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Name:
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lotowner
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Subject:
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Socialism Is The Cure For Oil Spills
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Date:
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5/9/2010 9:57:13 AM
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In today's Business Segment of THE DECAUR DAILY by writer Eric Fleischauer. Newspapers apparently do not have a profit agenda - nor are they pushing Obama's agenda for socializing this country.
Getting run over by our toys
BP and Goldman Sachs are toy cars.
Not the fancy ones they sell these days, complete with remote control steering and braking. They are the toy cars of my childhood. Wind them up and they will speed forward, in one direction. That direction is toward profit.
The two companies are engaged in vastly different enterprises, but fundamentally they are the same. Like any capitalist enterprise, their function — their sole function — is to generate profit. Shareholders wind them up, and they scurry toward the cash.
They also are the same in another respect. Both companies, in their enthusiasm for profit, created disasters that others will have to clean up.
In the case of BP, the cleanup will be literal. According to reports, BP could have reduced the odds of the economic and environmental disaster that is lapping at Alabama shores had it included a back-up shutoff device, called an acoustic switch, to its offshore oil rig.
It also could have added a second ram shear, designed to shut off the pipes if the first ram shear did not work. Both options were expensive, and BP did neither.
Designed to fail
In the case of Goldman Sachs, the cleanup others had to perform was figurative. According to a recently filed lawsuit by the Securities and Exchange Commission, Goldman Sachs created a synthetic collateralized debt obligation — basically a huge conglomeration of mortgages — designed for failure.
According to the allegations, the CDO was created with the expectation that housing prices would fall, and was loaded with high-risk mortgages. Goldman created the CDO for an investor who paid it $15 million.
The investor then bet against the CDO, the SEC claims, essentially shorting it like one would short a stock. Housing prices dropped, the CDO became worthless and the investor made a fortune. And our economy almost collapsed.
Chased profit
What happened at BP and at Goldman Sachs was fundamentally the same. Shareholders wound up both companies, and the companies did what they were supposed to do in a free market. They chased the profit.
The companies, who enjoyed their high-risk profits, certainly deserve our censure. The public will labor for years under the burden from the companies’ lack of responsibility.
From an economic perspective, though, the companies did nothing surprising. The marvel of capitalism is not that it creates responsible corporate citizens. The system’s beauty is that it correctly assumes that greed is the most compelling human emotion, and it harnesses that greed to benefit the public.
Capitalism creates oil slicks and freezes the credit markets when we lose sight of what it is. Capitalists seek personal gain, not public benefit. The public must look out for itself, and the way it must do so is through regulations that restrain the power of capitalism.
We allowed Goldman Sachs and BP to run roughshod. We wound them up and then lay down in front of them. We should not be surprised that Goldman and BP did what companies in a free market always do, seek profit.
The surprise is that we were deluded enough to think they were looking out for our interests.
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