Sunday, February 1, 2009

Can Government Provide an Alternative to Failed Businesses?

My wife and I had one of our (now regular) chats over dinner regarding the economy. From her commonsense point of view, any business that is on the brink of failure due to poor management should be allowed to fail, since those businesses are clearly not serving their customers very well (if at all). As readers may deduce from my recent posts about the rich and might of the World Economic Forum, I tend to support this logic, at least in theory; and, from that theoretical point of view, I believe that it is as applicable to the financial sector as it is to the automobile industry. The key difference between these two areas is that, where automobiles are concerned, there are plenty of alternatives to American products, ranging from buying from another country (Japan still providing the best product) to choosing public transportation over car ownership. In the financial sector, on the other hand, it seems as if greed has made scoundrels out of just about all alternatives; and, to make matters worse, the scoundrels are now consolidating, resulting in fewer options for the customer. Thus, however aggravated we may feel by all these practices that combine foolish decision making with arrogant confidence, we are really not in any position to "take our business elsewhere," because there really is no "elsewhere!"

According to a recent report on the BBC NEWS Web site, the government of the United Kingdom may be considering a possible "elsewhere" for their own population:

The government has confirmed that it is hoping to extend banking services at the Post Office, creating a so-called 'People's Bank'.

The Department for Business Enterprise and Regulatory Reform (BERR), headed by Lord Mandelson, wants to broaden services at the 12,000 UK post offices.

Some observers believes the move may help to stimulate lending.

The report makes it clear that Mandelson's proposal is still very much in the "trial balloon" stage. There will be many hurdles to leap on the path to approving the proposal; and, should it be approved, even more hurdles on the path to implementation. However, since I experienced the Post Office Savings Bank in Singapore, I appreciate the logic behind this proposal; and anyone who knows enough to appreciate Barack Obama's invocation of the "legacy of history" should recognize that Mandelson is following in the footsteps of Alexander Hamilton, who had been faced with a new country that had won its independence but lost most of its financial resources in the process. However, if Obama is indeed committed to "doing what it takes to maintain the flow of credit," then a little bit of Hamiltonian thinking might be worthy of consideration, even if it is ultimately not invoked. Let us hope that our President's economic team will take the trouble to monitor Mandelson's progress!

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