I realize the political nature of this topic, so please hear this question as sincere and not baiting / trolling: How is it a bail out if the government shut everything down to protect us from a pandemic? We’re intentionally pausing the economy, which will undoubtedly lead to a recession. Many of these companies were doing well financially prior to this disaster.
And I’m not defending AirBnB. I’m asking this about all companies. Isn’t this exactly the time our tax-funded government should step in and prop up successful companies, small, medium, and large.
What public service is Airbnb providing that they should be artificially sustained in the absence of a viable market instead of giving direct public financial support to their employees?
Yes I know what they do. That wasn’t the question.
I have used them, like many.
But that doesn’t mean they should be sustained in the absence of a viable market. The employees should all be supported, like anyone who is living through this. No question.
But the company? Why do we, as a society as a whole, need to sustain the company in the absence of a market? Someone else would create the same business again when there’s a market for it. If there is again.
This is a natural disaster, businesses shuttered before the government did anything because many people wisely started to quarantine themselves. So to be fair to the government, a lot of shutting down was happening anyway.
Being a natural disaster, I think the fairest characterization of the money is a relief effort, just as if a hurricane had struck.
A bailout is a fair term if the market screws up, as in the 2007 financial crisis due to subprime mortgages. Though the causes were complex, people were selling dodgy financial products that obscured value and risk.
In this case, many companies are adapting to a big shock quite well because of automation and delivery, but there are a ton of businesses that closed because they have a face to face business model.
I cant speak about AirBnB, but the reason bailouts are unpopular with some companies...say...airline companies is because they purposely implemented stock buy-backs and wasted most their reserve cash chasing EPS. Now they come for money. How is that fair to other companies which remained cautious and maintained cash reserves?
Are you saying every airline should have held cash reserves (really more likely to be bonds or other investments) sufficient to sustain them through a total wipeout of their entire customer base for months on end? A scenario that has never happened before in the history of commercial aviation?
Resources tied up in cash buffers are resources not deployed elsewhere, after all.
The argument seems to be that because the government adopted business operating, they should get a hand.
I'm not sure I buy that. When you're a business owner, you take risks. Also ones that you weren't explicit about.
Suppose the government creates a rule that adds paperwork, so that all businesses now need to pay more to fill in docs. That could easily be the thing that kills certain businesses. Should they get bailed out? This actually happened in my business.
I'm not sure I'd go that far. I think if there is a major, near-unforseeable danger that where public policy requires shutting down business, then I think Bylund has a fair point that it shouldn't be treated as "sucks to be you" entrepreneurial error.
But I also think there's a lot more gray area. What if you were exploiting the fact that something was illegal but not enforced? That doesn't seem to merit a bailout.
What if you were running on extremely tight margins so that a week of lost revenue for any reason, even a justified one like a pandemic, would shut you down? Again, doesn't seem to merit a bailout.
No, if companies aren't allowed to fail then the economy is broken. Every time a company is bailed out it just incentives less accountability in the future.
Besides, no one is going to bail out the small, or even medium sized companies despite what politicians say.
> How is it a bail out if the government shut everything down to protect us from a pandemic? We’re intentionally pausing the economy, which will undoubtedly lead to a recession. Many of these companies were doing well financially prior to this disaster.
I don't think it's a question of moral deserts; as you say, none of the businesses suffering right now are doing so because they did something irresponsible which blew up.
But the concern is that we likely can't bail out literally every business in the economy that's in trouble, in which case the choices we make should be driven by global societal utility. Eg, if the airline industry was destroyed, the economy would be far worse off post-crisis, so it's reasonable to keep airlines afloat to some degree.
