Whatever is done to shut down the economy to stop the coronavirus is essential to protect companies as well as individuals, says Bloomberg Economics Editor Peter Coy. #Coronavirus #Covid19 #CoronavirusUS #Stimulus
If companies fail en masse, high-functioning teams that have taken years to assemble will fail. Synergies will be lost. Workers who thrive in a particular niche will strive to find new jobs from new employers who don’t understand who they are or what they’re capable of doing.
One elegant way to keep companies afloat is Germany’s kurtzabeit, or short-work time, in which governments subsidize the salaries of workers who would otherwise be laid off.
Joseph Stiglitz, the Nobel laureate from Columbia University, advocates a super Chapter 11 that would avert mass insolvency. It’s reasonable to impose conditions on the aid the companies get, such as caps on executive compensation, restrictions on dividends and buybacks.
It’s also reasonable to pick and choose which industries to rescue. For example, airlines are a vital infrastructure, but casinos and cruise lines are not. Companies with valuable physical assets can bounce back relatively easily.
For example, the failure of a shale oil producer does no harm to the hydrocarbons that remain in the ground. Politics should play as little role as possible in bailout decisions. Bailouts of companies along with aid to individuals will be fantastically expensive, but that’s because the need has never been greater.
The surest way to maintain support for the restrictions that protect the public from Covid-19 is to alleviate the damage that those restrictions do to the economy.
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