of it just being a handout to businesses , they would receive equity in exchange

Is anyone talking about bailouts without equity? I thought that was implied, since it's how they handled the automaker bailout 12 years ago.

But regardless I don't see the efficacy of bailouts for most companies. Besides a few critical businesses like the airlines and Boeing, the money would do very little to help the workers who have been laid off or furloughed. The government needs to pick up that tab directly, or else the cash isn't going to be used for it.

My understanding is that they are talking about "free" bailouts without equity. This article [1] suggests this is the case for the airlines, which would receive a "grant", and small businesses, which would receiving tax credits. It is unclear to me if this is just a mischaracterization by the MSM.

I expect that workers will see very little of the 2 trillion dollar bill. $1000 for an estimated 30 million workers (~10X current numbers) would be about 1.5% of the bailout. 3 months of unemployment for the same would be about 10% of the total.

[1] https://www.cnbc.com/2020/03/25/coronavirus-stimulus-bill-up...

The checks are going to a more like 120 million households (ballpark, haven't checked the BLS), and your unemployment ballpark is 10 million shy of the estimates.

This would be a portion of the plan, not the whole thing.

Well, without workers there are no businesses.

The robots don’t agree with this statement

Try selling them anything.

Robots are hardly pervasive though.

And without businesses there are no wages to pay workers. The problem is that the match between employees and business and the match between customers and business are both very valuable and can take a long time to replace (think about built up institutional knowledge, personal relationships which are how things really get done rather than formal structures, brand trust, etc). So you only really want to break those links if the business isn't viable and there's an economic need to redeploy those resources elsewhere.

You're absolutely right. Those things are important.

While businesses are shuttering down, they are essentially laying off massive amounts of people. Or they simply stop paying wages, or reduce those wages. That's already happening. All the things you mention between parentheses (institutional knowledge, personal relationships,...) are already in the process of being destroyed.

For instance, a significant part of the workforce works through outsourcing, temp contracts or freelancing. So, those contracts are now rapidly getting terminated in order to keep expenses down. Meaning that you get a domino effect.

At the same time, businesses will get a contribution that partly replaces lost income...

> an economic need

The idea of supporting people directly over businesses can be easily motivated: because the underlying motivation is to save lives.

Businesses can be rebuild. Lives can't. The ghoulish statistics media espouse every hour do represent very real people. Friends, family, co-workers,... You could apply calculus and "write off" a part of the population in order to safeguard businesses, but the true cost of dealing with a massive death toll is a collective mental trauma that will have lasting effects for generations to come.

The sad part is that there's not much middle ground. Many will die, many will impoverish. Whatever actions are taken now and over the next months and years, it's damage control.

Yes, agreed. Both businesses and individuals need support, and I think it would be reasonable to tie business support to them keeping their employees on the books.

It's just a continuation of the trickle-down approach that's been concentrating wealth in the US for the past four decades.

The US was founded in large part as a revolt against British crown corporations. And until the mid 1800s, only public-interest corporations were allowed. But once the railroads had bought enough of the government, corporations got human rights, and the US was managed for their benefit.

Almost half of all Americans in the workforce are employed by small businesses. The false dichotomy between the interests of the individual worker and the massive, faceless corporation on the other hand is not tremendously helpful in this context.

How many small business owners are doing stock buybacks?

I don't think anyone taking the money will be doing any stock buybacks

The stimulus package includes guaranteed loans for small businesses.

I have nothing against small businesses, even if they're incorporated. I was a small business, in one of my careers. What I find disgusting is bailing out the wealthy, while barely helping the working class.

I don't know how financialization fits with respect to trick down economics. Particularly consumer financialization. They both seem to accelerate winner-takes-all processes.

I just (re)learned, via Against The Rules podcast, that repealing prohibitions against usury debt was an important deflection point. Here's an apparently good writeup about South Dakota, Citibank, and credit cards:

https://www.pbs.org/wgbh/pages/frontline/shows/credit/more/r...

https://atrpodcast.com

Companies in SF are still laying off staff.

This money isn't going to bring those people their jobs back, for a while.

So, no... the companies are safer for the near-term, but people who'd rather be working are going to be on unemployment, and probably for a while.

The bailout doesn't really seem to help with that.

IIRC the stimulus bill does not allow for stock buybacks. So, I am not sure how they're bailing out investors.

Wait until the unemployment numbers are out in a couple weeks. When the government shuts businesses down, people lose jobs.

Let's not forget everyone who has a 401k and was hoping to retire this year.

To add to how wrong this headline is, the government is literally sending everyone a check.

I am sure some guy on medium is more capable of sizing this up than our entire senate and house of representatives, though. You should trust him: it's corporate greed.

CSPAN is the place to go if you want to know what's really happening.

Those rules are largely for show as Section 3 gives a provision allowing the treasury secretary to simply waive the rules:

https://mobile.twitter.com/davidsirota/status/12428737470962...

That's interesting, I had no idea. Puts a lot of power in Mnuchin's hands I guess. I think he does have our best interests in mind, though.

Given this emergency though, and the amount of time it takes congress to even pass a bill like this, I would have to say I am not opposed to that clause.

Yeah, the road to hell was paved with good intentions and so on. At the end of the day, you have to trust someone.

The author is Nassim Taleb. A highly respect figure on HN among many other circles. You might have also heard of one of his books "The Black Swan"

well I stand corrected on that, it looks like he does have some experience with what he's writing about

However I don't agree with the comparison of the 2008 bailouts with the current stimulus bill at all. Those definitely were corporate socialism, but I think we have progressed as a country since then.

> Those definitely were corporate socialism, but I think we have progressed as a country since then

Please provide reasons with sources to back up your opinion.

This isn't wikipedia.

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