From Bangkok to Bangalore, What Isn’t Outsourced?

In an age of shrinking economies and a time when it seems nothing is made in the USA anymore except financial scandals, many pundits say the question is not what is outsourced but simply what is not. In California, a state with governance marred by bankruptcy and disputes between Governor Schwarzenegger and the legislature, discussion of outsourcing has morphed into radical action: the governor decided last week to outsource the California legislature to China.

“Yah, I’ve had enough already with the little girlie-men in de California legislature, you know?” the governor said on Meet the Press last Sunday. “Dis is it. I’m gonna CRUSH deir little GIRLIE-MUSCLES and send dem all to China to squabble over dere! If dey don’t like it, dey can lump it. A few sessions with a bunch of tight-wadded Chinese bean counters is just what dey need. Let dem shut up and enjoy some dim sum for a change while I balance da budget.”

In Beijing, however, the Chinese government was less than receptive to the idea. “We already have provincial legislatures,” trade minister Shi Guangsheng said yesterday. “First of all, this is not a trade issue. If the Americans wish to outsource all their private-sector employment, we are more than happy to assume ownership of the American middle class. But the California Congress would most likely find little to occupy them in China. We already have provincial legislatures, and besides, we don’t have any girlie-men in China and frankly we don’t want any.”

California lawmakers aside, it is well known that just about everything else American has already been outsourced. Americans no longer even lick their own stamps, that function having been exported to dingy streets from Bangkok to Bangalore. In Bangkok, Thailand, the stamp-licking company sign, tucked away between the fishmongers and laundries, says ME LICKEE, YOU LIKEY? Inside, what looks like a sweatshop is actually a stamp-licking room with part-time workers assiduously licking American stamps and sticking them on envelopes that will be shipped back to the United States, thus explaining why U.S. First Class letters are so often delayed.

In Bangalore, India, the stamp-licking concession belongs to the Sir Leaks a Lot Corporation. Asked about the misnomer, Operations Manager Varnish Singhalong told a Demockracy.com reporter, “Ah, yes, that was an English error. Because we can’t spell very well in this organization. But it doesn’t matter anyway. We are stamp lickers, not a call center. Besides, ‘Sir Licks A Lot” doesn’t sound very dignified. “Sir Leaks a Lot” might at least suggest we are plumbers.”

New outsourcing initiatives in the U.S. include the exporting of obesity. US customers call up the International Lardbutt Company in Cambodia and buy them a gallon-sized Slurpee for five cents, which the foreign surrogate proceeds to slurp down by proxy and get fat.

And the American’s hunger pangs? “Hey, I suck it up,” said one happy male customer in Houston. “A little rumbling in the tummy is worth it. I slim down and I feel like I’m a patriot, exporting death by obesity to the heathen abroad. The time difference of 12 or 13 hours means the poor devil has to get up at three in the morning to suck one down, but hey, nobody put a gun to their heads forcing them to get paid slurping Slurpees in the middle of the night. I’d call that a pretty good job.”

As for Hollywood, it was only a matter of time. “Hollywood has essentially been outsourced to Bollywood, no doubt about it,” a studio executive who wished to remain anonymous said. “Bollywood makes more movies in a year than McDonald’s flips burgers, and for one-tenth the cost. By the way, are burgers still made here? Anyway, why should we pay Brad Pitt millions for his pretty face when we can give some crooner in India a couple of bucks and a pack of Marlboros to sing and dance around the script? We’ll save hundreds of millions a year that we can pay ourselves in bonuses.”

Are there any projects in the works? “Our first Indian film will be a Mumbai remake of Michael Clayton with Arjun Rampai in the Clooney role and Preity Zinta as the Tilda Swinton character,” the executive said. (The Swinton role of “Karen” has been changed to “Kali.” Kali is the name of the wife of Shiva the God of Death referred to in the original version.) A journalist who was shown pre-release clips from the famous Clayton ending reports a song-and-dance fest featuring a love triangle, angry parents and a hero who fights and defeats a plethora of gangsters, none of which has anything to do with the original plot, although some modified dialogue remains. “See, now, that’s just not the way to go here, Kali,” Rampai croons in sync with his dance steps. “You know, for someone as smart as you, you really are lost, aren’t you? I’m the easiest part of the equation, and you want to kill me? Don’t you know who I am? I’m a fixer. I’m a bagman. I fix anything from illegitimate caste-climbers to bent Maharajas, and you want to kill me? Five million rupees—that’s to forget about your lower-caste origins.” Kali tiptoes across the set, arms flailing, singing “This discussion will have to take place in another setting, oh yes, oh yes, take place in another setting!” Rampai swirls to her side and belts, “DO I LOOK LIKE I’M NEGOTIATING?”

Health Care Reform: A Lesson From the Big 3

US health care reform is the biggest domestic issue facing America today, and action is needed to fix it. But as I was reading about Chrysler’s bankruptcy the other day, it got me thinking about the similarities and differences between the auto industry and the health care industry. As the rhetoric and furor over health care reform gets more and more heated, it might help the debate if we step back and take a look at the failed auto industry and try to learn some lessons about what to do and what not do when reform is needed.

To use an oxymoron, American health care is sick. As many reports have stated, Americans spend twice as much on health care as similar western countries. Half of this cost is paid thanks to the American taxpayer (or the American taxpayer’s children and grandchildren, thanks to budget deficits). But even with all that spending, objective impartial statistics rank America’s health care near the bottom when compared with those same western countries. (See Demockracy article from February 16, 2009, “Health Care in America – A Time for Change” for a full discussion of this issue.) However, even with the groundswell of support from many different corners, this is not a problem which will be fixed at the flip of political switch. This is a problem which has been forty years in the making and will probably be forty years in the fixing.

So, as we watch the plight of the Big 3 automakers, I can’t help but compare their plight to the current situation of the health care industry and compare the position of the auto companies of 1960s to the health care providers of today. For many, many years, the Big 3 automakers were the most celebrated and profitable companies in the world. CEOs, executives, shareholders, unions, and car salesmen all got rich and fat on the profits from the US auto industry. They were the “Masters of the Universe” in the mid 20th century. A national infrastructure was built to support the industry. “What’s good for General Motors is good for America” was the oft-quoted refrain.

GM, Ford, and Chrysler made cars that were the shiniest, biggest, boldest, and the envy of the world. Even if you didn’t need or want rear fins or white side wall tires or big V-8 engines,  you got them because it was the American way to do things. Cars got bigger, more expensive, and more inefficient, and the industry run by the three big oligarchs with almost no other meaningful competition slowly lost touch with the consumer.

And then in the 1970s the car industry had a hiccup. The Japanese (and others) devised a cheaper, more sensible way to make cars which fit the needs of the consumer. These cars were cheaper and on objective criteria, better (sound familiar to an industry we know?). Detroit of course tried to react in the 1970s and 1980s. The industry went through thirty years of pain – a government bailout here, a merger there, a few concessions from the unions. They pared down their product lines to sell mostly SUVs and big cars (cars which people really didn’t need, but old habits die hard). Salesman and marketing programs claimed that the quality statistics comparing the Japanese cars were flawed, and anyway, who wants to drive a small little Japanese car (“I don’t care what the statistics say, the American made car is better”).  And now thirty years later, the Big 3 are on the critical list. Their infrastructures were just too cumbersome to change in the radical ways that were necessary to survive. Chrysler has now died, and GM and Ford are gasping their last breath. It is sort of ironic that one of the biggest problems of the auto industry is the escalating health care costs of the labor force that simply cannot be reduced under the current system.

Saying all that, and even with the Big 3 in their current sad state, I don’t think I know one American who is not a lot happier with the car they drive now compared to what they drove thirty years ago (OK, maybe we need to exclude owners of ’57 Chevys or ’64 Mustangs). All of the trauma and gut-wrenching decisions and layoffs and closures, although obviously difficult for those directly involved, were part of the process required to allow the American consumer to buy the product that was best for him.

So the similarities to the health care industries today and the auto industry of thirty years ago are obvious. The health care infrastructure is bloated and inefficient – it is providing products and services which are too big, expensive, and inefficient to many US citizens. It is more expensive and has less quality than other countries’ health care systems. A huge and complex national infrastructure has been built to support the entire industry. CEOs, executives, and shareholders, along with many powerful physician specialties, are all getting rich on the profits of the health care industry. These constituents do not want to stop the gravy train – but stop it will and stop it must – someday. In the long run, the American consumer will force the change – and it will most likely lead to trauma in the industry. It might take thirty years or longer – but the health care industry will change. In fact, I will make a bold and a rather pessimistic prediction: We will know that health care is “fixed” when one or more of the health care giants of today go bankrupt. The trauma that is necessary to change the system will almost certainly lead to the bankruptcy of a major player in the industry. Just like the Big 3, one or several major health care players will not be able to adapt to changes in the industry, and the result will be predictable. The somewhat tricky issue here is that the bankruptcy that occurs could well be the US Government, which foots nearly 50% of the health care bill in the U.S. – the bankruptcy in the health care industry which occurs might be US.

CHANGING HEALTH CARE IS DIFFERENT – IT’S HARDER

Although there are similarities in the predicaments of the auto and health care industries, there are three major differences worth noting, none of which are going to make reform any easier.

First, there is limited foreign competition to replace and offer alternatives to an inefficient industry. Health care, especially in- patient and primary health care is almost inherently a domestic industry. Japan, India, or China cannot easily begin a strategy of exporting health care to America and provide a competitive hammer to the industry. But this trend can be hard to predict.  If a consultant would have advised the CEOs of the Big 3 in 1960 that they would be brought to their knees by Japanese companies exporting two ton cars from Japan across the Pacific Ocean, he would have been laughed out of the board room. In the high technology world of internet, ipods, blackberrys, and instant data transmission, it is not inconceivable that a cheaper, more efficient health care model could be imported into the US and provide consumers with an alternative. If this does happen, you can be sure the first persons to cry foul will be the doctors, US health care companies, and their lobbyists who, predictably, will complain about low quality, “non-approved” health care, cheaper replacements, job losses, un-American competition, etc. – the mantra that car companies have moaned about for years.

Second, the US government does not just regulate or support the health care industry – it is the health care industry – as mentioned before, approximately 50% of health care spending is through Medicare, Medicaid, and other government programs. Moreover, the rules, regulations, and reimbursement programs developed and administered by the government are incredibly complicated when compared to other private industries. So when we speak of infrastructures that need to change, we are not speaking of a board room in Detroit; we are speaking of the mother of all infrastructures – the US Government. Needless to say, changing the direction of this US battleship will not be an easy task.

Third, the health care industry by its very nature involves life and death situations. The auto industry had to deal with issues like increasing miles per gallon, faster times for 0-60 mph, and how many grocery bags could fit in the trunk. Health care involves more serious issues – which cancer drug is likely to cure a sick child, kidney transplants, strokes, and heart attacks. Health care is emotional and stressful. To affect change within this emotional environment will be much more difficult given the potential side effects if a particular policy is in error.

If anything, then, these three major differences of the health care industry, as compared to the auto industry, will make change harder not easier. The lack of  foreign competition to drive changes and to lower costs, the gargantuan bureaucracy of the US government, and the emotional issues involved all are roadblocks to change. Change will not be easy.

LESSONS TO BE LEARNED

It has been said that he who fails to learn from history will be destined to repeat it. So what can the health care industry learn from the plight of the auto industry?  In my opinion,  there are several important things.

First, what is required to fix the health care system is major surgery. The cost structure and system is fatally flawed. The auto companies cost structure was fatally flawed thirty years ago. Tweaks here and there allowed thirty years of survival for the Big 3, but they did not fix the problem. The health care companies, the insurance companies, and the US government cannot keep forcing their “SUV” solutions when what the consumer needs is a reliable, efficient, quality health care system. If rich people want to pay for big SUVs, then let them, but the average person needs good and efficient, not excessive and gaudy.

We will need to accept that this major surgery to the health care system will be painful and it will take a long time. There will be winners and losers. Jobs will be lost, salaries may be lowered, and mistakes will be made. And given the emotion and seriousness of health care, the mistakes may lead to serious consequences. Let us be prepared for these mistakes and issues. These issues that change brings about cannot reduce our desire and drive to change the system for the better. And as we are going through these painful changes, let’s not let lawyers and tort laws allow even more money to be sucked out of the system by legal confrontation. Tort reform is needed to limit damages and to let providers make the decisions necessary to cut the waste out of the system without worrying about multimillion dollar lawsuits that ultimately just add more costs to an already inefficient system.

Second, good old fashioned competition will ultimately serve the needs of the health care consumer best. Whatever the system looks like in twenty years, it must be a competitive system where individual consumers choose what is best for them. This does not mean that government cannot be involved, but government needs to develop and nurture a system which promotes competition. However, it must be noted that just introducing competition into a system which is broken is not just a cure all. The private and public health care system does have competition now, but it takes place at the wrong levels and on the wrong things. This dysfunctional competition does not focus on delivering value for money to customers, but instead motivates providers to capture more revenue, shift costs to the deep pocket, and restrict services to those who cannot pay. The competition is more about profit and revenues and less about providing value to the patient. Flawed model – flawed competition. The industry needs to develop new business models that reward quality and efficiency, not simply a fee-for-service mentality. Reform should focus on creating a system whereby providers compete directly on the six overarching “Aims for Improvement” (as identified by the Institute of Medicine) for health care. These aims are:

• Safe: Avoid injuries to patients from the care that is intended to help them.
• Effective: Match care to science; avoid overuse of ineffective care and under-use of effective care.
• Patient-Centered: Honor the individual and respect choice.
• Timely: Reduce waiting for both patients and those who give care.
• Efficient: Reduce waste.
• Equitable: Close racial and ethnic gaps in health status.

If competition is refocused along these parameters rather than just on profit and revenue, then the competition will bring value to the customer. The book Redefining Health Care: Creating Value Based Competition on Results by Michael Porter and Elizabeth Teisburg is an excellent treatise on how competition can be implemented into health care systems to drive the most efficient solutions to the consumer.

Regarding competition, it would be interesting, indeed, if a foreign competitor could begin importing health care services into the US.  I have traveled and lived extensively overseas and experienced health care in many foreign countries.  I can testify that many, many overseas providers would be more than willing to provide health care to US citizens at a fraction of the cost that is paid in the US (and this is from persons living in Western Europe – the opportunities from a low cost country like India or China must be staggering). And remember, before you get protectionist, these other countries’ health care statistics are better than ours – don’t be fooled like the automakers who claimed that your 1972 Ford Galaxy is really better than the Toyota Corolla.

Finally, the leaders of the health care industry, public and private, must focus on what Detroit did not – the needs of the consumer – what does the average citizen want and how much will he pay for it.  In too many cases, the health care industry has lost touch with its customer – the patient.  Instead, the dysfunctional system we have now has redefined the customer as the payer, which usually is Medicare, Medicaid, or a large insurance company. As a simple illustration of this, let’s assume there are two viable, equally effective procedures available to cure a patient: Medicare pays $100 for Procedure A and $1000 for Procedure B. Guess which procedure will be recommended by the Provider – the Provider will choose the one giving him more revenue (assuming more revenue generally leads to more profit). The patient won’t argue, he just wants the best treatment, and there will be an implied view that the more expensive treatment is the “better” treatment. No one is worse off except the government, and they have lots of money – right? This is a simple example, but this is how it works. There are scores of accountants, lawyers, and clinicians who are employed not to provide better care to patients, but to maximize revenue from the “customer” (Medicare, Medicaid, et al.).

The current system and structures are designed to maximize revenue and profit from the intermediaries – they are not focusing on the needs of the customer. The average person does not need the “Cadillac” of health care; the average person does not need the Mayo Clinic. The average person does not need a multimillion dollar tort settlement. The average person needs and wants good, reliable, quality health care at a reasonable cost. The average consumer knows in his heart that health care bills are too large, but that there are currently no viable alternatives for the average citizen. (There are no inexpensive imports he can turn to!) The industry leaders cannot let their existing infrastructures, inefficient practices of the past, or bloated costs and salaries be the drivers of the decision-making process. The industry cannot survive with a “if we build it, they will come” attitude. The health care industry must give the consumers what they want.

Other countries have health care systems (public and/or private) that give the same or better health care results to its citizens for about half the cost of the US. The Big 3 automakers did not survive such inefficiencies, and neither will the health care industry. Change must come or the health care industry will ultimately face the same crisis as the Big 3. Change is imperative; failure is not an option.

If Republicans Won’t Play Along on Health Care, Who Cares?

The Republicans bluffed and lost in February when they complained that the stimulus bill wasn’t “bi-partisan” enough. Okay, so House and Senate Democrats acquiesced to some of their demands, including tax cuts for businesses and removing provisions for “family planning” (the euphemism that refers to things like abortion and contraception). The Republicans responded to these concessions by voting against the bill.

Not a single House or Senate Republican voted in favor of the stimulus bill. They apparently believed that this would demonstrate to the American people their opposition to wasteful spending and fiscal irresponsibility. Trouble is, the American people didn’t much care what the Republicans thought; they’re in the midst of a financial crisis, where hundreds of thousands of jobs are being lost each month. Hell, yes, they want a stimulus!

Republicans were using a two-pronged approach to sway the public: (1) tax cuts are superior to government spending when it comes to stimulating the economy; and (2) the government is spending way too much. I won’t go into the merits of the arguments here, but suffice it to say that those were the counter-arguments to the Democratic spending bill (yes, “stimulus” = “spending.” Recall President Obama’s statement: “What do you think a stimulus bill is?”).

The public doesn’t much care for tax cuts when those tax cuts would benefit only the top earners in the country. Now, what does look like a good idea is investment in public works projects that have been long-neglected by Reaganites who believe that the government shouldn’t spend any money on anything that isn’t national defense.

Those four paragraphs were a flashback.

Interior — White House, Present Day.

President Obama is meeting with GOP leaders, reminding them that when they clamored for “bi-partisanship,” they abandoned it just as much as they accused Democrats of abandoning it. Between 2003 and 2009, Republicans were used to getting their way every time. Sure, Democrats have controlled Congress since 2007, but for some reason, Democrats spent those two years perfecting the fine arts of cowering and acquiescing. Whenever Republicans talked about “bi-partisanship,” they meant, “Give us everything we want or we’ll call you names. We’ll say you’re soft on terrorism. We’ll say you’re engaging in pork-barrel spending. And if that doesn’t work, then we’ll call you socialists and say that you hate America and want the terrorists to win. So you’d better give us all the things we demand, and if you ever try to put your own agenda forward, we’ll slap you down so hard you’d think Mike Tyson had taken Trent Lott’s seat.”

Well, the tables have certainly turned. And I’m pleased that Obama is prepared to shut Republicans out if they refuse to play ball. Hypocrisy? Not at all. I believe in universal health care. I think it’s absolutely necessary and I think it’s nothing but good. If Democrats are willing to embrace it and make it law, then I support them. When Republicans tried to stop SCHIP, I disagreed with them. It’s a matter of not only agreement and disagreement, but also of what’s good for this country. Quite honestly, the Republicans are not interested in governance. They’re interested in stalling until 2010. They want the wheels of government to grind to a halt so that they can then go back to their constituents in November, 2010 and say, “Look at what the Democrats have done for you! Nothing, that’s what! Aren’t you sorry that you voted them into office?”

And therein lies the fundamental difference: Democrats, including President Obama, are interested in doing something constructive. I will frequently disagree with the methods they use, but I largely agree with their philosophy that the government is going to need to spend money to improve the country. I agree that the wealthy should pay for the impoverished. And I agree that health care should be our right not only as citizens, but as human beings. I think the Democrats’ approach is superior to the Republicans’ approach, and that is why I believe that if Republicans are unwilling to reach an actual compromise with the Democrats, then they should be left behind. It is not the Democrats who should have to bend to appease the Republicans; the Democrats won, their ideas are better, and if the Republicans don’t want to go along with them, then it’s their own funeral. Congress doesn’t even need the Republicans.

I’m not the only one who believes this. The American people would rather the Democrats get on with their agenda instead of watering it down to please Republicans whose sanction they don’t need and whose contempt they will get in return for their efforts. In the New York Times/CBS poll referenced above, 56% of those surveyed said that they thought Democrats should stick to their policies, but 79% thought that it was Republicans who should be bi-partisan. That says a lot: not only do Americans want Democrats to do whatever it is Democrats want to do, but they simultaneously think that Republicans should do whatever it is the Democrats want to do.

Health care reform is way too important for Democrats to be chicken about. The last significant health care reform we had in this country was the prescription drug bill from 2005, which funneled a lot of money directly from the government into the hands of prescription drug companies. Sure, the bill could have included a provision for the government to use its significant bargaining power to get better deals on drugs — but then, that would hurt the drug companies’ revenue, wouldn’t it? At approximately the same time, Congress passed a bankruptcy bill that offered terrific terms for banks, credit card companies, and the very wealthy, but left middle- and low-income people in the dark.

The relationship between bankruptcy and health care is quite close; President Bush declared, in 2005, that we needed the bankruptcy bill so as to stop people from gaming the system and trying to get the rest of us to pay off their debts. To listen to him, you’d think Americans were going bankrupt after buying too many Faberge eggs. At the time he said that, though, fully half of bankruptcies in American were being caused not by frivolous over-spending, but by health-care spending. People were — and still are! — spending themselves into tremendous debt in order to stay healthy and alive. And since our health care system discourages regular check-ups, people are guaranteed to see a doctor only when the condition is serious, which means that it will cost more money to fix than it would have if a doctor had caught the condition earlier, during a regular check-up.

It shouldn’t be surprising that Republicans see health care as a political issue instead of a humanitarian one. In 1993, Bill Kristol wrote that Republicans couldn’t afford to let the Clinton health care plan survive; if it did, then the Republicans would be finished. Let me re-iterate that: to Bill Kristol, it was more important that heath care get defeated so the Democrats wouldn’t win re-election in 1994 than it was for people to have universal access to health care.

That’s what we’re up against. And that’s why I support the Democrats. And if Republicans don’t want to join, who cares? Let them explain to their constituents in 2010 about how they didn’t want those same constituents to have universal health care, all so that the free market could survive.

Car Trouble? Let’s Bail

With the struggling auto industry predicting its own demise, there has been resistance by some Republicans on Capitol Hill to bail them out. And for those of us who haven’t been comatose the past eight years, we may have a knee-jerk reaction to disagree with anything Republican. So we may think bailing them out is a good idea. But let us not be so quick to judge a policy by its opposition.

“It’s insanity,” said Libertarian Party spokesperson Andrew Davis in a newsletter released Wednesday. “It’s insane that we keep going back to the taxpayers to bailout struggling corporations who, for lack of good management and sound business practices, have become unprofitable. Who in Congress is standing up for the taxpayers?”

When talks began a month ago about bailing out the struggling auto industry, I initially felt a little better about bailing them out than, say, bailing out the financial industry. In my mind, both the financial industry and the auto industry were greedy and stupid. All they wanted was more money, and they didn’t care about any negative repercussions of getting a lot of it.  However, also in my mind was the feeling that while the financial industry was mostly greedy with a good helping of stupid, the auto industry was mostly stupid with a good helping of greedy–and for some reason, I was more sympathetic to the mostly stupid.

Like many individuals, the auto industry had the mindset–sometimes referred to as path dependency–that if it has worked in the past, why wouldn’t it keep working? So, they kept building bigger cars that got fewer miles per gallon. Then, when gas prices skyrocketed, people started buying smaller, more fuel-efficient cars. This left American automakers–who had been building half-ton trucks and wide-load Hummers–with lots full of beasts they couldn’t sell.

Production went down, sales went down, and now they’re nigh unto hopeless. Some may want to blame the American people–who wanted these gas-guzzling mammoths, especially when gas was so cheap–and say that auto makers were going where the market was. Perhaps if things had stayed where they were–with gas prices and demand and such–they would have kept doing well. But when it comes down to it, automakers were being ignorant to the reality of the situation–that people would eventually want cars that ran on alternative fuels. A lack of long-term strategic thinking left the industry too vulnerable to sudden shocks in demand.

So what Detroit needs more than billions of dollars in bailout cash is some good leadership. As has been mentioned by others, the big three automakers need a complete restructuring–not an influx of money. All of the CEOs with their private jets and their fancy suits need to be standing in the unemployment line while new, fresh, smart leaders take the reigns to save the industry.

A government bailout–the very kind these aforementioned Republicans are resisting–doesn’t allow for that to happen and undermines the principles of the American free market economy. You see, the idea of capitalism and free market-ism is that the general population should run the economy. They decide what they want to buy and whom they want to buy it from. Those organizations that make mistakes, sell bad products, or poison their customer will soon be out of business; while those individuals who make bad choices with their money–or lack of money–will soon be begging on the streets.  Every so often, in order to grow in the long run, the market must flush out its waste water. People need to suffer the consequences of their bad decisions or they’ll never learn to do it differently the next time.

But bailouts turn the government into some sort of indulgent parent: “Oh you don’t have money for that? Here let Mom and Dad pay for it. Just promise to pay us back.” And as we all know, when someone has tons of bills to pay, the last people on the list to pay back are always the parents. Just like the $700 billion bailout of the financial industry, an auto industry bailout is not letting capitalism happen. When the government steps in instead of letting the greedy go bankrupt and the stupid go further into debt, that’s not capitalism.

There’s a natural ebb and flow of the economy (this time it’s, admittedly, a large ebb and/or flow). But let people learn from others’ mistakes. Let us be able to look back on this 20 years from now and realize what went wrong and the negative consequences of those actions. Without letting these companies fail, we will create moral hazard. In other words, there will be no incentive in the future to perform better , because, no worries, the government will just bail you out!

But even if the auto bailout does pass, let’s hope that’s the first step and not the last. Money doesn’t solve everything. The only way the money will do any good is if real, radical change takes place from top to bottom. There needs to be an industry-wide shakeup, and new leadership needs to step in, step up, or step out. There needs to be accountability.

Lehman Brothers Files for Bankruptcy

After failing to find a buyer, Lehman Brothers, the 158-year old Wall Street investment firm appears ready to file for bankruptcy on Monday, according to reports. The Federal Reserve further relaxed wholesale borrowing requirements, drawing strong interest from the banks.  In order to avert a general crisis, the largest remaining investment firms have pooled over $70 billion in capital to help collectively cover their trading positions, and provide a pool of capital.

With the infusion of liquidity, Bank of America appeared close to acquiring investment brokerage Merrill Lynch early Monday. Lynch’s stock had fallen nearly 2/3 for the year, and BoA found the firm an attractive target. Look for consolidation to continue, as a number of remaining firms such as the insurance firm AIG still face uncovered future debt obligations, requiring further capital inflows. Just when it appeared the financial markets were beginning to settle down, an entirely new chapter begins. Black–Scholes be damned…