Too Big To Fail.
I’ve heard this phrase a few times, referring to some banks and auto-makers and I thought it was something of an indicator of a way of thinking. A collectivist, statist mode of thought where organizations are more important than individuals (pretty much the definition of collectivism, anyway).
In my perfect world, no company is too big to fail. No “industry” is too big to fail. Why? Because of a simple law. This is not a law made by governments, because if they had their way, I think they would want to repeal it. The law I’m referring to is, of course, the Law of Supply and Demand. As long as there is a demand, someone will supply it.
Example: A major car maker goes out of business. Almost happened, but government intervention prevented it by making all of the rest of us pay them. Why are they going out of business? They can’t compete. Someone else makes it better, faster, cheaper, with better quality. Or, they are bad managers. They use all their profits to line their pockets with golden parachutes and sweet bonuses even when the company is doing badly. Really, it doesn’t matter. The point is, they should be allowed to go out of business.
Will the demand for cars suddenly drop now that our hypothetical car company goes out of business? No. People will still want cars, and the same number of people will want cars. The demand won’t drop, because there’s no reason for it to drop. So, now you have the same demand, but the supply dropped significantly. What will happen?
Prices will go up? Possibly.
Production by remaining car-makers will go up? Probably. They want a some of that stranded demand.
Ex-employees of the defunct car-maker will start up their own companies? Probably. I think it’s entirely reasonable to think some of these smart engineers and managers will start their own companies and make cars they always wanted to make but couldn’t.
Ex-employees will be hired by the remaining companies to help meet the demand? Probably.
So, what’s happened when we let the company fail? Some people are out of work. Well, 10% of Americans are already out of work. New companies start up, requiring workers. Other car-makers increase production, requiring workers. If I seem callous about job losses, I’m not. I’ve been laid off more than once, so I know what it’s like. I thought it was the end of the world, but it wasn’t. Sometimes I did better than I did before, other times I did worse.
My point is, it won’t be the end of the world. People will still make cars. People will still buy houses. People will still want all the things they’ve always wanted. The difference will be that the ones providing them are now the ones who can deliver better, cheaper, faster, or with higher quality.
Is that so bad?