There has been a lot of talk recently about government bailouts.
With the coronavirus shutdowns and lockdowns in full swing, it is a bleak time for the Australian economy and the ASX companies that underpin it. Many industries have shuttered or closed entirely and many more are trying to scrape by with reduced turnover, consumer interest and the new restrictions on social distancing.
But some companies simply aren't in a position to just 'go into hibernation'. Bills still have to be paid and equipment still has to be serviced.
We have seen an example of this just this week with Virgin Australia Holdings Ltd (ASX: VAH) going into voluntary administration after the federal government refused to offer the company a full bailout.
Many commentators and politicians have been questioning this move. Companies employ people, after all, and it's the employees who arguably have the most to lose from a company going out of business.
So should the government bailout companies in this crisis in order to save jobs?
In or out on ASX bailouts?
Well if it were normal times, the answer most people would give would be a hard no.
Bankruptcy is a nasty thing, but it's an integral part of the capitalist system we choose to live with. Astronaut Frank Borman once said that "capitalism without bankruptcy is like Christianity without hell" – which is a blunt but inarguably honest perspective.
Government bailouts are financed with taxpayer dollars, the precious money we all pay to contribute to a functioning society. Many taxpayers might not feel comfortable with their money being used to intervene in a free market.
But, as mentioned earlier, we are not in normal times. We are facing an unprecedented crisis – one which is hurting some sectors far harder than others through no fault of the sectors in question. Is it fair that Qantas Airways Ltd (ASX: QAN) and Virgin are struggling whilst Woolworths Group Ltd (ASX: WOW) is not? Not really.
Yes, maybe Virgin and Qantas should have had more capital put aside for an emergency. But their current woes can't be completely blamed on management decisions. And there are thousands of jobs on the line.
As you can see, there are a lot of perspectives and values to weigh up here. Over in the US, debate still rages about whether the government should have saved the businesses it did in the GFC.
Sometimes there are no right or wrong answers to tough questions!
