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Richard Stallman's Solution To 'Too Big To Fail'

Posted by Soulskill on from the tax-each-line-of-unreleased-code dept.

lcam writes "A Richard Stallman opinion piece appears at Reuters addressing the 'Too big to fail' view that has recently caused large corporations to be bailed out by taxpayer dollars. His solution is elegant: 'We tax a company’s gross income, with a tax rate that increases as the company gets bigger. Companies would be able to reduce their tax rates by splitting themselves up.' However, it could use some refining. For example, his measure would create a required minimum 'Return on Investment' scale that corporations need to follow to be viable, and these types of metrics are very industry specific. Another issue is that many large corporations stay in business because they don't take unnecessary risk. Companies like Intel, Lockheed, Walmart are very large and have a very low chance of failure, yet Stallman would have them split up as a result of the excessive risks that banks and insurance companies were seen to have taken. It also has the potential to cause problems with the global market; some multinationals may find it better to simply 'move out' to a country that doesn't compromise their business models. How can this idea be made better?"

12 of 649 comments (clear)

  1. I have a better idea... by aaronfaby · · Score: 5, Insightful

    How about we just don't bail them out?

    1. Re:I have a better idea... by sumdumass · · Score: 5, Insightful

      How about propping up depressions to only appear as recessions doesn't make it not one to those in the lower half of the economy. If the current system is failing, propping it up to save grace for the wealthy doesn't appear to be a smart idea.

    2. Re:I have a better idea... by Anonymous Coward · · Score: 5, Insightful

      It's called evolution. Those that can and need to live on evolve. Those that can't die off. Just like life.

      We can't keep supporting old economies and old industries that need to change into something else. Yeah, it's hurts like hell and a generation pays the price for awhile, but at least we grow and move into the future instead of supporting the past.

    3. Re:I have a better idea... by Hatta · · Score: 5, Insightful

      Bail them out, save the economy, but jail the executives responsible. If your firm destabilizes the economy you go directly to jail.

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      Give me Classic Slashdot or give me death!
    4. Re:I have a better idea... by tlhIngan · · Score: 5, Insightful

      Corporations that are poorly managed need to go bankrupt and the burden should not be placed on the tax payers. Yes, some people will lose their jobs. That's called life, sometimes it happens

      You missed another important market - some people lose their life savings. Now, the US does not have a particularly strong social security net, so a lot of people rely on investment funded savings and investment funded retirement plans.

      The problem is that these people now have to choose between food, utilities (heat/electricity/water), or a roof over their heads.

      Plus, a lot of people would suddenly be in a lot more difficult positions. So you've saved the requisite amount of money to live on for 6 months in case you get laid off. So let's say you get laid off. No problem, you have a cushion of money to live on. But no, you got laid off AND your bank failed (WaMu, anyone?). Now you have no income and no money. If you were dilligent, you may have socked away money elsewhere but now you only have half the money and the real risk that they could fold too.

      Yes, companies should fail. However, when you're "too big to fail" it means vital corners of the economy are interdependent. When a small business fails - OK, some people left without jobs. When a large presumably infallible company fails, it ripples throughout the economy.

      If Apple failed - you'd have maybe half a million people out of work, and many more who have lost a significant chunk of their savings and pensions.

      Ditto Microsoft.

      But say Google failed - now you'll have ripples through the entire online economy - practically overnight there would be no more advertising (Google and all Google-owned companies like DoubleClick), and sites that relied on it would be in trouble. We saw a ripple of it a few years ago when online ad rates tanked and paywalls cropped up.

      In an ideal world, businesses failing would be a neat, clean, simple affair. These days, most companies are horrendously intertwined with many other companies (two competitors may have a very incestuous relationship, for example - think beyond love/hate Apple/Google), so it becomes a very messy affair.

    5. Re:I have a better idea... by Archangel+Michael · · Score: 5, Insightful

      False. These banks took unnecessary risks and should fail, and the shareholders would be on the hook for the "non-payments". Too big to fail means too many hands in too many pies that we can't extracate who did what and to whom.

      Fuck-em. Let them fail. bail out the deposits, make sure you get what you can from the loans outstanding and fail the bank and fuck the shareholders. I guarantee you that those people running FAILED banks will never work again(except at McDonalds), and those propsing the same kind of "banking" will never get promoted again.

      And we should be able to raid the trust funds of all ill-got gains of the criminals who run and ruin these firms, including all the Operating Officers and Board of Directors.

      --
      Agent K: A *person* is smart. People are dumb, stupid, panicky animals, and you know it.
    6. Re:I have a better idea... by jimmy_dean · · Score: 5, Insightful

      That's what they wanted you to think, but really, can you prove that? That's a huge conjecture. And even if it was true, I don't like the current state of the economy nor all of the power the government has usurped from productive citizens. All the government did was to make the hangover temporarily go away by drinking more alcohol. You don't cure a hangover that way. You endure the pain, and you don't get wasted in the future.

      --
      -> Sometimes, you just gotta break free from the shackles of proprietary code.
    7. Re:I have a better idea... by Hatta · · Score: 5, Insightful

      What you've done is create a new type of criminal. One who's educated, who's proven to have few moral concerns, and now has nothing to lose.

      We already have that kind of criminal, they're called bankers, and they control our economy. They will do less damage in jail than they will wielding hundreds of billions of dollars.

      If you want to recommend excessive and inhumane punishments for what basically amounts to negligence and fraud

      Bullshit. The 2008 financial crisis destroyed 100X more wealth than was stolen in all the property crime that year. Let me say that again. The total sum of all property crime in 2008 was less than 1% of the losses in the financial crisis. And these financial losses have real human costs as well. When you destroy a mans livelihood you are responsible for the pain that causes. When your negligance and fraud are excessive and inhumane, you should expect excessive and inhumane punishments. Execution would be just fine by me.

      --
      Give me Classic Slashdot or give me death!
    8. Re:I have a better idea... by Petron · · Score: 5, Insightful

      Can you cite a case where a business went under and their competitors did as well... Unless the competitors were also doing poorly.

      If GM went under, Ford and Chrysler would be higher in demand as they pick up the slack. If Johnson Controls (makers of car batteries) lost money due to GM going under, they will also have higher demand from GM and Chrysler... Plus they still provide batteries for existing cars. (in other words, the company should diversify, not provide products for only one business).

      I use to support the "Safety Net" idea, but now... I don't. Safety Nets remove risk. Risk helps us avoid bad decisions. If a bank is told to make loans to people who are high-risk, The bank will protest. They know it's a bad idea. But if the government adds a safety net, say a promise to bail out bad loans... Why wouldn't the bank make the loan? If the loan works out: they get paid. If the loan fails: they get paid. Win-Win for the bank. Housing demand goes up, Home prices go up. Bank loans go up. You want to talk about making the economy suffer... it was just a matter of time before the bubble burst. And anybody who warned about the loans and tried to stop the bubble bursting was dismissed as "Hating the poor" or "Playing chicken little politics". *sigh*

      --
      if (it != oneThing) it = another;
    9. Re:I have a better idea... by YoungHack · · Score: 5, Insightful

      Bank deposits are not guaranteed by the government. Bank deposits up to a limit are guaranteed. My deposits are guaranteed. So are yours probably. But my employer is big. The amount of money required to make single payroll is more than is guaranteed under the limits.

      So my money is secure and your money is secure. But at the end of the month, suddenly my employer can't make payroll because a bank failed. Perhaps yours can't either. That's a big deal.

  2. Or The Punishment Could Fit the Crime by rmdingler · · Score: 5, Insightful

    You can say what you will about the War on Drugs. If I decide to parley some jars of loose change into the highly lucrative cocaine distribution market, I stand to make a market-torching return on my initial investment. The reason I pass on this incredible business opportunity is because in the event I become indicted, there's a very real chance the unborn grandchildren will be grown & gone before I come up for release. As long as white collar mega-crime is punishable by a maximum 50 lashes from a wet noodle, there is no negative incentive to modify their collective behavior.

    --
    Happiness in intelligent people is the rarest thing I know.

    Ernest Hemingway

  3. Simplest Solution by CanHasDIY · · Score: 5, Insightful

    Simplest solution: reinstate Glass-Steagal, and stick to that shit this time.

    Next simplest solution: make "Bail-out" == Nationalization. if we taxpayers are footing the bill, we have every right to own that motherfucker.

    Yea, it really is that easy.

    --
    An enigma, wrapped in a riddle, shrouded in bacon and cheese