Lessons from the Titanic
At the moment though there is a fascination with the BIG and a massive fear of their failure. This is not surprising. Big companies provide large amounts of tax revenues, employ large numbers of people and in many instances are the source of huge national pride. So the motivations and politics behind keeping flailing big companies afloat are huge. Governments are pumping billions into propping up big companies, their investment in them now is so huge that they can’t afford for big companies to fail. The question at hand now though, is this fuelling a virtuous or a vicious cycle. How much longer can this course of action be sustained and at what price will western governments continue to protect big companies? Western governments appear to be behaving more like the captain of the Titanic before it struck an iceberg – stoking the engine to get more power out of it and racing across across an ocean they know is littered with obstacles. There is now a danger of artificially maintaining companies that have become ineffective and inefficient in the new world of work. Let’s not forget that if big is back, a notion the article seems to support as a good development, then why is it that the economies that are rebounding fastest such as China and South Korea are those dominated by small companies?
Rather than continuing to bail out big and potentially ineffective companies, governments need to be removing the burdens and barriers which prevent entrepreneurs from starting businesses and turning small companies into big effective ones. It is on this last point that I do agree with the Economist