Bailouts

This bone of contention has been picked clean many a time. Fundamentally though, we must clarify two critical axes.

  1. Is it necessary?
  2. Can it make enough money to fund itself perpetually?

If it is not necessary, we should cut our losses and let the unnecessary entity die. Sure, there will be fall-out and unhappiness. In the long run, it is better to make space for something new than to create an artificial environment to sustain it. This only drains resources.

If we can answer both questions yes, then the bailout should be a once-off event aimed at creating the efficiencies and frameworks that enable the reality of question 2. This could include changes in legislation, management, privatisation, etc.

If it is necessary but cannot sustain itself, it should be budgeted in the fiscus as an expense. Certainly, this requires efficiency and governance practices of the highest order. It is a necessary evil and should be viewed as an asset because of whatever the answer to question 1 is. If it is able to generate revenue streams, this should be used to offset the shortfall in the budget. Any contribution in this respect should be viewed as a positive outcome since it alleviates pressure on the budget, instead of the other way around.

We cannot accurately ascertain the legitimacy of a bailout without first understanding the purpose of the organisation.

The artificial protection of jobs, however, is a long term trade-off for a short term win.

Arie Wubben

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