Business Management

Since the near collapse of the financial sector in September 2008, and the resulting global recession, governments around the world have engaged in aggressive efforts to stimulate their stagnant or receding economies. In the process, many large corporations in the financial and manufacturing sectors not only benefitted greatly from stimulus funding, but also secured their survival in a turbulent marketplace. Two years later, one can begin to analyze how effective these spending programs have been in stabilizing the economy and avoiding the potentially catastrophic results of a complete economic collapse reminiscent of The Great Depression. As we begin to see signs of recovery in Canada and the United States, the temptation may be to assume that all is well, and the worst has passed; however, aggressive government intervention in the marketplace, despite its good intentions, was not the wisest course of action. The economic relief bills passed since 2008, were prepared hastily and lacked the power to hold recipients of public funds accountable for misspending taxpayer dollars, undermined the free and competitive marketplace, and hindered new and innovative business from growing and filling the void left by larger companies.

America has always been perceived as free market capitalist system of democracy where the government abstains from interfering in the marketplace (Rosenfield, 1985); however, over the years the governments has increasingly been involved in deliberate manipulation of the market. From providing land grants to railroad companies at the turn of the century, to research and development funds made available to industries like nuclear energy, aerospace, and semiconductor technology (Rosenfield, 1985); the government has a history of propping up certain industries while allowing others to fail, all at taxpayers’ expense.

Government spending programs are usually proposed in the interest of creating jobs or stimulating the economy, however, such spending highlights the hypocrisy of both, large corporations who are swift to cry foul when government agencies try to introduce regulatory measures into the market, and governments that defend an economic system driven by a free and competitive market (Rosenfield, 1985).

The U.S. government’s assistance to large private enterprises raises questions about the state of American capitalism, a system of free entrepreneurship that has been the symbol of America’s economic superiority over the last hundred years. Chicago Business School Professor Luigi Zingales poignantly poses the question in article written at the height of the debate over the proposed financial relief efforts: “ Do we want to live in a system where profits are private but losses are socialized?” (Zingales, 2008) At the heart of Professor Zingales’ inquiry, is the sad realization that public relief for private corporations over the last century has destroyed the free and competitive marketplace; a sentiment echoed by former Chrysler chairman Lee Iacocca. While appearing before the U.S. Senate,

The hypocrisy of the business community is what causes the concern for the state of the free market. Large corporations rigorously lobby governments to shelter their profits from taxation and their marketplace behaviour from regulation, yet in tumultuous times actively seek relief from their own mismanagement and incompetence (Rosenfield, 1985). This behaviour absolves mismanages enterprises from the responsibility and accountability, thus allowing companies that would otherwise fail to survive artificially. To this day we see companies who have already been given a government sanctioned lifeline, which provided a short term boost, only to return to Washington years later seeking more aid.

The best example of this behaviour is American automaker Chrysler.