Capitalism is under threat in America like never before. Although the new Obama administration isn’t particularly business-friendly, they are not the worst problem.
The biggest threat to capitalism is rent-seeking companies looking to get some advantage from the government at the expense of competitors.
The Libertarian Party of Georgia has little sympathy with the AIG insurance company, which now is in the government’s crosshairs over the issue of executive bonuses. We all know the adage “He who pays the piper calls the tune;” AIG took government money and now the government is micromanaging the company.
AIG had a choice. It could have entered chapter 11 bankruptcy for a protected reorganization that might have saved the company. Had it done so, the shareholders and the senior management would still be in charge of AIG. The company then could make necessary business decisions, or fall into chapter 7 bankruptcy and liquidation.
Instead, AIG’s management jumped at the chance to save their collective positions. They thought they would have a financial advantage over its competitors in the mortgage and insurance industries. They thought they would still be in charge of the company.
AIG has brought woe upon its own head. Yes, the TARP bailout and the stimulus bill are mistakes; yes, the federal government has nationalized the mortgage and domestic auto industries; yes, the very politicians who really caused the current economic problems are deflecting blame to the private companies that did what congress and government regulators told them to do. But if AIG had refused TARP funds it would still be a private company.
Executive bonuses are the center of this week’s circus. Never mind that the government which is outraged — outraged, I tell you! — over these bonuses is the same government that specifically exempted those very bonuses from other restrictions in the TARP package.
And just yesterday US Senator Charles Grassley challenged AIG’s management to apologize to the public for ruining the American economy and then commit hara-kiri, or Japanese ritual suicide (Are there any Republicans left that even claim to be pro-business?). Christopher Dodd is hyperventilating while proposing ex-post facto and bills of attainder laws to deprive AIG or its executives of any of that bonus money, and no one in Congress (well, except Ron Paul) seems to care that his fantasies are patently unconstitutional.
Can anything be worse? Yes. Having set the precedent with AIG, Congress will go on to claim it is leveling the playing field when it expands its dictatorial micromanagement to other insurance companies that did not accept TARP money. And once that precedent is set, those controls will be rolled out to all businesses in every industry.
Libertarians are fond of the Revolutionary era slogan “Live Free Or Die.” AIG should have refused TARP money and opted for bankruptcy. It is possible they would have failed and gone out of business, but that risk is part of capitalism and freedom. By allowing themselves to become the government’s punching bag, AIG has done more to undermine limited government, free markets, and capitalist principles than Hugo Chavez and Fidel Castro combined.
