
Capitalists or Cronyists? - hliyan
https://www.profgalloway.com/capitalists-or-cronyists
======
lordnacho
This is a good point again, in the same line of reasoning as the Social
Capital commentator.

If we don't allow businesses to fail now and again, there's never an
opportunity for young people. Everything will always cost too much to be able
to afford doing something on your own.

Case in point is myself. Shortly after uni, I worked for a hedge fund that
grew to a billion dollars. The boss took a huge bet that went wrong during the
GFC, and I ended up starting a new firm with a few other guys, using what I'd
learned as well as the reputation (it wasn't the same kind of trading) to a
new place, giving me a much bigger stake. If the boss hadn't screwed up, I'd
still be an underling, the opportunity cost of leaving would keep it that way.

A similar story can be made for non-labour assets. I'm sure there's some smart
operators in the airline industry with some ideas about how to run an airline
business. But if we bail out the airlines, he can't buy the planes/landing
slots cheaply, and most of the staff will correctly guess that their jobs are
safer with the old airlines. And they will be around to compete with Airline
2.0.

Same in every other business, from mom and pop restaurants to investment
banks. The forest fire is an opportunity for saplings.

------
skybrian
There is an argument that if a business was okay before the pandemic and would
still be okay after the pandemic, maybe it should survive the pandemic,
because new businesses aren't that easy to build. If it's not okay after the
recovery, let it fail then.

A counterargument might be that starting over isn't such a bad thing, as long
as the former employees are taken care of.

I expect that it depends on the business.

~~~
roenxi
People probably will argue that but it has some weaknesses. If a business was
okay before and expected to be okay after a crisis then its creditors probably
_will_ let is survive the crisis.

It is appropriate for the government to act in the short term (especially
while enforcing quarantines) to make sure everyone can feed themselves and
nobody is left homeless. But business bailouts are fundamentally silly;
capitalists are more than capable of keeping a business alive on life support
if they think good times will come again in 6 months.

Capitalists and bankers are self interested, not stupid. If given any freedom
to make choices they aren't going to shut down a good business because the
government shuts things down for 6 months.

~~~
skybrian
There's a funny thing about a market panic: the creditors disappear. This has
little or nothing about the strength of the business in normal times.

~~~
roenxi
The pandemic has made the situation binary for most businesses; either shut
down if non-essential or face an abnormal surge of demand if they supply basic
goods. Although credit might help neither of those cases requires new
creditors.

The former case does require relief from their existing debts. Any existing
creditor who insists on payment isn't going to get very much out of the
situation vs. one who lets them off the hook for 6 months and then has a
viable business paying back their debt. Deals would be worked out.

Creditors are looking to maximise their return. If a business is likely to
bounce back after a temporary blip then they aren't going to insist on payment
now.

Not to say it won't hurt; but _someone_ has to be hurt in all this and the
social contract is that the people who get hurt when the economy collapses are
capitalists not taxpayers. The businesses would by and large survive.

------
js8
I have a feeling that the same article could have been written 100 years ago,
and still would be correct. (And even 200 years ago, Adam Smith was writing in
the same vein, that we should have a meritocratic system, not cronyism.)

I think that capitalism, in the sense as described in the article, has always
been just a dream, and never historically accurate. What actually somewhat
changed it was adoption of social democracy as a response to the Great
Depression (and the rise of USSR to some extent).

~~~
llamaz
Social democracy is still fundamentally capitalism. Adam Smith was a left-wing
radical living in a transnational period period between feudalism and
capitalism where the main Tyrannical force was the state - now that has
changed to corporations.

Whether you're left or right wing economically, it's an accepted fact that
capitalism has a cycle of boom and bust built into it. Right-libertarians
(e.g. The Democrats and The Republican Party) believe that this can be avoided
by freeing the market by removing deleterious incentives, centrist Keynesians
(e.g. FDR with the New Deal, Bernie Sanders) don't trust capitalists to self
regulate and instead accept the cycle of boom and bust, but try to avoid the
social unrest by smoothing out and mollifying the crises, and left-
libertarians (e.g. John McDonell, Richard Wolff, Paul Cockshott) try to
eliminate the cycle of boom and bust, much like the right libertarians.

This framing (e.g. of Democrats as economically right) may be provocative to
Americans, but is natural in the rest of the world. I'm Australian and Bernie
Sanders is to the right of our right wing party.

------
sails
> Letting firms fail, and share prices fall to their market level, also
> provides younger generations with the same opportunities we, Gen X and
> boomers, were given: a chance to buy Amazon at 50x (vs. 100x) earnings and
> Brooklyn real estate at $300 (vs. $1,000) per sq. ft. Just as we pretend our
> service men and women are heroes, and then treat them like chumps, CNBC
> advertisers and Peter Navarro want to pretend they give a sh*t about younger
> generations so they can protect the wealth of old people and
> management/advertisers. Enough already.

Scott Galloway often refers to this "wealth transfer" from the young to the
old in his writing. I think it is an interesting idea and seems to be somewhat
novel.

------
pmoriarty
_" If you're seeing this message, that means JavaScript has been disabled on
your browser, please enable JS to make this app work."_

How annoying.

Does anyone have a link to a plain text version of this article, or at least
something that doesn't require javascript to read?

~~~
viklove
If you want to incapacitate yourself out of some irrational hatred for a
programming language instead of just employing a tracking blocker like uBlock
Origin, you kinda have to live with the consequences.

~~~
pmoriarty
Enabling javascript means exposing myself to:

\- javascript vulnerabilities

\- tracking

\- ads (which themselves are well known vectors of malware)

No thank you.

~~~
tehlike
That's why he mentioned ublock - to prevent ads and tracking.

~~~
pmoriarty
I do run uBlock, but it can't catch every novel JS tracking or advertising
mechanism, while disabling JS can. In addition, I prevent exposure JS
vulnerabilities and malware.

This is defense in depth, and has nothing to do with hating JS as a language,
and everything to do with a desire for more security and privacy.

~~~
tehlike
I approach defense similar to Swiss cheese model. You can't cover everything
at every level, but if you have multiple levels, the probability of failure
drops significantly.

You can decide not to drive a car in order not to die, at the cost of
inconvenience and money because now you limit your options for groceries etc,
and you limit the fun you have because your travel options are limited.

