A True Threat Of Failure Makes You Conservative

Posted on Fr 16 November 2007 in misc • 1 min read

Bluesherry left me a comment a few days ago that had a link to a Libertarian bashing article.  Columnist George Monbiot so eloquently titles his article,[]{.push-double} [“]{.pull-double}Governments aren’t perfect, but it’s the Libertarians who bleed us dry.” In it he writes how Northern Rock pushed for deregulation, got themselves in big trouble, and then asked for a government bailout. His stance is that Libertarianism and its ideal of self interest lead to this incident and its the taxpayer who’s left to foot the bill.

Personally, I disagree with his article. In a true free market, Northern Rock wouldn’t have the safety net of a Government bailout. Failure, in that case, would mean extinction and complete loss of shareholder wealth. Faced with a[]{.push-double} [“]{.pull-double}true threat” of that nature, the majority of businesses would adopt conservative policies and not engage such risky behavior.

The best line of that article was from Presido, a commentor (emphasis mine):

This taxpayers’ money being made available to bail out these banks is precisely what causes the moral hazard that leads to these banks knowing that they cannot lose. They can lend recklessly and make huge profits for their management and when it goes sour the taxpayer will foot the bill. This is called privatise the profits and socialise the losses.