Doomed Economy

This is why, in plain english, the big corporate bailout plan is not going to work:

The economy won’t recover until consumers start buying again.  And that won’t happen until they are out of debt and have saved enough money to begin reestablishing their credit.  So the question is how can the government help us get to that point.

The approach favored by Congress and the Bush administration hopes that an elite group of financiers will distrubute our taxes to corporations .  The selected corporations are then supposed to figure how to sell things such as loans and merchandise to other corporations and regular consumers.

The risk with this approach is that a lot of tax dollars will be spent trying to sell consumers things they neither need or want.  And this economic shock will probably change consumer’s behavior in unexpected ways.  In other words, the chances that financiers will choose the wrong corporations that have chosen the wrong product to sell are very significant.  In fact, the function of financiers under these circumstances is similar to the function of Soviet bureaucrats planning the old Russian economy.  We can expect the kinds of results that all those planned economies gave with this top-down bailout for our economy.

A better approach would give consumers the power to direct our tax dollars to businesses both small and large that offer efficiently produced products wanted by consumers.  And while consumers figure out how to spend that money, it will be deposited in their bank accounts.  Entreprenuers and viable businesses will go to those revitalized banks with their lists of potential new customers and be offered loans.  The risk of wasting tax dollars on pointless ventures will be minimized when compared to the current plan.

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One response to “Doomed Economy

  1. It does sound much better than what the “big minds” have proposed so far. As Nader says, we have socialism bailing out campitalism, unfortunately there is nothing in return for people in this bailout plan.

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