I read articles and listen to commentary about the bailout of the US financial industry and wonder, “Does giving people money solve their problems?” I’m not an economist or a financial guru so I won’t try to pontificate too much in this post, but I am a concerned citizen of both the United States and the World. Each of us has a relative or a friend that has been bailed out on multiple occasions and then chooses to spend the bailout funds unwisely. Eventually this same person manages to slip back into the same hole that their beneficiary just dug themselves out of.
Why? Why do we help? And why do they fail to improve?
I don’t know. I just sit back in awe at the spectacle that is before us. You have to admit that it is a very interesting and tragic conundrum that we find ourselves in. How can the financial industry be spending the Federal Aid package by providing bonuses?
How? Easy. Someone internally just wrote the checks and it was done. This is the same thing that our dysfunctional family and friends do with the money we provide them. They write a check just the way they did before we gave them the money. And the great thing for them is that once you give somebody money they can do whatever they want with it. After all, it’s their money now isn’t it? If you didn't think the money would be spent wisely maybe you shouldn't have given it away. Or maybe you should have been more careful about how much, to whom, and under what conditions it could be spent.
In Charles Dickens classic, David Copperfield, he wrote,
"Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery."
This was written in 1849. 160 years ago and yet it is as true now as it was then. In the book David Copperfield learns this valuable lesson from Mr. Micawber who is thrown in jail for spending “twenty pound ought and six”. While visiting Mr. Micawber in jail young David is promptly told by the man that spending beyond his means would make him “miserable”. Immediately following this statement Mr. Micawber convinces David to lend him a shilling for Porter. The Micawber family moves into the prison with Mr. Micawber and enjoys a more luxurious life than before thanks to friends and family that feel bad for them and send assistance to them in their “dire” circumstances.
We are a society that has annual expenditures of “twenty pound ought and six”. This is not limited to just the financial sector. It goes across many sectors and even into personal finances. The long-term result of outflows exceeding inflows, according to Mr. Micawber, is misery.
So what do we do now?
US Grant says
I’m all for moving into the prison with them. It worked for the MiCawbers…
Steve says
You hit the nail on the head! The SYSTEM is broken, and adding money will only temporarily delay the inevitable. CEOs still don’t understand why $20 million dollars in a year is an excessive sum for anybody. Wall Street doesn’t understand why a couple million a year to be “lucky” at trading stocks or to get away with manipulating markets in order to achieve a bonus is wrong and not healthy for the economy. Right now is not when we need to make more cars (we have too many sitting in parking lots with nowhere to deliver them for sale). We have a bunch of meddlers who don’t understand the system. Until we all understand our effect on the system and act accordingly to benefit the system as a whole, we will continue on our current path.
john crossan says
Well I think we’re down, but not out. Our terribly inefficient, messy, democratic, republican system will get us out of this, somehow, and without a doubt faster than any other country. As Winston Churchill said “It’s a terrible system, it just happens to be better than any other.”
Hopefully lessons learned, that good times don’t go on forever. But I don’t know. We’re incurably optimistic, and we don’t study history. Scholars typically don’t make a lot of money.
What hopefully what will do us some good is our society questioning how elite groups can be rewarded many orders of magnitude above average, when clearly they’re not orders of magnitude smarter, and certainly not delivering real performance.
Certainly a market system needs to deliver rewards to drive performance, but there was something wrong with this market system.
Hopefully, some of this questioning comes back to the plant floor, and plant leaderships maybe learn to use more the knowledge and capabilities of all, rather than just having elite groups of problem solvers deliver their solutions.
Joy Lumsden says
Way beyond the current financial crisis the human race is breaking the Micawber rule big time in relation to the resources of the planet.