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Politics : View from the Center and Left

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To: Cogito who wrote (129354)	1/27/2010 9:50:17 AM
From: Katelew	Read Replies (2) of 542055

It becomes a vicious cycle. Yes, but it doesn't spiral down forever. An equilibrium point is reached, and it will be reached faster if the government doesn't try to preserve every job. Another reason is that the government has no way of really knowing whether or not a company is well-managed or not when it tries to prop them all up. Strong companies tend to survive recessions on their own because they have prepared for the inevitable downturns. They have money set aside, or have hired well, or have solid inventory contol systems in place, etc. So to blame a business failure entirely on a recession is mistaken. Actually recessions serve to clean house....weed out the weak and redistribute assets to more efficient use. They spawn innovation, too, and often entirely new industries and technology come about from the crisis management that takes place. Just this morning I read about two new policies Caterpillar will adopt to help its suppliers more easily obtain bank credit. Perhaps the main reason to avoid government intervention is simply that it prolongs the process of weeding out the weak. Unemployment insurance runs out. Better to get the process over with quickly so rehiring can start.

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