Friday, May 16, 2014

GM Problems Prove Why Government Bailouts Don't Work

There is a reason why companies who mismanage their operations are forced into bankruptcy. It's the way capitalism is able to thrive in a world filled with greed. However, there is a new political mentality in Washington D.C. these days that is more concerned with keeping people employed, rather than follow the rules that make the system work. If you need an example of what happens when companies are not allowed to fail after bad management, just look at General Motors today. U.S. taxpayers bailed out GM when it should have been allowed to go into bankruptcy and later emerge a different company. Capitalism DOES NOT work without the component of fear of failure kept in the mix. At the present time, GM continues to make stupid mistakes - because senior management believes failure is not possible since the government is likely to bail them out again. Some politicians do not understand what makes capitalism work, so they use silly techniques to keep companies in business when they should be allowed to fail. The next time Washington D.C. decides to bailout a private company, remember what happened at General Motors – because these same problems will repeat themselves again.

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