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Richard Stallman's Solution To 'Too Big To Fail'
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?"
How about we just don't bail them out?
Noted software license defiler and communist Richard Stallman urges heavy taxation and breakup of country's largest corporations!
Simply clever.
aaaaaaa
Ugh, this read like a computer law proposal from an old senator-- This, is completely out of his areas of understanding.
Give stockholders the power to execute executives who they find to be committing control fraud, along with those responsible for oversight who aid and abet them (government regulators, board of directors, contracted accounting oversight, etc).
Or one can simply use the current Sherman Act (in US) as it is currently written. The tools for trust busting are already there, there's simply no will to use them.
The greatest enemy to capitalism are the capitalists and the tendency for consolidation. If you want to keep capitalism healthy simply make sure there are plenty of capitalists.
The banks should have been broken up as part of the bailouts. No need for any complicated new tax codes.
It's a suggestion, not a claim. You don't take a grain of salt with a suggestion, you evaluate it on its merits. What are your problems with this one?
...at the top. Those executives certainly earned their big million dollar bonuses when the bailout was needed.
How do we make the idea better? Throw it out.
Let the businesses that mis-manage their risk fail. This will send a very loud and clear message to the rest of the market that we won't pick up after those that should fail. And consequently, those in the market will begin to manage their risk better..
How about judging the idea on its merits, instead of the ad hominem technique?
He's known to be... extreme.
So were the founding fathers. Xtreme to the maX! *air guitar solo*
Don't bail them out. Don't let them fail and have the knock on effects take down half the economy with them.
Instead if they get to the point that they need a bail out they are nationalized. The share holders get *nothing*. The bond holders get *nothing*. The board and C?Os get a grand jury/under oath senate hearing/SEC/whatever investigation and the book thrown as them. The government does the splitting up and selling off over time (so no fire sale) to divest.
Sure that sucks for people who have pensions/401ks/IRAs/etc invested in those entities (directly or indirectly). But if it's the predetermined outcome upon "failure" then everyone involved knows this going in and should be factoring that risk into the price they're willing to pay and allocation size they are willing to make.
And yes the government is still effectively bailing out the next level down (that's how the knock on effects are being avoided).
Your grain of salt is too large, it must first be split into smaller grains first.
Just don't bail out any "too big to fail" corporations. Use the same funds to bail out the people (with minimum income policies; there are actually some quite realistic implementations of the idea, such as Friedman's negative income tax proposal, or the Pirate Party's uncoditional minimum income policy). This way you let the economy and employment restructure itself, without causing suffering to the actual population that make up the economy.
The theory sounds great, but this won't work in practice. Why? Simple.
Corporations pay ZERO taxes. Period. If you disagree with this, you don't fully understand the system. While there is in fact a corporate tax rate/code, it doesn't matter. Every corp either 1) hides their revenues offshore, usually through Ireland and other European subsidiaries or the Caymens, or 2) PASSES THE TAX ON TO THEIR CUSTOMERS in the form of higher prices.
So either you pay via prices going up... or you lose because that money is now held overseas. Oh, and both of these systems are insanely regressive/repressive vs. small corporations & startups; they don't have the national presence to hide, nor do they have millions to pay crack tax teams to squeeze through loopholes. Option #1 out the window. Option #2 is problematic; they can raise their prices but then customers often flock to a lower priced competitor exercising option #1. This is how many, many startups die; they produce excellent product at reasonable prices but are eviscerated by regulations and tax codes bought and paid for by their multinational brethren, for the sole purpose of ensuring no upstart gets off the ground and actually competes.
We can argue about how things SHOULD be, but the above is a stark and accurate assessment of how things ARE, and we have to live and work in the real world. Stallman either does not realize this or chooses to ignore it and operate in a utopa.
You want a real solution? Eliminate the corporate tax code entirely. Then the money stays at home, and you implement the Fair Tax. That's a national sales tax which replaces ALL forms of federal taxation in favor of a tax on consumption. It's made non-regressive via a pre-bate.
If this gets implemented, all of the sudden we will find out that all of these mega banks are making peanuts in net income, just as we found out that Apple pays 1% tax rate and Romney pays a mystery very low tax rate that we are not privy to know exactly.
Regardless, when we are dealing with multi-national corporations, do we want to punish them or do we want to help them? A lot of people want to punish them without realizing that they are punishing themselves in the end.
Do we want NYC and our country to be the center of big banking - providing tons and tons of high income banking jobs - or do we want to give that up to London and Hong Kong because they offer a better working environment to these MNCs?
witold.org
First of, the economy isn't a machine, it's organic, and this engineering approach generally fails. Companies react to regulation, and regulation itself is the result of government, another organic entity. When this type of laws are enacted, the first thing that happens is that concentrated business interest will make sure they actually benefit from the regulation. It can take many forms. Maybe some corporations will be grandfathered in and therefore manage to keep at bay competitors who can't reach a competitive size, maybe the law will have exemptions that only politically connected firms can obtain. It's misguided to push for a law without taking into account the way it will be distorted by the political process. Contrast this to the viral - hence organic - approach the GPL took.
Second, too big to fail is about the systemic risk that some financial firms exhibited. Walmart is big, Google is big, but they're not too big to fail in the sense that their failure wouldn't particularly cause havoc. If Walmart fails, many different sellers can buy the stores and keep supplying them with goods. In the case of financial companies, the argument went as follow: if a bank fails, many other financial companies may be in trouble if they hold financial instruments whose collateral ultimately is guaranteed by that bank. Unfortunately, it can take a long time to sort out who is really it, and during that time, it becomes very risky to lend to anyone, for fear that they might be exposed to the failing institution. This in turns cause more financial companies to fail in a domino effect. That's the theory at least. I don't know if I buy it, but at any rate, it makes the case that the banks were too heavily interconnected to fail, not too big. Columbia professor Rama Cont has suggested that the solution to this problem is to emphasize clearing houses to bring in transparency in who holds what.
\u262D = \u5350
RMS's idea predates the latest bank bailout era with many many years. his idea was not inspired by 'too big to fail' at all. his idea is simple a mechanism to make sure there are fewer big companies - and only in cases where a larger size is indeed increasingly profitable, so that it's still worth to have the larger organization which has to pay more taxes because of its size.
RMS's experience is simply that 'large entities' don't behave in a 'good' manner, and thus there is a clear advantage to society of having fewer of them.
He acknowledges that splitting up a company will take a lawsuit and that will be costly E.G. Microsoft, but then at the same time says the solution is to tax them heavily... Which will still require changes in law and will still be blocked by the banking lobby and we're back to square one again. The problem will still be that banks are currently too big period.
Every apex predator of the past that ever ruled at the top of the food chain was brought down by something other than an overwhelming number of pray animals. For the dinosaurs, it was drastic change in the environment (climate and/or meteorite, take your pick), for the European jaguar it was more than likely climate change and for sabre tooth tigers it was probably humans. The bottom line is that something other than within the system must influence the status quo to make "too big to fail" no longer hold true.
Stallman's proposal is still within the system, that being congress and law, and the system is setup to prop up the current apex predators (banks, MPAA/RIAA, Big Pharma etc...)
For banks, I can see a sudden dumping of embarrassing records or a chain of whistleblowing that will make avoiding criminal prosecution Enron style, impossible to avoid. I don't know if there's already an investigation going on (I doubt it), but since all the Occupy protests didn't so much cause the feds to blink, I doubt that's an avenue with results.
If computers were people, I'd be a misanthrope.
RMS is a brilliant software engineer. That does not make him brilliant---or even competent---in economics.
Obligatory SMBC: SMBC #1776
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
RMS' idea sounds kind of neat, but it suffers from a fatal problem: All that happens when you force crazy high taxes onto big companies is that they leave the US. This is exactly what's happening in France right now, with their recent tax reforms.
The correct solution, as others have already pointed out, is to simply let these companies fail. Funnily, the "experts" who said "if we let Citibank/MorganStanley/etc fail society will turn into a Mad Maxian nightmare where we'll all be forced into cannibalism" are the exact same people who would have lost a lot of money without a bailout.
The companies most responsible for imperiling the financial system have relatively low revenues (but large, highly-leveraged assets.) Large companies whose collapse wouldn't endanger a damn thing like commodity businesses would be punished. (If, say, Exxon, were to go bankrupt, they have plenty of "hard-dollar" assets that would be eagerly scooped up by somebody else with little to no disruption to production.)
We called it the monopolies commission. The term monopoly apparently doesn't mean a lack of competition anymore.
This tax idea would just get redefined over time too.
Break the link between business and government. That should hold them off for a while.
The problem with taxing a company's gross income is that it just causes the company to raise prices so that, after taxes, it makes a profit. It would be more rational to tax the profits, the difference between earnings and expenses. This is the money that mostly/normally gets distributed as dividends to stockholders. One could now argue that the company would just raise prices so that the amount of dividends paid would still be the same as before such a tax was put in place. The implication is that perhaps companies shouldn't be taxed at all in order to keep prices down --only their stockholders should be taxed, per individual income taxes. And if that last thing isn't being done fairly enough, well, then, perhaps that is the thing to fix!
Financial institutions can get too big to fail. And this seems like a potential resolution for financial institutions.
These companies are very leveraged, and just one of these can bring down many others, and eventually the whole economy.
And IMO taxes should always be taken out to alleviate the problem they are trying to address. So the taxes should go to something like the Federal Reserve for handling contingencies.
But other large companies I think should be handled on a case-by-case basis. Any single company that would go bankrupt, would hardly effect the unemployment rate. But a financial catastrophe could send it soaring.
In our current downturn, we are familiar with the failure of a few large banks. However, in the Great Depression, what they experienced was the failure of a large number of smaller banks (more than 10,000 banks went out of business between 1929 and 1933, according to http://www.econreview.com/events/banks1929b.htm, contributing to the depression). Merely breaking up banks does not guarantee that they will succeed, particularly during a widespread economic failure. Instead of "too big to fail", you have "too many and small to fail", but it's really no great improvement. It actually makes it harder to assist the individual banks, even if you intend to do so.
Gross receipts tax is idea for running a country. There are several embedded things is does:
(1) It penalizes those who add little or no value in the supply chain
(1a) and those who filter through shell corporations to hide money or sheild liability
(2) It rewards local suppliers and short supply chains
(3) It levies cost based on volume of goods and services, not on profit
(4) If you can keep your God damned hands out of the "exclusions" pot, everybody pays and its much harder to hide the money
Almost nobody in business bases their fee on fee percentage on your profit, which should the defense of your assets (both through law and military) be based on it? It should be a cost of doing business, not some penalty for being efficient. And unlike a tax on profits, which starts out with a whole laundry list of exemptions for "allowable expenses," there's no need to put exclusions in the tax law.
Having a sliding scale would be okay, but it should be no more than a factor of two top to bottom imho.
Is it just my observation, or are there way too many stupid people in the world?
remove medical coverage from jobs
That would explode the interest rate on loans, absolutely cratering real estate prices.
Even worse unless you simply give up on the debt, as the short term notes come due, you need to refinance at the new 20% interest rate, which means the fedgov implodes once interest payments exceed any theoretically possible revenue. Of course we're already bankrupt right now, so facing that fact isn't the real problem, but with political types all that matters is appearance, so the policy would get the blame, even though its just a shoot the messenger thing. If you mean "do something about the debt" as in repudiate it, yeah we could try that for sure.
Someone with more forex experience would have to speak to that. I think a high interest rate / high inflation situation in the .us would have a pretty strange effect on the .jp economy, probably insta-collapsing it. Which is going to happen inevitably anyway. I'm not sure if its been long enough since WWII to eliminate nationalism from .de and .jp, but we could be fighting WW2 again. This time they'd probably win. Not sure if that's necessarily bad.
"Science flies us to the moon. Religion flies us into buildings." - Victor Stenger
Easy. Socialist Revolution. String the bastards up and stop industrialism before it completely kills the planet.
Shoes for Industry. Shoes for the Dead.
Of course he is extreme. He is a programmer that somehow thinks he can dictate morality if someone wants to use his programs.
And now he has decided that even without a degree in economics, a basic understanding of capitalism, nor of normal human interaction...that he can fix society.
Even if he were right, he has no credibility in this world and as such, is spouting nothing but the most simplistic jargons and hoping it sticks. We all do that. I talk with my friends about how to fix the economy all the time...however, I'm quite certain if someone were to post my rants to the world, I'd be rightly be given the same criticism as I gave him above.
This is before throwing out personal attacks like Toe Fungus Eater. I'm certain most of us have done something disgusting, but the man has so little understanding of how others work that he does so in public, while on stage, while the cameras and spotlights are on him...again, I'm certain MOST of us have done something equally disgusting, but we know what is not good taste and wouldn't do it in public with tens of GNU fans watching. These sorts of things happen with him time in and time out, and thus his knowledge of how humans interact -- which is all business is -- is suspect. Again, I'm not attacking him for this...we've all done something like this to one extent or another. He just don't know its wrong (or at least decided to be wrong by society).
The man is both extreme and not credible.
Part of what taxes -- and especially taxes on businesses -- pays for is their participation in a Rule of Law society.
This means you have access to an independent court of law for adjudication of claims against you and claims you may make (especially important when you rely on intellectual property), a civil and military security force to protect your physical assets and employees from harm, and a transparent law-making regime you may lobby to see your interests are represented.
I'm just fine with companies moving, but I'm just as fine with not allowing them to participate in the benefits provided by a Rule of Law society. Feel free to relocate to the third world and feel just as free to see how well the Cayman Islands or Lichtenstein or some of these other tax-dodge nations can protect your global shipments or your factories or your intellectual property.
There's only a small handful of countries able to provide a Rule of Law society and they should band together via treaty to inhibit transnational games and tax dodges.
France, specifically where most of the large companies and industries are owned in part or in whole by the French government? Seems like you're putting a statist barrier in place to lead the way for mass nationalization of everything. And we've already seen where the CCCP wound up.
he wants corporations to be enslaved.
It seems to have worked well for almost 60 years, during which time the global economy did pretty well.
This idea has no chance of being implemented and, as the submitter points out, fails dramatically outside of a few specific industries. Those industries, insurance and finance, have their own insurance funds (e.g. FDIC). Why not just make the rate you are required to pay the corresponding insurance fund go up as the firm gets larger. i.e. if your firm makes has 1 % market share the nominal rate is 1% of profit but if you 10% market share the nominal rate would be 25% or something like that were the maximum percentage is like 85% and is imposed when a firm reaches some critical fraction of the marketshare.
As a brilliant and educated man that has done great work, but makes his living as a speaker and academic (as opposed to someone who actually has to make a living writing software), RMS' views always have that fresh, clean, "Ivory Tower" scent.
"For every complex problem there is an answer that is clear, simple, and wrong."
-H. L. Mencken
Intel takes quite big risks whenever it builds a new facility to use new smaller scale technology.
Airplane companies pretty much risk their entire business every time they design and launch a new model.
Slashdot social media options: AIM, ICQ, Yahoo, Jabber and Mobile Text. Why no MySpace?
Holly crap. You people scare me... Not only here but all over the internet are idiots that think that somehow they are entitled to tell private businesses what to do with their money and assets. This entire discussion should not even be had. If you don't like Apple to get big, stop buying their shit. Don't like Google collecting your data? Stop using Google. Do you want your local retailer to do better, buy there and pay twice the price of Walmart. But the moment you discuss what business owners should do with their property you are nothing more then a collectivist leach.
"Socialist revolutions, hang / jail the guys that destabilize the economy" You idiots. It is you with your insatiable hunger for stuff digging deeper into debt. It is you wanting ever more handouts that are destabilizing the economy. You demand your "gifts" from politicians in exchange for your votes and they gladly oblige by regulating those "gifts" out of private hands.
Why would anyone risk their capital to build a business when there is a risk of being jailed for being successful "destabilizing" the economy. You people deserve what you are now getting... No jobs, no wealth and eventually the lights go out. There is no such thing as a free lunch.
Sjeesh!!! Grrrrrr.
A VAT tax might be an OK idea, but this idea is pure bad. Different businesses have different profit margins and need to be different sizes. How on earth could the government bureaucracy figure out what the right rate was? This assumes WAY more knowledge about the correct economy than we actually have!
IHMO the right thing to do is nationalize failed businesses, clean house at the top and sell off under controlled circumstances for a small profit, or at least a minimal loss.
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
What he is proposing is returning to a 18th century style economy....except we have robots..
You say that like its bad. The alternative our masters are currently implementing is basically feudalism. I much prefer 1850 to 850.
"Science flies us to the moon. Religion flies us into buildings." - Victor Stenger
The Finance sector has grown too big for its britches in terms of its share of GDP and no doubt in other respects, and that's half the problem right there. I say reenact Glass-Steagal and deploy your idea-- but targeted mostly at financial institutions. Other types of corporate business could be taxed at a fraction of the rate for financial services, though I would consider adding an exception of some sort for businesses that are identified as engendering natural monopolies such as cable telecom.
The burden/threat to society that TBTF carries will vary from industry to industry, but Finance is special in that it becomes an embodiment of the trust we have in society to operate smoothly and fairly. When they become too big and then fail, all of the trust we have for doing business with just about anyone else evaporates.
he wants corporations to be enslaved.
As opposed to our current system of corporations enslaving us and the .gov
Sounds good to me!
Personally I'd like to see direct participatory democracy wrt granting, renewing, and eliminating corporate charters. Convince all of us that your crooked little monopolistic cabal "deserves" citizenship via individual national referendum every 10 yrs or so ... or your corporation is dissolved in one year. You think a certain bank sucks? Vote it out of existence. Sounds good to me. If they behaved themselves, like my local non-profit childrens hospital, they probably wouldn't have much fear of extinction. That also sounds good to me.
"Science flies us to the moon. Religion flies us into buildings." - Victor Stenger
What counts as a failed law? Also "unholy" has only one "l".
Pretend that something especially witty is here. Thanks.
You can drive a Godzilla?!
Companies like Wal-Mart are big enough that they should split. The distribution arm is large enough to be a company itself. Wal-Mart doesn't want to split it off because then Sears/K-Mart or Target could take advantage of the efficiencies of the distribution. Wal-Mart started off as a retailer, and now, could close its retail arm tomorrow and still show an increase in profit by the end of the year. Splitting up such large companies is best for the consumer, country, and investor. The only person it doesn't benefit is the management team of the "I ran fucking Wal-Mart" fame. Often the child becomes larger. Southwestern Bell grew up to buy AT&T. Union 76 split off its drilling arm, who later grew up and owned the rig in the Gulf that caused the spill, while Union 76 merged and got bought until nobody even remembers it.
Learn to love Alaska
It's a suggestion, not a claim. You don't take a grain of salt with a suggestion, you evaluate it on its merits. What are your problems with this one?
A suggestion claims there is a problem for which it is a solution. A suggestion claims it is a good way to solve said problem.
So yes, a suggestion is a claim. If I suggest that you install Linux on your computer, I am claiming that Linux is an OS that is capable of serving your computing needs.
If I'm technically illiterate, then you'd be justified in taking my suggestion with a grain of salt. Even if my suggestion happened to be a good idea, there's a good chance it was just blind luck, rather than expertise.
Well apparently Obamacare counts as one because the LOOK OVER THERE! PRETTY COLORS!
You are not alone. This is not normal. None of this is normal.
While I tend to think Stallman is a little nutso on many things, I agree with him on this one. And being an engineer is an advantage here. Engineers tend see the conceptual isomorphism across problem domains. It's the pattern that catches one's attention and leads to a similar solution. This is an easy example of that. It would probably work too. As for corporations relocating so that they don't have to break up, well, let them. Their maladaptive behavior will eventually catch up with them wherever they go, while USA banking would become as boring as it is in Canada and Sweden, if we're lucky.
Please do not read this sig. Thank you.
Pass a failed law: Go to Jail. Politicians need to have fear of jail. Obamacare would have never ever passed.
What is missed is that "when you are to big to fail", you got that way by hiring ex-politicians, using lobbyists and donating huge sums to politicians in return for writing favorable laws.
In return politicians want "a return", so they put rules on things like the banks in order to satisfy their political party or favorite group.
The Community Reinvestment Act was obviously at the root of the MMM (mortgage meltdown mess), but we don't see any laws making politicians go to jail for having voted for that law and then failing to eliminate or restructure it when it was known it was going out of control.
We are all part of the same compost heap. We are the all-singing, all-dancing crap of the world. Like the first monkey shot into space... without pain, without sacrifice, we would have nothing.
Spacemonkey!
From the summary: "His solution is elegant ...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..."
Which is to say, the proposal requires layers upon layers of kludgy patch-ups to make it even remotely plausible, which will make it highly gamable in ways that mere technologists will never figure out, but the sociopaths who run companies will be all over.
There are some fairly well-known, well-tested ways of dealing with this, Glass-Stegal being the most obvious one. People who are attempting to create new, untested solutions are missing the point.
Blasphemy is a human right. Blasphemophobia kills.
As exampled by Walmart and the Wall family having more wealth that what is it 40% of the rest of the country. Maybe we should broaden the anti-trust laws or modify them so that companies that try and take over hardware stores, grocery stores, clothing stores, sporting stores, appliance stores, building supply stores, automotive supply stores, nurseries .... are trying to monopolize the retail space at the expense of hundreds of thousand mom and pop stores and hundreds of thousand US jobs. The too big problem also is a problem for companies that succeed. Thats why we had anti-trust legistlation. It needs to be updated.
In nature, a diverse complement of plants and animals is more resilient to disease and environmental stress than a monoculture vulnerable to a single disease, or drought. Business ecology is little different. Anything that encourages a variety of smaller corporate entities in the same business, but using different survival strategies will be more robust.
Please do not read this sig. Thank you.
So I don't know what Obamacare has to do with this topic other than at a marginal level. But let's examine your notion of "Pass a failed law: Go to Jail."- How do you decide that a law has failed? Do the people decide? Do the politicians? I'm particularly curious in the context of healthcare reform how you can tell that it "failed" before many parts of it are even implemented. And how do you decide which politicians are responsible for the failure? Very often legislation is a result of compromise, so you can get some people saying that a law failed because it did too much while others claim that it failed at its goals by doing too little. Worse, sometimes it doesn't even matte what direction one goes in as long as one doesn't have too much compromise. For example, a major reason that the space shuttle was such a problem was that they designed it to satisfy everyone.
The founders of the United States banned a state religion in the First Amendment ("Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof") because they realized churches were competing power structures.
Nowadays, we have the new church, corporations and specifically corporations of the financial sector.
You really want to know who runs this country? Here are four data points from which you can draw your own conclusions:
1) The head of Goldman Sachs goes before Congress and admits he was selling bad products to clients, products which he was betting against. A classic swindle. Nothing ever came of it. Or any of the other revelations.
2) There was a PBS show called "The Untouchables" which chronicled why Wall Street executives were never prosecuted for fraud.
3) However, someone you'd think was powerful and connected, a former Michigan state Supreme Court justice is facing jail time for lying to a bank which she was working with in order to get a short sale completed for a house she owned. Her crime? She tried to hide another asset, a paid off house, from the bank.
4) Another person you'd think is powerful and connected, the chairman of the Washington DC City Council, Kwame Brown, was removed from office and convicted of a felony for lying about his income on a pair of loan applications, totaling around 200,000 dollars. Absolute small potatoes. Also a very common practice in the mid-to-late 2000s, on home loans.
Noticing a trend? If you're a financial sector executive, you run the show. It doesn't matter that you've swindled billions of dollars from the country, nothing is going to happen to you.
However, If you cross the financial sector, even over relatively trivial matters and sums, it won't matter if you're the elected head of the city council or a justice on the state supreme court, you will be removed from office and suffer significant consequences.
The financial sector runs this country.
That would explode the interest rate on loans, absolutely cratering real estate prices.
While I disagree with the idea of creating inflation as a 'solution' -- what you are saying isnt justification for not doing it. Existing homes are still highly overvalued.
Even worse unless you simply give up on the debt, as the short term notes come due, you need to refinance at the new 20% interest rate, which means the fedgov implodes once interest payments exceed any theoretically possible revenue.
If the federal government wanted to create inflation, then it would have to forcibly print new money above and beyond what the demand for money dictates is necessary to avoid deflation. Interest rates end up low because there arent enough available alternatives to satisfy the demand for a place to invest.
This is in fact the problem with inflation in a nutshell. People are given a disincentive to save money, but the good opportunities to loan money don't grow as a response, and the result is that the supply of loaners goes up and thus the price for loans goes down. It is when the money supply is tight that interest rates are propelled upwards.
"His name was James Damore."
I didn't remember who said it, but it is an excellent piece of wisdom:
All the simple solutions have been found.
If someone comes up with a solution to a current-world problem that can be explained in a few sentences, I tend to become very, very sceptical. The world largely isn't that simple anymore, and we have entire professions whose jobs basically is to find loopholes.
Assorted stuff I do sometimes: Lemuria.org
For every complex problem, there is a solution that is simple, plausible, elegant, and wrong.
(Attributed to many people).
Rather than bailing the banks out, they should buy whatever number of shares instead. The Bank still has liquid assets to continue trading, and the goverment can sell those shares in the future. While the goverment have shares special rules apply, all management bonuses for the last 10 years need to be repayed within 12 months, no management bonuses while the goverment has shares. No manager to receive more than a given wage referance point, possibly a politicians wage at whatever level. The federal manager cannot receive more than the prime minister, a state manager cannot receive more than a state political leader, a branch manager cannot receive more than a council politician. Jail time sounds good, but remember these people are above the law, so it will never happen.
So, you are proposing that mistakes should now be a crime, if committed by legislators? If you think we have a bunch of power-hungry clowns in office NOW, imagine the crazies we'd attract (or, rather, the smart people that would be driven off), if the penalty for a "failed" law was jail.
(And, what, precisely, is a "failed" law anyway? I would think it would be one found to be unconstitutional, but that doesn't apply to either of your examples.)
The big question is: if investing in the company to keep it afloat is a good investment, why isn't someone else doing it? Sure, 10 years is a long horizon, but there are still investors who take a long term interest... And even if in some cases the government can profit by nursing the company back to health through direct and indirect capital injection (guaranteeing the borrowing of the nationalised company essentially subsidises the cost of capital at the expense of taxpayers as the capital markets make the national bonds more expensive as the dept grows), this will not be the case for all companies (as the bad decisions and waiting too long the start the cleanup can leave quite a large negative balance) and who trusts politicians or bureaucrats to make good judgment calls there...?
RMS wants software to be free, but is happy for people to be enslaved by the state. That's a massive contradiction. I would have thought his philosophy on software is very much aligned with libertarianism, yet his political discussions suggest otherwise.
How can you want software to be free and not people?
Considering that software and people are two very different things, I fail to see the contradiction. Are you suggesting that one who supports freedom must always support any form of freedom?
Should termites be free? How about viruses? How about serial killers?
btw, RMS's stance on software is anything but libertarian. If you want to relate it to politics, I'd compare it to communism. Not Chinese or Russian communism, but more of the Marxist ideal. A lack of ownership, communal collaboration that anyone can take advantage of. 'Free' is a complicated word and doesn't necessitate libertarianism. A libertarian would claim that ownership is a right, a freedom we enjoy. I don't know if RMS would agree with that. I'm pretty sure he thinks that information should be free but people should be restricted by laws that say you can't murder or steal and stuff like that. When people advocate freedom, they tend to be advocating the freedom to do the things they specifically want to do. Not even the libertarian advocates anarchy, which is freedom taken most literally.
'Free' is a fun term for philosophers because it can be turned on its head in all sorts of different ways.
"From the depths of my skeptical and rationalist soul, I ask the Lord to protect me from California touchie-feeliedom."
It penalizes those in low-margin business, such as commodities, while rewarding those in high-margin, highly-leveraged, businesses. To what end? The bankruptcy of Exxon (with lots of easily-liquidated assets) would harm the economy a lot less than the failure of, say, Goldman Sachs. It doesn't make any sense to distinguish between the two in effective tax rates.
"The Community Reinvestment Act was obviously at the root of the MMM (mortgage meltdown mess)"
Ridiculous, partisan hogwash. A conservative meme discredited a thousand times by people who know more than you. Step out of your ignorance into the cleansing light of reality.
"It gets better": a slogan not just for for bullied kids, but for victims of Rush Limbaugh, too.
Talk about overrated moderation. This unfounded claim has been used as right-wing propaganda since the first days after the meltdown began. Go back and do some proper research on this. The CRA had nothing to do with the lending meltdown. At most, it was a very minor factor in the whole situation.
What motivated lending companies to make bad loans to completely unqualified people was pure greed, not a government mandate!
Lending companies were being encouraged by extreme demand for more and more loans that would then be packaged and sold into complex investment instruments. Everyone thought that the geniuses in wall street had figured a way to eliminate the risks of this stupid practice, and they kept making good money on the loans they made, regardless of borrower qualifications. In turn, they wanted more, more, and more people to borrow money, because it seemed like an infinite money machine that magically eliminated all risks.
It all came crashing down one day, and we were left holding the bag. All because of greed and lack of proper regulations of the financial sector.
Let me repeat that: the causes of the meltdown were greed and lack of regulations! Not a government mandate!
We already have trouble finding good politicians to run the country, adding disincentives like that will only lower the quality of politician. Why would anyone run for office when they can do something else that is much better and much lower risk?
"First they came for the slanderers and i said nothing."
"The Community Reinvestment Act was obviously at the root of the MMM (mortgage meltdown mess)"
Not so obvious:
Most subprime loans were made by firms that are not subject to the CRA.
Loans made under the CRA program were made in a more responsible way than other subprime loans.
It was only after the Bush administration cut back on CRA enforcement that problems arose.
Community Reinvestment Act had nothing to do with subprime crisis
http://www.businessweek.com/investing/insights/blog/archives/2008/09/community_reinv.html
CRA is from 1977, high-risk toxic mortgage loans started to increase dramatically around the year 2000, regulations have been weakened considerably under Bush jr.
http://en.wikipedia.org/wiki/Subprime_mortgage_crisis#High-risk_mortgage_loans_and_lending.2Fborrowing_practices
It's the same solution as always: simply enforce the laws we have. Enforce anti-trust law, enforce truth in advertising law, enforce laws against anti-competitive behavior by monopoly and near--monopoly sized corporations. If the SEC had enforced its regs fully against Goldman Sachs, et al, that were on one hand recommending to their customers to buy mortgage-backed securities, and on the other hand having a prohibition against them for in-house investing and NOT telling their customers about this, they would not have been able to dump as many of these junk securities on other banks or the government.
Companies like Intel, Lockheed, Walmart are very large and have a very low chance of failure
These are all companies which I think would benefit us if they split up into smaller corporations. I like the idea.
in girum imus nocte et consumimur igni
Many are so big that they can block the laws needed to stop them from destroying the economy or the environment.
The method is simple: a progressive tax on businesses. 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.
I really like Richard Stallman, and I am even intrigued by this idea, but I see a few obvious issues with it.
1. They will block any laws like this. If they can't, block the laws due to public outrage,etc, then we could have just simply passed the first hypothetical law stopping them from destroying the economy.
2. Whats to stop them from circumventing such a law by splitting up into smaller companies but still being controlled by a small group of owners. A rich person or group of people can hold a majority stock in many large companies and do everything they could do when the companies were one. Is being a powerful shareholder for 10 different HP division spinoff companies be different than being a powerful shareholder of monolithic HP stock?
I feel like the simplest and best answer to "too big to fail" is not artificially keeping companies small, but rather letting big companies fail. Yes letting companies fail in an irresponsible way can have devastating consequences. But bailouts are not the only alternative to catastrophe. This is the same false dichotomy thrown out whenever another bailout happens. It is possible to do a controlled failure. We can fire all the top executives, ensure that all other employees get paid, and have the shareholders of the company lose their shirts rather than the tax payer. Meanwhile we can have the government keep the company running until the assets are liquidated or the whole company sold to the highest bidder.
In order for the free market to work, bad decisions need to be punished. Perverse incentives are what screws everything up. If a company can be big and not fail, then great. But we have to let them fail if they are failing. We can do it gently like putting a big company on hospice or something, but it needs to happen. Otherwise we have the same incompetent people running even larger companies and shareholders who are incapable of losing money so there is no incentive to make good decisions.
There should be no such thing as too big to fail. IF we currently can;t manage big failures, then that's the thing that needs to be fixed.
"How can this idea be made better?"
It can't. It's a crap idea.
"Big organizations are evil! If we went back to having small, personal, friendly organizations, everything would be better!" is a popular meme these days but it just isn't realistic, if you look at it dispassionately. We have big organizations because there are more of us, and we're doing very complex and advanced things. You only really need five people at Bob's Bakery Inc. to supply your town with bread, okay, but you can't have five people at Bob's Car Factory Inc. supply your town with cars, and fifty thousand people at Bob's Multinational Food Corp can, without question, supply your town with bread more efficiently than Bob's Bakery Inc. Sorry. It doesn't fit in with our romantic notions of How Things Ought To Be, but it's how they are.
I wish people would get over this vaguely sepia-tinted bourgeois fantasy where somehow we manage to supply several billion people with their expected quality of living via some sort of utopian version of the late Victorian economy, and start coming up with answers to the much more practical - but less zeitgeisty and much more _difficult_ - problem of 'how do we make large organizations more responsive to the concerns of the individual, where that's practical and desirable?'. That's a question worth asking and trying to answer.
I think this would need some tweaks at the international trade treaty level, so it was seen a competition-neutral, but I like the idea in principal.
FFS, principle not principal. Principal has a very specific financial meaning, and it's not what you mean here. If you bloody English speakers can't even be bothered to learn your first language properly, it's not surprising you're so crap at picking up others.
no taxation without representation!
Why is this flamebait? Stallman is known to support Fidel Castro & Hugo Chavez. Now, if Cuba & Venezuela had rock solid economies, then he would have a point. But Venezuela, which ought to be the Saudi Arabia (in terms of wealth, not religious fanaticism) of Latin America, is currently one of the poorest, thanks to his policies. And Cuba too is a total basketcase. So for Stallman to be treated here like he is some sort of an expert is absolutely inane of the guy who thought this story was worth submitting. Stallman is no more insightful on this than he is on his opinion that pedophilia should be legal if the kids involved are okay with it.
RMS wants software to be free, but is happy for people to be enslaved by the state. That's a massive contradiction. I would have thought his philosophy on software is very much aligned with libertarianism, yet his political discussions suggest otherwise.
How can you want software to be free and not people?
Considering that software and people are two very different things, I fail to see the contradiction. Are you suggesting that one who supports freedom must always support any form of freedom?
I find it odd that someone wants a tool that people use to be free (as in speech), but not for those people themselves to be free.
Should termites be free? How about viruses? How about serial killers?
btw, RMS's stance on software is anything but libertarian. If you want to relate it to politics, I'd compare it to communism. Not Chinese or Russian communism, but more of the Marxist ideal. A lack of ownership, communal collaboration that anyone can take advantage of.
I consider RMS's stance on software to be libertarian in the sense that people respect the rights of others. A facet of communism is one where there is a controller (the state). This is more akin to proprietary software. "Free" software has no controller and hence isn't particularly communist.
'Free' is a complicated word and doesn't necessitate libertarianism. A libertarian would claim that ownership is a right, a freedom we enjoy. I don't know if RMS would agree with that. I'm pretty sure he thinks that information should be free...
This comes down to the concept of intellectual property. As a libertarian I don't agree with the concept of intellectual property. I don't think the state should be able to grant an inventor a monopoly over the use of his/her inventions. Many disagree with me on this, and many libertarians think intellectual property is needed. I see intellectual property as a limitation of our freedoms. To me, wanting information to be free is libertarian, not Marxist.
...but people should be restricted by laws that say you can't murder or steal and stuff like that. When people advocate freedom, they tend to be advocating the freedom to do the things they specifically want to do. Not even the libertarian advocates anarchy, which is freedom taken most literally.
'Free' is a fun term for philosophers because it can be turned on its head in all sorts of different ways.
Yes, indeed it is. And for every 10 people you'll have 10 different opinions. I think that freeing people is *far* more important than freeing software.
As I see it, the bigger problem is that once you get over a certain size, you have enough money to set up all of the string of businesses in Ireland, the Netherlands and the Cayman Islands to do your necessary tax dodging.
So if you said that companies over a certain size had a second fomula without all of the same deductions allowed, and they had to pay the greater of the two, then you've got something similar to our current AMT.
Just for starters ... lobbying should not be tax-exempt. Sure, it's typically a cost to the company and so counts against profits, but if you spend $50M/year on lobbying Congress to give you even more tax breaks, that should be taxed. Maybe add advertising, too. Or only allow deductions for direct salaries up to some amount (eg, 5x or 10x minimum wage)
Then, take all of the other loopholes that are being abused by companies to reduce their tax liability, and cap 'em so that you can only use them to take out something like 50% of your tax liability.
I don't know all of the numbers, so I can't give more specifics, but this would either show the absurdity of AMT on so many people, or raise some money from the corporations who don't like paying their fair share of taxes.
Build it, and they will come^Hplain.
We had a solution to "too big to fail" for banks. There was the Glass-Steagall Act, which forced a complete separation between brokerage and banking. Worked fine from the 1930s to 1999. Then it was repealed because the big banks wanted to get bigger. "Today, Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century. This historic legislation will better enable American companies to compete in the new economy.", said the Treasury secretary in 1999.
Right there is how we got into this mess.
Basically, revenue from the sale of goods and services work the way they do today with only profits being taxed. Interest income, dividend income, trading gains, etc... get taxed for businesses just like everyone else on a revenue basis.
Dell's CFO nearly destroyed the company single handedly back in 1993 through excessive currency speculation. He managed to double down correctly on a billion dollar + trade to get out of the hole he created. But if he had bet wrong again, the history of Dell would have been drastically different. Why not just call it insurance like FDIC and make it optional? The government would set rates of each company based on the perceived risk. In the long run protected stocks will be viewed favorably by the market.
Amateur night economics
Tax rent seeking revenue progressively, tax profit for sales of goods and services like today.
Rent seeking - Interest, dividends, trading profits, licensing fees (RMS would like that one), political contributions, ...
Allow for a certain amount of rent seeking revenue can be treated as regular revenue and subject to expense deduction. Becoming TBTF is actually a rent seeking behavior, so setting making the rate progressive is an act of taxing rent seeking.
Of note, Adam Smith proposed that taxes on rents are desirable.
If inflation and returns on saved money are consistent then it will have little impact on savings rate. But, in general it is a good idea to try to stabilize the value of the currency, although demand pull inflation needs to be separated from commodity shock inflation since their causes and the actions taken to mitigate are likely different. Demand pull inflation as a result of there being more financial assets (currency) chasing a relatively fixed amount of real goods is mitigated by draining currency via narrowing the deficit of the currency issuing government by raising taxes and/or decreasing spending. And, the reverse when deflation threatens due to recession.
Some of this is automatic, and already exists. On the revenue side, income tax receipts increase as more people have jobs and income tax receipts increase, if incomes increase enough, a progressive income tax causes the deficit to narrow even more. On the spending side, unemployment insurance, food stamps, and other safety net spending will tend to decrease, narrowing the deficit further. In an economic down turn when deflation threatens these act in the opposite direction. I would prefer additional more powerful automatic stabilizers, but these are a few examples of controls on demand pull inflation/deflation.
I don't know enough on the commodity side to say how that should be handled, but hoarding of useful commodities via ETFs backed by actual warehoused commodities held off the market should be banned.
It hampers his credibility because because he has no track record and saying the same crap everyone does -- that has no depth to it.
Its like the people that say they wish congress wasn't made up of 'professional politicians'...nice idea, but you need someone that has the understanding of how the system works...or throw out the ENTIRE system. Not just congress...EVERYTHING.
Back to the point, without a rack record someone can say all they want and have no standing. And outside can still be an outsider so long as they have some record. Stallman has absolutely nothing other than being a technologist that couldn't even bring his own works to market, had to rely on someone else, and ride on others coat tails...of whom, the biggest proponent of his philosophy tells us that it was a pragmatic choice only because it was available and he could have easily gone the way of other licenses out there but felt it was 'good enough' for what he was attempting.
As for cards, I wouldn't know what colors are supposed to be there. I'm familiar with these sorts of ideas in psychology...we use to do experiments like this in cog. However, no matter what, you almost always find a significant number of experts that do notice it is different. And often it is just that folks don't find any interest because they don't care. It is a great magic trick, and doing it for effect ends up taking more psychological know how to misdirect others than purely showing off the cards.
Hm, how many businesses has RS run? I'm talking real businesses, with 100+ employees, not just incorporated DBAs for the collection of patent money or consultant paychecks.
In that case, he should STFU.
The root cause of the TBTF issue was...the rating agencies. How, you say? The rating agencies were given the imprimatur of a government agency in legislation in the early 20th century - they were credited IN LAW as being 'the official' agencies worth using. This naturally meant that people treated them like government agencies, when in fact they were commercial businesses with all the tendencies toward greed and (when handed a government monopoly) indolence.
Eliminate them, and suddenly the market HAS to revert to actual capitalist economics: there IS no 'golden', unsullied source of ratings, and investors have to evaluate their investments or use someone they actually trust. Ultimately, the amounts risked are much more carefully invested (or, if not, lost WITHOUT recourse to government - ie taxpayer - assets).
-Styopa
Second, if you're a /. editor you might pay attention to the fact that the original post's assertion:
doesn't stand up to even cursory arithmetic. To wit:
The liquid value of an company can be considered the cash value invested in it since, as the liquid value, it can be exchanged for cash. The decision not to exchange it for cash is an act of investment or re-investment depending on one's perspective. The liquid value of a company is calculated by taking its projected future profit stream, adjusting it for risk (which gets larger as you go into the future so the risk-adjusted profit stream trends toward zero with time) and then asking how bit of a loan you could pay off with that risk-adjusted profit stream at what modern portfolio theory calls the "risk free interest rate" which is basically the long term average of the return on short term government treasuries, like 3-month T-Notes.
So now we have a basis from which to talk about "return on investment" because we have defined exactly what we mean by "investment".
On this, mathematically correct, definition of "investment", as the liquid value of the company, we can see that Stallman's plan taxes only the return, regardless of the investment. Moreover, in this mathematically correct definition of investment, its clear you should tax only the risk free return on "investment" aka "liquid value" -- as that is what keeps network effect monopolies from getting huge profit streams that get bigger just because they are the biggest. For example Bill Gates had a network effect monopoly bootstrapped when IBM distributed MS-DOS on its PC's and made everyone dependent on paying Gates money or else they wouldn't be able to run most of the software on the market -- and software developers had to write software for MS-DOS because that was where the market was.
Seastead this.
How about we break it up into 3 separate branches of government?
Say! We can go further than that! Lets make it more responsive to the people by breaking it up into 50 regional mini governments!
We could go even further and have smaller subdivisions around population centers! Lets call them... grandchild governments? that is shitty... it needs a new word... ah... how about "city" ?
Now some areas of the country are stupid or crazy and so we have to split the powers up with the subdivisions so we don't have wars going on between the divisions... ;-)
Democracy Now! - uncensored, anti-establishment news
Banks and organizations like them carry depositor insurance, as do stock brokerages for the cash portion of accounts.
Contribute to civilization: ari.aynrand.org/donate
End all income taxes on corporations. End all income taxes on people. Operate government on this simple principle: you get what you pay for, and you pay for what you get. Productive industry will flock to the US and prosper, and the number and severity of failures will drop dramatically. The whip wielders in government have nothing positive to offer humanity.
Contribute to civilization: ari.aynrand.org/donate
The main problem is the banks. The solution is simple:
- If you are a bank that offers "essential" services, such as bank accounts, home loans, etc, you are not allowed to also participate in "risky" financial speculation practices (derivatives, shares, etc).
Forcing the separation of essential banking services from speculative practices is simple, and is not really that far from existing or previous legislation in various countries. It prevents the ridiculous situation where a government says they will underwrite the speculation of a private company, which is essentially the same thing as the government saying "Sure, have a great time at the casino. If you win you can keep the money, if you lose, we've got you covered."
Even better: start a government-owned organisation for essential banking services. The postal service is halfway there anyway, and goodness knows they could use the extra revenue.
some multinationals may find it better to simply 'move out' to a country that doesn't compromise their business models.
This is an usual counterargument to any regulation: if you do X, then multinationals will go away. We should not get impressed. Let them go away and never come back: other actors will grab the market they leave behind.
Stallman is being quite wise in applying the benefits of computer science to similar problems outside computers.
The bigger picture: too big to fail has a flip side issue that was and is also a HUGE problem today: undue influence of government. Too much power concentrated becomes a threat to democracy, freedom etc. Ultimately that is the issue that causes the troubles in markets and governments. The main reason they can't fail is they are too powerful to allow themselves to fail!
Separation of powers was a realistic approach to government design in order to limit the always occurring errors in all human social systems. The problem is that we don't apply this risk mitigation technique outside of government! As Ben Franklin said, all such systems of government fall into despotism - or in CS: Eventually the error correction algorithm itself fails because it is inherently flaws and the system crashes. His thinking can be extended onto billionaires if we don't fix the election system and media.
Democracy Now! - uncensored, anti-establishment news
Stallman has nailed this one big time. I see no reason why the 60 Walmart family members should earn what tens of millions of the bottom Americans earn. I would even go local with this one. That if in your region there is only one grocery store chain then it should pay much higher taxes than a new smaller chain looking to offer competition. The same with telcos. The big ones would be nailed and the new smaller hungry ones would have some breathing room.
This is not just about some commie redistribution of wealth but often smaller businesses are able to provide a more human type of business but if they are pressured into economies of scale then they are encouraged to not grow for growth's sake.
But I have a second suggestion. Salary / corporate income taxes should also be proportionate to how the employees are all paid. Pay low wages and the company along with the top executives pay a much higher tax rate. This even nails the small businessman driving around in a $100,000 car while his employees might have trouble feeding their kids properly. So the executive acting out of pure greed pays the employees more.
The reason Stallman's idea doesn't work(aside from the fact that he's a loony) is that he's solving the wrong problem. Well he's not really solving the wrong problem as he would love to see companies like Microsoft and Intel broken up, but that's solving his problem, not the problem he's associating the fix to.
There's no such thing as "too big to fail", the issue is "too important to fail" and is an awful lot harder to solve.
Companies like Intel, Microsoft and/or Apple pretty much can't become too important to fail because, barring some sort of extraordinary act of corporate stupidity they only really go out of business because no one wants their product and if no one wants their product there's no real impact to the loss of said company. Even if they do make such a massive mistake, if the underlying business is sound someone will inevitably buy them up and keep going essentially as you go.
The companies that can become too important to fail are essentially companies which provide an essential service. Utilities, Banks, Hospitals, Transport etc. The loss of these kinds of companies, even when the companies in question are small has a significant impact on their customers, and the loss of a sufficiently large percentage of the service provision(either through one large entity or many small ones) failing is in essence catastrophic. This is difficult to legislate because as previously mentioned, having smaller companies doesn't necessarily solve the problem. Having your bank close down is a serious impact, even if everyone else's stays up. In addition, industry standards or lack thereof being what they are, gross misconduct of the kind which caused the GFC tends to be endemic in an entire industry. In essence, if you'd had 1000 smaller wall street banks, the likelihood would be that at least 80% of them would have been just as crooked and you'd still have needed to bail them out since losing 80% of the financial services sector is catastrophic no matter how many companies make that up.
The most common solution to this problem, even in the US, is to socialize these kinds of institutions. Even in the US, with the notable exception of banks, most companies which would fall under "too important to fail" are either fully publicly run or heavily regulated and subsidized. The idea here being that without the profit motive a lot of the asinine behavior dissipates.
For those who find the idea of fully socializing critical infrastructure too terrifying, there's something along the lines of the UK model where you bail the banks out when they fail, but instead of letting the people who caused them to fail or profiited by their failure to walk away into the sunset with loads of cash they get prosecuted and their assets seized(the UK didn't quite do this, but they came closer to this than the US did). This means that while the idiocy of a few people doesn't destroy the economy, the executives who caused the crash get heavily punished and the stock holders in these companies take heavy losses(as a shareholder, even a minor shareholder you are culpable, at least insofar as the value of your investment for the actions of the company). This provides a sort of compromise wherein taking stupid risks or allowing a company you hold shares in to take a stupid risk still causes you to pay a heavy price, but the rest of us who did not have a say in how that company was run don't.
Then of course you have the US model where you do something like buy up 90% of AIG without putting any government representatives on the board, allow the people who caused the mess in the first place to retain their jobs and profits and see shareholders walk away with a good ROI even though the company they invested in was criminally negligent. In essence you have the model wherein the idiots who took gigantic risks walk away handsomely rewarded while John Q Public takes it up the backside and millions of people who aren't rich enough to have their own lobbyists or friends in the administration lose their jobs and livelihoods and ge
By the way, I have seen GNU software in HPUX and Solaris. We don't call them GNU/HPUX or GNU/Solaris. Linux is a Kernel. Ask anyone developing embedded systems. No GNU there, but it is still Linux. He gave his software away. Now he wants everyone to bow down because we used it. What happened to the HURD Kernel? Get over it.
Yeah I know. Call me a troll. It is a subject I am passionate about. Sorry if I offend, but I have a right to my opinion.
Insert Generic Sig Here:
> Lets make it more responsive to the people by breaking
> it up into 50 regional mini governments!
I agree. That would be a good idea.
If you disagree with me on social issues, then it's pretty clear that you are a narrow-minded bigot.
I think companies split up too readily as it is, in the UK at least. Like the railways, once responsible for everything within their fences, are now the supreme buck-passing artists. Train late? The train staff blame the signalling (different company), who blame the track maintenance teams (different company) who blame a sub-contractor (different company) who say they are only an administrating agency who blame their self-employed workers who blame thier suppliers who blame a delay on the railway ... and so on and so on.
:-
Same with the electicity supply, water, road maintenance, builders, and, in my professional job, even "well known", "large" engineering companies which are actually conglomerates of sub-companies. It is often impossible with these these to find out just who you are dealing with, they are administrative mazes, deliberately so. Even the people "fronting" a company often genuinely do not know who is behind them, there are so many layers of buck-passing though mini-companies of pure middle-men, all taking a commission, that the buck stops nowhere.
This love affair with small companies in the UK was boosted by Mrs Thatcher, who's attitudes were rooted in her father's small-town grocer's shop. The fallacy of applying this attitude to the economy as a whole is described here
www.nuke.demon.co.uk/grantham_grocer
...bloated for the sake of a next version to sale the more it cost the end user....
It's already done in Europe on beer producers:
https://en.wikipedia.org/wiki/Progressive_Beer_Duty
It works very well in the UK.
RMS's experience is simply that 'large entities' don't behave in a 'good' manner, and thus there is a clear advantage to society of having fewer of them.
Excellent comment, but I'd like to clarify and detail a bit: most companies at any particular point in time don't naturally behave in a good manner -- large or small. Small companies that don't behave fail. (There are competitors waiting to take their business.) All companies that are good in nature eventually become bad in nature. It may take a few years or a few decades, but it will happen. Because of this, it is better to have all companies be smaller so that no 'large entity' exists. Small entities don't take everything else with them when they go down. Going down is not a matter of if, but when.
I won't say I totally support this plan but it is viable solution. Basically the more money you make as a corp the more you are a health risk to the economy if you die. So we use treat your tax rate like insurance. Although I still say that letting companies fail and then selling their assets to bidding companies is what I believe we should do instead of bailing out.
Gee, who could oppose that?
Stallman obviously knows nothing about the current political environment in his country.
`Perche non reggi tu, o sacra fame de l'oro,l'appetito de' mortali?'
1) Actually prosecute someone if they're breaking the law. 2) Hold all C-level officers responsible. Make them put all salary and stock in a "bailout pool" as part of the bailout agreement; all proceeds are used to support unemployment benefits for the little guys that are losing their jobs.
http://www.lietaer.com/2010/03/the-worgl-experiment/
Casteism
We (the administration) also forced banks and institutions who were healyhy and didn't need the help to also take the money
I think we have this all wrong. we have a tax code that is so out of control. What we need is a flat tax for individuals and corporations. No thousands of pages of exceptions, deductions, get arounds. If you make very little you pay very little, if you make a lot you pay a lot period. (This is like the widow's mite) One of the problems I see is we have many who are not supporting the government. If you live in this country you should be required to contribute to the support of the government. Now I realize that we have an out of control and bloated government - that is another problem that needs to be addressed. We do need laws or rules to keep greedy corporations from figuring out ways to take profits out of the US, but again that is because of all the loop holes and wiggle room in our current system.
Too many of these ideas are tossed out by people who don't really understand the issues, and it shows.
But hey, since when did that ever stop anyone, me included?
My thought on the subject: The government doesn't get to decide that a company is "too big to fail" and step in -- until it does fail. At that point, part of the rules of the bailout are: (1) the company gets split up into parts that are not too big to fail, (2) none of the current officers of the company are permitted to have any position as an officer or board member of any of the pieces, and (3) none of the pieces are permitted to merge with or aquire each other for (x) years.
This is an orderly process to deal with financial institutions that have to be bailed out. They are put into receivership. As the lender of last resort, the government makes good on a company's debt, but puts the company into receivership. The company's assets are sold to pay down the debt. Effectively, the company can be broken up and its pieces sold. Trading of the company's stock is frozen and the stock becomes effectively worthless (provided the amount of the bailout exceeded company's assets).
This is how the dissolution of Washing Mutual was handled. Unfortunately, all of the company's assets were sold to JP Morgan Chase, another to-big-to-fail institution. IMHO, Washington Mutual should have been broken into pieces, and the pieces sold to community and regional banks.
http://en.wikipedia.org/wiki/Receivership