Wednesday, March 04, 2009

Is it time for Atlas to shrug?

I was reading this article from the Economist today. Link. The article gives data that since the US government has taken (or tried to take) the economic reins into its hand, the sale for Ayn Rand's book "Atlas Shrugged" has gone up. People have been comparing today's scenario with the times mentioned in the book. Many are hailing the book because many small or privately owned banks have stood tall during this recession while many big and public banks have weathered. While many say that the world is inching towards a situation where innovators will not be rewarded (like the anti trust case on Microsoft which broke the company apart)

This really got me into thinking about what do I think about what's happening nowadays?
There are many points that I wanted to write about
1) Nationalization of banks
I do believe that fascism, socialism, communism kills competition and in turn kills innovation. But what should be done in this situation? Should the banks be allowed to fail or should government stimulate the banks with more tax payers money? Many people believe that banks should be allowed to fail and the tax payers money should be given back to the people. It makes sense but this solution is wrong in the long term. The main agenda for the government to bailout the banks is to stop the market from coming to a complete standstill. Imagine the scenario where the government allows the banks to fail. Millions of people lose their jobs and their savings. The price of commodities/markets comes down to pennies. Now if the government gives money to the people, what will most of the people do? Put the money under the mattress and save like there is no tomorrow. So there is very little market circulation, there is plenty of supply, no demand and therefore price of most of the things is worthless. Now, if the government bails out these banks, people still have job, people can take loans, make deposits and the whole money supply chain continues. therefore I think, in this dire situation in which no one knows the correct solution, it is worthwhile for the govt to bail out these banks. Of course, its prudent that these banks and auto companies don't misuse these funds to pay off bonuses. Talent should be rewarded but not from someone Else's pocket.
2) an Lassiez Faire economy: I do not believe in a total Lassiez Faire economy. I think there has to be regulation. Greed is a double edged sword. In the right people, it can bring immense benefit but in the wrong people it can bring great despair. I am not worried about the first group of people , its the second group for which regulation exists. And since all men must be treated equal, regulation must exist. The bigger question is how much? Make it little and its next to nothing and make it more and it becomes a pain in the ass. I think all regulations should follow the imperial model. As it grows, refine it and adjust it to suit the conditions. Of course there is no correct answer (if there was, we would be living as robots).
3) Big companies. If I started the company and it really hit it off well, should I allow it to grow very big? Like google? I think even if my company became a hit, I will not want to let it grow into a big company. There are many reasons. With big company, I will loose control. There will be many decisions that I will not make. But since the company is my baby, I will want to make all decisions. What will actually happen, only time will tell

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