The global economic crisis was brought on by excessive, speculative risk-taking by major financial institutions in North America and Europe, including AIG. However, when they faced collapse for their exposure, it became clear that it was difficult to successfully wind them down, without dire consequences to the economy. They were “too big to fail”, and thus governments were forced to spend hundreds of billions to bail them out. Binham (2015), shows that while it is possible to force these companies to put aside more capital, the incentive for morally hazardous risk-taking still exists, since these institutions know they will fall back on the taxpayer in the event of failure. Even most importantly, given the information asymmetry enjoyed by these firms, given their expertise in the industry and access to customer and other information relative to the regulators, the behavior will inevitably continue. This article includes regulatory measures to reduce the moral hazard, including tighter debt-to-income ceiling, loan-to-value limits and breaking up of large businesses to reduce their effect on the economy in the event of failure.
Income/wealth inequality continues to be a problem not only in the US but also across the world. This article makes a valid case to move away from state-driven redistribution that may prevent a costly welfare state and encourage greater equity. It is refreshing to learn of thriving worker ownership enterprises in the country, including some programs by some of the most successful and respected firms in the world. I however think that more worker ownership is simply newly fangled socialism that would kill entrepreneurship, motivation and hard work in the country, which will ultimately lead to stagnation such as has been evident in Cuba. Even the examples offered by the article ignore important realities. Regardless of any forms of profit sharing or shared ownership, gaps between shop floor workers and top managers/owners remain, and these will simply create more inequalities. I think the idea of a nanny state is not as bad as conservatives want it to be, for there are countries in Scandinavia that have huge welfare programs and are thriving. Further, I think the real reason as to why worker ownership will never catch on, is because it suffers from practical issues. Companies today as struggling with mounting pension liabilities, and it would be worse if every employee that worked for a firm left with a share of it, unless this is supported by massive and infinite growth.
I think it is plausible that if everything can be produced cheaply and in large quantities due to technological advancement, then its prices would fall considerably. If 400-carat diamonds can be mined for $1 because of better technology, then their price should be negligible. If this can happen to every good/service, then scarcity can be overcome. However, the most interesting thing about this article and idea of a mode of production without scarcity is how familiar it is. It is the central tenet, and last stage of man’s evolution from the primitive stage to communism. This is predicated on the elimination of exploitative capitalism so that labour earns all its value, the abolition of governments, end of exploitation, and ownership of monopolies. I believe an economy such as this would fail because many productive activities such as programming are not recreational. Without the motivation for people to be productive, the very process of human advancement would stagnate, which would once again generate scarcity.
Binham, C. (2015, July 14). Public still likely to pay out for bank failures, warns Carney. Retrieved July 18, 2015, from Financial Times: http://www.ft.com/cms/s/0/901ea05a-2a4a-11e5-8613-e7aedbb7bdb7.html#axzz3gF77O0IN
Harwood, M. (2014, Sept 11). Why co-ops are the future of the American economy: Congress should boost worker ownership over corporate subsidies. Retrieved July 16, 2015, from Aljazeera: http://america.aljazeera.com/opinions/2014/9/why-co-ops-are-thefutureoftheamericaneconomy.html
Wikipedia. (n.d.). Post-scarcity economy. Retrieved July 18, 2015, from https://en.wikipedia.org/wiki/Post-scarcity_economy