Rescuing Companies from collapse

Carlos Rodríguez Braun comments on the renewed calls, ubiquitous in times of crisis, to rescue companies, increase public spending, expand the state, and other items on the vegetarian socialist agenda.

LA RAZÓN – CATO – Aid to companies is logically prohibited in the European Union: in a single market, companies must compete on equal terms. The Economist noted: “Restricting public aid frustrates interventionist politicians – of whom there are many – but it is vital in preventing taxpayers, consumers and competitors from paying the costs of a rigged market.”

The coronavirus crisis, unsurprisingly, has weakened European standards. Today we are talking in Spain about the rescue requested by Globalia, but our country is no exception. There are torrents of public money pledged in various nations. It all started with the modesty of helping SMEs, and in a short time we were already immersed in national champions, such as Renault in France, Lufthansa in Germany, and others that were also “strategic”.

The European plan, greeted with enthusiasm everywhere, and for which Pedro Sánchez was embarrassingly applauded at Moncloa, has given these bailouts a letter of nature, and we can predict that queues will form to collect it.

The risks, however, are considerable, starting with the fact that no one here rescues the taxpayers, who are the ones who will pay the supposed European gift. But the single market and the possibility of having competitive European companies are also at risk: we will never have them if there are no open economies.

Now, in the face of the crisis, only socialism seems viable, and it only seems easy to refute the arguments of its more carnivorous variants. Let’s say, it is clear that the populist ultra-left takes advantage of the situation to sell its usual damaged merchandise: companies must be nationalized, public spending considerably increased, the State expanded, CaixaBank and Bankia not merged, etc. They sweeten this by claiming that only the rich will pay for it. The collapse of the electoral expectations of Paulita Naródnika and her henchmen reveals the brief support that the workers are preparing to offer such fantasies.

Somewhat more solid they resemble at first glance the old theses of hegemonic vegetarian socialism. It seems common sense that in a crisis we cannot be liberal; that action must be taken immediately to prevent businesses from closing and jobs from being lost; that if the people do not spend, the State should spend instead; and that politicians and experts can handle public money well, guiding it to rescue solvent companies and invest in sectors of the future.

When we realize that the above are exaggerations, errors, myths, poisoned candies, which can, and generally tend, be worse remedies than diseases, it is too late. The customary alliance between politicians, bureaucrats, intellectuals, trade unionists and non-competitive businessmen has formed, and the result of the market fixing is that, as always, nobody here will ever rescue the main victim: you, madam.

This article was originally published in La Razón (Spain) on September 11, 2020.