Libertarian economic blogger Meredith Jones points out the real source of greed in the AIG bonus hubbub — government interference in the market. Had government stayed out, AIG would have simply declared bankruptcy, restructured its business, righted itself and the court would not have allowed the bonuses to be paid. But once government arrived with mountains of taxpayer cash, executives simply helped themselves to your money, citing their contracts with AIG.
Read the entire article at Capital Freedom.
…Of course, we blame the evil executives and call them greedy. But we forget that Congress and government intervention are fueling this greed. People are far more greedy when they are not spending their own money. We naturally agree with the free market, which gives us the incentive to forego short-term gain (and long-term losses) in favor of slow but steady long-term gains. The free market is just and fair, rewarding good decisions and punishing bad ones. The free market forces companies to make better decisions and spend wisely because otherwise they risk losing their incomes if they fail. Are the executives at AIG greedy? Sure! But we should not forget that it is the free market that reins in their greed and forces them to work for their bonuses, at least in the long-term. When we introduce government into the equation, we change the natural course of the market and give companies like AIG a free pass to do business with a short-term mentality rather than a long-term strategy…
