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Capitalists or Cronyists?

Scott Galloway@profgalloway

Published on April 10, 2020

7-min read

Lenin said nothing can happen for decades, and then decades can happen in weeks. Yes, a pandemic pulls the future forward, and there’s a lot to learn. Another phenomenon that forms rain clouds of perspective is, wait for it … death. Or, specifically, being close to it.

My father is approaching 90, recently divorced (for the fourth time), and spends his days watching replays of Maple Leafs games and abusing Xanax. His affinity for Xanies is a feature, not a bug, since at the end of your life “long-term effects” lose meaning. He’s near the end, exceptionally intelligent, and high. In sum, he’s my Yoda.

Our calls are mostly me yelling short questions (“HOW ARE THE LEAFS LOOKING FOR NEXT YEAR?”) and waiting for something profound in return. Occasionally he delivers.

“You must unlearn what you have learned!”

Just kidding, Yoda did actually say that. But when I asked him what he thinks makes America different, he said:

“America is a terrible place to be stupid.”

That’s why he immigrated here. A pillar of capitalism is you can’t reward the winners without punishing the losers. I worry our government has been co-opted by the wealthy and is focused on protecting the previous generation of winners, even if it means reducing future generations’ ability to win. Aren’t we borrowing against our children’s prosperity to protect the wealth of the top 10, if not 1, percent?

In Depression-era Scotland, my dad was physically abused by his father. His mother spent the money he sent home from the Royal Navy on whiskey and cigarettes. He took a huge risk and came to America. My mom took a similar risk, leaving her two youngest siblings in an orphanage (her mom and dad had both died in their early fifties), and bought a ticket on a steamship. She had a small suitcase and 110 quid that she hid in both socks. Why? Because they wanted to work their asses off and be rewarded for the risks they were willing to take. This is capitalism, a beacon of hope for people who are smart, hard working, and comfortable with risk, promising a greater share of the spoils than those who are not.

However, no more. Modern-day “capitalism” in America is to flatten the risk curve for people who already have money, by borrowing from future generations with debt-fueled bailouts for companies. We have consciously decided to reduce the downside for the wealthy, thereby limiting the upside for future generations.

CNBC guest: Equity holders deserve to get wiped out.
CNBC host: Why does anybody deserve to get wiped out in a crisis like this? This is a natural disaster, why does anybody deserve to get wiped out? Wouldn’t that be immoral in and of itself?

“Immoral,” here we go. Morality for CNBC, and the current administration, is not capitalism but the worst type of socialism, cronyism. Rugged individualism and capitalism on the way up, privatizing the gains — and then socialism/cronyism on the way down as we socialize the losses with bailouts.

Red Envelope

In 1999, the firm I co-founded, Red Envelope, was drafting an S-1 in anticipation of an IPO. At 31, I stood to register $30-60 million on the IPO. The bursting of the bubble damaged us, but the injuries weren’t fatal, and we were the only retail IPO of 2002. In 2008, a longshoreman strike left all our holiday merchandise hostage on a cargo ship 8 miles off the shores of the port of Long Beach. Then, as the credit crisis began to take hold, a prescient analyst at Wells Fargo decided to pull our credit facility. Within 90 days we were Chapter 11. That event, combined with divorce, reduced my net worth 97%.

I didn’t deserve to lose near-everything. What happened wasn’t my fault — ok, maybe the divorce. Regardless, was this fair or (im)moral? Just as there’s no crying in baseball, there’s no fairness in shareholder accretion or destruction. Looking at jets at 31 wasn’t moral or fair either. So, what happened? Exactly what’s supposed to happen in a market economy — downside registered against commensurate upside.

Red Envelope went through something also uniquely American … and productive — bankruptcy. The equity holders (e.g., yours truly) were wiped out (#bummer). However, we did our duty as board members and found a buyer, Liberty Media, who paid our vendors and kept the employees. No job loss, all debtors paid. When a 31-year-old is shopping for jets in November, part of the agreement with the invisible hand is he may lose most/all of it by March. There’s a word for that … capitalism.

The capital structure of private firms is meant to balance upside and downside. CNBC/Trump want to protect current equity holders at the expense of future generations with rescue packages that explode the deficit. They also want to protect airlines, who spent $45 billion on buybacks and now want a $54 billion bailout, disincentivizing other firms (e.g., Berkshire Hathaway) that have built huge cash piles foregoing current returns.

The rescue package should protect people, not businesses. From 2017 to 2019, the CEOs of Delta, American, United, and Carnival Cruises earned over $150 million in compensation. But, now … “We’re in this together” (i.e., “bail our asses out”).

And what happens if they (gasp!), go out of business? Simple, the equity holders, and unsecured debt holders, get wiped out. These are the cohorts who, despite the recent meltdown, have registered a 3.3x increase in the Dow since the lows of 2008.

As long as they keep making old people, and younger people want to take their kids to Disney’s Galaxy’s Edge, there will be cruise lines and airlines. Since 2000, US airlines have declared bankruptcy 66 times. Despite the obvious vulnerability of the sector, boards/CEOs of the six largest airlines have spent 96% of their free cash flow on share buybacks, bolstering the share price and compensation of management … who now want a bailout. They should be allowed to fail. Bondholders will own the firms. Ships and planes will continue to float and fly, and there will still be a steel tube with recirculated air waiting for you post molestation by Roy from TSA.

The Lie

Trump/CNBC have adopted a narrative that this is about protecting the most vulnerable. No, it’s about buttressing the most wealthy. Pandemics typically result in higher wages over the next several decades as we recognize that essential workers (the gal/guy delivering your Greek yogurt and placing your Indian food in the backseat of your car) should be paid more. A good thing.

Letting firms fail, and share prices fall to their market level, also provides younger generations with the same opportunities we, Gen X and boomers, were given: a chance to buy Amazon at 50x (vs. 100x) earnings and Brooklyn real estate at $300 (vs. $1,000) per sq. ft. Just as we pretend our service men and women are heroes, and then treat them like chumps, CNBC advertisers and Peter Navarro want to pretend they give a sh*t about younger generations so they can protect the wealth of old people and management/advertisers. Enough already.

Earlier this week, I was on MSNBC with an early Uber employee, who reminded us, “We’re all in this together.” What bullsh*t. My guess is this executive registered $10-100 million in equity crafting software that figured out an elegant way to pay their 3.9 million “driver partners” less than minimum wage, ensure Uber isn’t obligated to provide them with health insurance, and avoid paying payroll taxes to adequately fund the CDC. But Dara Khosrowshahi and his several-hundred-strong comms department wrote a compelling letter to the government urging them to help his driver partners.

Dara, pay your “partners” before picking up the pen again.

Walking the Walk — PPP

We recently founded Section4, a firm attempting to disrupt graduate business education. We offer online business/strategy sprints that aim to provide 30-50% of my classes at NYU Stern for 7% of the price. We are eligible for some of the $350 billion federal PPP program. With a modest amount of paperwork, in 7 days or less, we’d receive a loan for approximately $250,000. If we don’t lay off any employees, most of the loan would likely be forgiven. This is meaningful cabbage for us.

We are not going to apply for the program.

Our backers are wealthy, and if we can’t make this work — pandemic or not — then we don’t deserve to be in business. Yeah, our demise wouldn’t be our fault, nor is most success. Like steroids for the body, the moral hazard of government assistance only leaves the economy less healthy in the long run.

Just as death is a key part of life, so is the demise and reinvention of firms that can’t endure tropes. Covid-19 is no more historic than an 11-year bull market. With dangerous disregard for future generations we’ve decided that hundreds of thousands of people dying is meaningful, but the NASDAQ going down would be worse. The rescue package is $2.2 trillion. The annual CDC budget — $6.6 billion.

We. Have. Lost. The. Script.

To be clear, socialism may be a better way to go, as evidenced by the study showing 4 of the 5 happiest nations are socialist democracies. However, unless we’re going to provide universal healthcare and universal pre-K, let’s not embrace The Hunger Games for the working class on the way up, and the Hallmark Channel for the shareholder class on the way down. The current administration, the wealthy, and the media have embraced policies that bless the caching of power and wealth, creating a nation of brittle companies and government agencies.

The terrible thing about crises is they always happen. The wonderful thing is they always end. As we fight to bring this crisis to an end, let’s re-embrace capitalism and foster a future generation of leaders and firms that are soldiers, not hoarders. Yes, America is a terrible place to be stupid. It will be a worse place if we replace capitalism with cronyism.

Life is so rich, 

P.S. What happens when universities send tuition bills for $68,000 to host a bunch of marginal Zoom classes? Catch episode 4 of the Prof G Show on Apple, Spotify, or wherever you listen to podcasts.



  1. Jeffrey Isaac says:

    This is a wonderful thought out piece- with two exceptions.
    1. The graph of wealth owned by different classes excludes the growth in the total wealth. In other words, it’s OK to get a smaller piece of the pie if the pie grows large enough. PEW also noted that the middle class has shrunk over time with virtually all of it having migrated to the upper class. I have frequently seen this used to show that our shrinking middle class is bad when in fact- in this case- its great as more people are now in the upper class.
    2. This article rightly points to the crony capitalism of socializing losses during the Trump Administration- and now with Biden- the proposed bailouts are much, much larger.

    Apparently- Progressive Democrats believe that good intentions suspend the laws of supply and demand when it comes to minimum wage and dollar devaluation. Nothing robs more from the middle and lower class than inflation which occurs over time by excessive government spending.

  2. Shelley Wolinsky says:

    You are the smartest person I have ever agreed with.

  3. Chris Marlett says:

    Well done synopsis of the dysfunction of human nature and cycles! We will get to that socialist democracy with some pain as we transition away from living off our past glory. New countries will become what the US was of old.

  4. Marc Oliver says:

    Small business owner. The pandemic hit and my town closed all retail except the big box retailers. To Scotts point, govt selected the winners. I’m lucky, I aggressively paid down debt and was able the weather the storm but many local shops couldn’t afford to be closed for 2 months. Had Govt provided direct aid to individuals and let them support who the wanted we’d be much better off.

  5. Ramdas Sunder says:

    8 months late to comment, but this rings so true to me. I was bereft of words to explain to myself why every single airline balance sheet was not just wiped clean of any form of equity or junior debt, all senior debt converted to equity, and THEN made eligible for Govt rescues in exchange for the Govt taking a 25% share of all airlines that would be put in an ETF and IPO’d 12 months after the pandemic ended. And then I remembered that we’d seen this movie before in 2008. Giveaways are so much easier.

  6. Barry Shoor says:

    Too big to fail … I enjoyed your take on capitalism however cronyists seems like a reach. Cronyism is everywhere and does not care a bit about government policy. Companies that fail under pressure from the “co” most likely will fail eventually even with Uncle’s help. However providing a temporary safety net for employers and their employees from a plague like this is part of any government role … again doesn’t matter whether it’s Capitalism or Communist. Although Capitalism has shown to be far and away more effective in helping out society. Innovation and education are the keys and any business that does not adapt is eventually going to fail and should. That is Capitalism at its best!

  7. Duh says:

    Capitalists are cronies. That’s how capitalism works.

    • Eugenia Patriniche says:

      Socialists are cronies too. It’s about people and their attitudes and behaviours. Most people don’t have a Northern European approach to life.

  8. mark filipski says:

    Love this article. Well written and thought out. Good luck with your new venture prof g. It reminds me of echo360

  9. Steve says:

    This is a very clever advertisement. Written to sound inflammatory and flippant, it has very little substance. There’s a false equivalence of “socialism” with “cronyism” that runs trippingly into a full-throated roar for capitalism. You end with a weak ass “tbh, socialism might be better, someone should look into that hmm” followed by one final “ra ra capitalism”!! Also congrats on your VC-backed startup. 1. Cronyism has nothing to do with socialism. Cronyism is featured in every government, all around the world. Also, why are you writing this *now*? “Cronyism” is about appointing your “cronies” to positions of power. “Cronyism” isn’t about bailouts per se. 2. “Future generations” don’t have to “pay back” deficit spending. Learn how a monetary sovereign works. 3. “Let big companies take the hit” at first *sounds* like you’re echoing the working-class cry, but it also kinda sounds like “well MY company had to file for bankruptcy—so should theirs! 😭” 4. How *precisely* does letting big companies go bankrupt help anyone? It makes property values go down? It reduces wealth inequality (by wiping out the wealth of a few of the wealthy)? The outcome of this is either a competitor purchases them (contributing to monopolies), or they shutter and everyone is out of a job. Both outcomes sound super great for our economy! 5. If I were one of your investors, I’d be furious to learn that you’re not going to apply for the PPP. Actually, I bet you *did* apply for it and *did* get it. No reason for you to be honest to your marks you’re trying to sell a bogus business education to. I take it all back—if I were one of your VC’s, I’d be super proud. You cast a convincing spell for Level 4 Susceptibles, defend Capitalism’s honor, and shit on socialism all in one beautiful piece.

  10. mackinac says:

    Socialism sounds great in this context however the problem is the leaders of socialism are/will provide the same cronyism. In capitalism, as described, you need to be smarter and more cautious to get ahead. When you have entrenched entities their leaders know how to milk the system, like airlines asking for bailouts after borrowing near zero rates to pay themselves via stock options. That is a hole that needs to be plugged. Bailing out the bond market and stock market with public funds is another hole that needs to be plugged. It’s not hard to plug these holes but it takes voters to be calling their representatives saying you either plug this hole or you are out and mean it. Right now it seems like socialism is saying the right thing and maybe it’s best to make that change now. However look at Xi. He is supreme. That is socialism at its extreme. Do you want to live under that? Big changes politically mix things up for the better because it reduces cronyism for a while. Maybe that’s what we need but how far will it go?

  11. Henry Luepke says:

    This is very good. Clear analysis. My comment-I was thinking this morning… It seems to me that, with a $2T government handout when faced with a well known risk coming to fruition, capitalism has been abandoned, officially, and must now be pronounced dead, officially. R.I.P.

  12. Steve Bowser says:

    Thank you for your thoughts, they are compelling. I find myself wondering about your first chart and the historic income mobility the US financial system has provided its citizens. It would be helpful to also see how the relative size of each each income group has changed over the past 40 years.

    • Kevin says:

      income mobility has gone down in the US (now lower than most European countries). And how exactly does “the US financial system” provide opportunities for earning more than your parents? Oh, you must mean the con about winning a fortune through the stock market!

  13. John G says:

    exactly – going back to Adam Smith “Wealth of Nations” – borrowing from wikipedia as it uses modern english – he Specifically warns against monopolies and tie-ins between government and big business. Yet here we are – still pretending it’s capitalism rather than “cronyism” Self-interested competition in the free market, he argued, would tend to benefit society as a whole by keeping prices low, while still building in an incentive for a wide variety of goods and services. Nevertheless, he was wary of businessmen and warned of their “conspiracy against the public or in some other contrivance to raise prices”.[89] Again and again, Smith warned of the collusive nature of business interests, which may form cabals or monopolies, fixing the highest price “which can be squeezed out of the buyers”.[90] Smith also warned that a business-dominated political system would allow a conspiracy of businesses and industry against consumers, with the former scheming to influence politics and legislation. Smith states that the interest of manufacturers and merchants “in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public … The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention.”[91] Thus Smith’s chief worry seems to be when business is given special protections or privileges from government; by contrast, in the absence of such special political favours, he believed that business activities were generally beneficial to the whole society: The “invisible hand” only works well when both production and consumption operates in free markets, with small (“atomistic”) producers and consumers allowing supply and demand to fluctuate and equilibrate. In conditions of monopoly and oligopoly, the “invisible hand” fails.

  14. wilt agarn says:

    There would be not happy and FREE social democracies if the USA military did not protect their asses.

  15. Robert McMahon says:

    Ok, while I enjoy the writing, this seems a bit shallow of an analysis and plays on the obvious of “no share buybacks!!” It assumes all businesses are publicly traded corporations. It mentions nothing of the impacts to the federal PBGC and pensioners when these companies go through bankruptcy. (Saving GM in 2008 was a good thing for the tax payer.) It assumes all these bankruptcies are chapter 11 vs 7 and that they remain as going concerns. A lot of writing for a little of information content (the opposite of a good poem.)

    • David W. Young says:

      Beg to differ on the bail-out of GM being a good thing for the vast majority of American taxpayers that were not GM employees or retirees! The U.S. Treasury lost $8 Billion on the resale of sequestered GM shares, losses not the same as gains from my accounting days; another government bail-out at the expense of taxpayers who would have loved “check in the mail” on that one. GM should have been allowed to restructure in 2009 into the much, much smaller company that its market share/product line demands with far fewer car lines that it will inevitably turn into in the years ahead.

  16. Levi says:

    4/5 happiest socialist democracies? Hey man, 5 out of 5, we of the NL are also social dems, while also being the 4th most competitive economy of the world while at it (USA nr 2) woohoo, so much for ‘socialism’ here. Best healthcare of Europe too, and therefore of the world. While the USA probably has the best hospital somewhere in there for your richest, we only have good ones, and pay less per person for it. It’s pretty great, you should try it.

    • Chris says:

      Hey Levi, I’ll take your word about the quality of Dutch hospitals, but I suggest you don’t put down the quality of the entire US healthcare system in one fell swoop. Especially if you haven’t experienced it (or have you?). I’m glad you’re proud of your country’s hospitals- and, sure, you have your reasons, but seriously – stick to what you know, not what you’ve read in someplace. there’s no need to make disparaging generalizations about the US (or any other) healthcare just because you’re happy with yours. I’m positive the Germans across the border will tell you they have the best healthcare in Europe….

  17. Jonathan says:

    Try rereading the first seven paragraphs, and when you hit the phrase “watching replays of Maple Leafs games”, draw the reasonable conclusion that you and he are in Canada. That completely changes the meaning wrt “America”, and the reader doesn’t begin to properly realign perspective until the eighth paragraph. Just saying.

    • J says:

      Galloway doesn’t live in Canada. His father watching The worst team in the NHL doesn’t make him Canadian.

    • Jo says:

      You reread the first 7 paragraphs but couldn’t put in a few seconds to open a new tab and type “Scott Galloway” on a google search to see he’s an American?

  18. Andrey says:

    Very well summarized what (one would hope) majority of “non-stupid” will be remembering for long after it is over and next and next and next elections are coming…

    • Guy says:

      Every 4 years, choose “lesser of two evils”. Put up with all the stupidity until next circus. Repeat.

  19. RTNL says:

    More power to YOU, Prof. Galloway! Right on!!

  20. Jeff says:

    Couldn’t agree more. But it’s going to take a war to win back the culture from these criminals.

  21. Jake says:

    I’m 32 and co-own a successful business I bootstrapped when I was 26. This is my first time reading your blog and I could not agree more. My experience running my company has made me believe I am playing a completely different game than the wealthy. There’s really no bailout for us, the PPP money will help us survive but it’s the adequate cash on hand we kept, envisioning a downturn, that will make the difference. These large firms did exactly what we knew we did not want to do, which is rapaciously expand during what was clearly the high water mark of the economy. Firms that can only stay solvent if everything continues exactly like it did yesterday do not deserve to be in business–this is business 101. Unfortunately the current generation in power–baby boomers–coddled by decades of right wing politicians telling them they have a God-given right to maximum profits and cheap goods just do not have any sort of concept of greater good and are trashing the system that brought prosperity without a care for future generations.

    • Van says:

      The boomer generation is a cohort of 75 million give or take. The vast majority have no power. A significant number saw the writing on the wall as early as 1965 when they saw the silent generation getting shafted (read Susan Faludi’s Stiffed). A generation has no agency. Individuals have agency. Your argument is with them and it’s entirely possible to name names and give addresses. In many cases we even know how much wealth they stiffed society for. You cannot take action against a generation practically or with any degree of fairness so your complaint is impotent. You can take action against known individuals. Citizenship is a public office. Fill it.

  22. dwrawlings says:

    It always makes me laugh when I see countries like the Netherlands and Denmark described as ‘socialist’ – both are regularly rated as amongst the best places in the world to do business, and have a trading history going back centuries. That having been said, the essential point above is absolutely right – government focus should be on creating an environment that is business friendly, not being best friends with your favourite businesses. And the corollary is effective antitrust policy, and area where the US has also been losing ground.

    • BvB says:

      In the case of these two countries “socialist” doesn’t refer to the opposite of capitalist, they both have rich trading and business markets. It refers to the social foundation of legislation and support available to those people unable to support themselves (financial support, health, pension, etc.). You work for your own profit and success but if you somehow can’t then there is a fallback provided by the community to ensure you can live a basic life.

    • Farah Islam says:

      @BvB Exactly. What interests me is how in countries like the US the fallback is seen as “unfair’ and somehow undeserving. Why should “they” get help when ‘I’ve’ worked so hard syndrome. This is the cultural lock in that needs to change. The media and business narrative promotes it and strangles social progress and real economic prosperity.

    • Robin says:

      @Farah Islam And that works particularly well by building on a false assumption that the ‘they’ are primarily minorities.

    • Chris says:

      I have the highest respect for The Dutch, Danish, etc. economies. I hope they stay as healthy and competitive as possible for as long as they can. I truly do. But I do think 1) their case isn’t very replicable – or more places in Europe would be like them, and they are in a tiny group that somehow never gets bigger; I’m disappointed buyer it’s just a fact. 2) despite their economic successes and happiness on a individual level – are these happy individuals that confident and happy about their long term economic competitiveness? Just saying.

    • Chris says:

      I am totally for more capitalism free of cronyism. And my country (US) needs to clean some things up – as Prof Galloway deftly points out. But to the displeasure of my European friends – I would never choose the Scandinavian model over the American one. Elon Musk who is a South African of Jewish descent must have reached the same conclusion. He didn’t go to Amsterdam, Stockholm, Tel Aviv or even London. He chose to go to the US, all things considered. That choice tells you all you need to know which model is most attractive to talent and ambition. Galloways dad is right – America is a terrible place for stupid people.

    • Lucas says:

      @Chris What the hell are you talking about? There are plenty of examples across Europe of how well this system works. It’s not *just* the Dutch or Danish, it’s the Germans, Swedes, Finns, Norwegians etc too, and Europe as a whole has much stronger social safety nets than the US. There are no questions as to whether this model works or not, it is clearly proven to work and has worked for a very long time. Pure, unregulated capitalism on the other hand…all that does is concentrate wealth at the top and create a ruling capitalist class that gets richer and more powerful as time goes on, which is extremely evident by looking at history. No system is perfect but a social democratic system has proven to be the best one (and most balanced) so far.

  23. Nicholas says:

    Agree – focus any economic stimulus on people, not businesses. Bring in a death tax to redistribute beyond the grave. Ban governments/cities from ‘incentivising’ companies – the ‘red light district’ of government. Any company that is ‘too big to fail’ must be broken up. Society can’t be beholden to companies riding on a one way street.

  24. John Rodgers says:

    During the 1920s, the U.S. stock market underwent rapid expansion, reaching its peak in August 1929 after a period of wild speculation during the roaring twenties. By then, production had already declined and unemployment had risen, leaving stocks in great excess of their real value. Other causes were low wages, the proliferation of debt, a struggling agricultural sector and an excess of large bank loans that could not be liquidated. This looks a lot like what we are seeing today. Overvalued stocks partially due to buybacks, low wages, excessive debt, unemployment greater than 13 % and struggling businesses. It is past time to rethink what type of country we aspire to be. Corporate greed and cronyism in the White House and Senate is the problem.

  25. SueWhite says:

    What is happening today is always the logical conclusion of capitalism. You can reform it over and over, and it will still slouch toward hoarding, it depends on cronyism to work as it reaches that conclusion. Time to change the script. For real though not just nibbling around the edges.

  26. Marco Trusseau says:

    We’re not going to get ANY change from a second Trump term, at least not in any positive sense. We may not even get any MEANINGFUL change from a Biden administration, unless WE DEMAND IT.

  27. Lane says:

    Agree with Benjamin below. Let’s hope Scott makes it onto the Fox News platform and watch the sparks fly

  28. Richard Laska says:

    America Needs a National Debt Holiday In the throes of the Great Depression, Americans who had lost faith in the economy were running to their banks to withdraw their savings. The result threatened to mortally wound the entire financial system. To stop the run on banks, then-President Franklin Roosevelt declared a short ‘Bank Holiday’. Banks were closed, panic subsided, the banking system survived and life went on. Today we are faced with a similar disaster. Again, it is the creditors — those owed money — who are the driving force behind the panic. People who don’t have jobs, and companies which are forced to close, are still expected to pay their rent or mortgages. No income means no ability to pay credit card charges. No business means no ability to pay monthly rental on purchased equipment or leased space. As a result, the entire credit system, including retail commerce, is on the verge of collapse. If, as expected, the economy will shut down for a few months, credit scores will plummet, commercial space and homes will be foreclosed and masses of cars and other capital equipment will be repossessed. A self-inflicted wound on the economy. Even when the economy picks up again, consumers and businesses will be burdened with overwhelming debt accrued while they were closed or out of work. The result? A tsunami of bankruptcies. None of this is necessary. And most of it will achieve nothing but chaos. With the courts curtailed and law enforcement preoccupied evictions are impractical. Will our nation’s scarce resources really be used to throw people and businesses out in the street? Of course not. So long as mortgage, rent and loan payments consume the vast majority of income, no form of stimulus package can cover all, or even most, of these outstanding debts. The only practical way out of this quandary is to declare a ‘Debt Holiday’ for the duration of the national economic shutdown. A Debt Holiday would cover just about every form of recurring debt. For the duration, rents, loans, mortgages, leases and credit card payments would be put on hold. To keep the accumulating arrears from crippling recovery, the amount due would not accumulate. Debt collection would simply be in suspension. This will cause some hardship on the part of the lenders, but nothing compared with the disaster they, and the entire economy, would face if millions of debtors were forced into bankruptcy and millions more excluded from the consumer economy by overwhelming debt payments. Like America in 1933, the nation is in uncharted economic waters with unprecedented threats to our stability. Subsidies and direct payments are treating symptoms. To recover with a minimum of long-term damage, the economy needs an induced period of financial inactivity for the duration. Anything less determined and our economy will be crippled by this crisis for the next two decades.

  29. Richard Laska says:

    America Needs a National Debt Holday In the throes of the Great Depression, Americans who had lost faith in the economy were running to their banks to withdraw their savings. The result threatened to mortally wound the entire financial system. To stop the run on banks, then-President Franklin Roosevelt declared a short ‘Bank Holiday’. Banks were closed, panic subsided, the banking system survived and life went on. Today we are faced with a similar disaster. Again, it is the creditors — those owed money — who are the driving force behind the panic. People who don’t have jobs, and companies which are forced to close, are still expected to pay their rent or mortgages. No income means no ability to pay credit card charges. No business means no ability to pay monthly rental on purchased equipment or leased space. As a result, the entire credit system, including retail commerce, is on the verge of collapse. If, as expected, the economy will shut down for a few months, credit scores will plummet, commercial space and homes will be foreclosed and masses of cars and other capital equipment will be repossessed. A self-inflicted wound on the economy. Even when the economy picks up again, consumers and businesses will be burdened with overwhelming debt accrued while they were closed or out of work. The result? A tsunami of bankruptcies. None of this is necessary. And most of it will achieve nothing but chaos. With the courts curtailed and law enforcement preoccupied evictions are impractical. Will our nation’s scarce resources really be used to throw people and businesses out in the street? Of course not. So long as mortgage, rent and loan payments consume the vast majority of income, no form of stimulus package can cover all, or even most, of these outstanding debts. The only practical way out of this quandary is to declare a ‘Debt Holiday’ for the duration of the national economic shutdown. A Debt Holiday would cover just about every form of recurring debt. For the duration, rents, loans, mortgages, leases and credit card payments would be put on hold. To keep the accumulating arrears from crippling recovery, the amount due would not accumulate. Debt collection would simply be in suspension. This will cause some hardship on the part of the lenders, but nothing compared with the disaster they, and the entire economy, would face if millions of debtors were forced into bankruptcy and millions more excluded from the consumer economy by overwhelming debt payments. Like America in 1933, the nation is in uncharted economic waters with unprecedented threats to our stability. Subsidies and direct payments are treating symptoms. To recover with a minimum of long-term damage, the economy needs an induced period of financial inactivity for the duration. Anything less determined and our economy will be crippled by this crisis for the next two decades.

  30. Benjamin R Stockton says:

    I saw Scott’s interview with Stephanie Ruhl; powerful stuff and hopefully will galvanize minds…

  31. Andrew Opala says:

    I was at the Leafs practice facility recently I heard an announcement on the PA, “Would Mrs. Henderson please come and get her boys off of Rink B. They are beating the Leafs 3-1.”

  32. dan says:

    my comments don’t work without formatting which apparently isn’t available here. I would agree that my comments look like the rantings of a madman but its all in the formatting. I tried to change but no luck. I guess the world will suffer without my divine insight

  33. dan says:

    Mr. Galloway is absolutely right. This is wholesale looting at the highest levels of Power in the United States. All pretense of restraint is gone now. What can now be the argument against printing money to alleviate poverty? If you don’t understand why the former is a rhetorical question please don’t comment. I believe there is a Coronavirus and I do not believe that the response in Manhattan is appropriate for the response in Ottawa County Michigan. I’m sick of hearing “Stay Safe” “The state must declare the child to be the most precious treasure of the people. As long as the government is perceived as working for the benefit of the children, the people will happily endure almost any curtailment of liberty and almost any deprivation.” ― Adolf Hitler “My number one priority is keeping our kids safe and protecting the health of the people of Michigan.” — Gretchen Whitmer Thanks, Dan

  34. dan says:

    Forgot in my previous- working poor are being hurt the most.

  35. dan says:

    Mr. Galloway is absolutely right. This is wholesale looting at the highest levels of Power in the United States. All pretense of restraint is gone now. What can now be the argument against printing money to alleviate poverty? If you don’t understand why the former is a rhetorical question please don’t comment. I believe there is a Coronavirus and I do not believe that the response in Manhattan is appropriate for the response in Ottawa County Michigan. I’m sick of hearing “Stay Safe” “The state must declare the child to be the most precious treasure of the people. As long as the government is perceived as working for the benefit of the children, the people will happily endure almost any curtailment of liberty and almost any deprivation.” ― Adolf Hitler “My number one priority is keeping our kids safe and protecting the health of the people of Michigan.” — Gretchen Whitmer Thanks, Dan

  36. Shosho Oshiafi says:

    Hi Professor. Very objective analysis there. Good medicine most times tastes bitter. And you have laid it out bare pulling no punches. We understand the president is doing all he can to secure a return ticket, thus all the bending over backwards to ‘protect’ jobs. Just like a large body of water discharged from the shores under the guise of land reclamation, the economic catastrophe caused by backlash from the tides is going to be massive.

  37. carlos Luis Vassallo says:

    Abosolutely a brilliant analysis!

  38. Chris says:

    Bob Dylan wrote “you gotta serve somebody”. Who’s serving who? An alternate title for Scott’s piece could be “Adam Smith’s Invisible Hand Job”

  39. Samuel C King says:

    You act like past administrations are not just as guilty as this one. You are insulting the intelligence of your readers. Please don’t let your left leaning world that you both live and grew up in, cloud your amazing ability to open our eyes by your refreshing openness and wisdom.

    • Realist says:

      Where does he absolve previous administrations? Maybe stick to the subject without getting your snowflake feelings hurt?

    • David says:

      Where is that? The 1st graph goes back to 1983, and his boom/bust example starts during the Clinton administration. The article focus on the current actions of the current administration, which makes sense… because it’s a blog post about the current state of the world. Please don’t let your worldview cloud your ability to consider other ideas.

  40. Irondoor says:

    Just to add another “victim” to the list, a person I know well was majority owner of a private tech company in the wireless industry in 1999. He was set to make $40 million from the sale of the company to larger one that was going public in early 2000. To save on future capital gain taxes, he bought a ranch in Texas to claim residency. He assumed the tax savings would pay for the ranch. He then bought a large acreage in a western state and started building his “dream home” ($8 million). You know the rest of the story. Eventually lost it all, but never lost his hubris.

  41. Geoff says:

    There’s a fascinating circular argument in the notion that democratic socialism is the answer to cronyism. To wit, the most egregious cronyism in the world exists because of the state control of resources, not despite it. Regulatory capture is the thing that should be railed against, not merely free-market capitalism (Scott’s take) or statist control, a balance of which will always be the “right answer.”

  42. Liam Foley says:

    Grand narratives such as democracy capitalism/socialism are myths interpreted by individuals using confirmation bias There was, is and will be only one structure and that is ‘Power’ and its corner stone is exploitation. All the rest is just hyperbole and rhetoric.

  43. David Leon says:

    First, I agree 100% with this post. Taking it a step further, should there be any safety net other than bankruptcy? Should a company whose business is shut down by the government be compensated? If your business went from profitable to zero revenue because of a (legitimate) stay at home order, should you have a government lifeline until the order is lifted? Or just check your insurance policy and try to re-negotiate with your lenders and investors. Scott’s example of the longshore strike was a labor-management dispute, which is a risk inherent in logistics that happens every 5-10 years on the west coast. Nobody who is shut down now anticipated a government order shutting them down for a once-in a century reason. Maybe there need to be rules, like, no bail outs for companies with X amount of buybacks in the last X years, etc… Or should every business owner & investor get wiped out and give our companies / real estate back to the banks / debt holders? That might force us into new lines of business, like making masks, or live-streaming education…

  44. Carl Hattermann says:

    Interesting that the flight attendant Union is complaining that the government bailout isn’t enough. Why, in order for the airline to get money, must maintain employment level. What is the union afraid of? Bankruptcy which would void union contracts. So not only are we bailing out CEOs we are bailing out the unions

    • John Rodgers says:

      Unions have other tools when a company files for bankruptcy when the contract is voided. American Airlines spent 1.1 billion on buybacks in 2019 which added no value except to the CEO and stockholders’ wealth and artificially inflating the market value of the company. The airline industry’s wages for 2019 were up by .07 % adjusted for inflation. 96% of the airlines’ industry cash was used for stock buybacks. The SEC, operating under the Reagan Republicans, passed rule 10b-18, which made stock buybacks legal. Up until the passing of this rule, the Securities Exchange Act of 1934 considered large-scale share repurchases a form of stock manipulation. The bulk of executive pay is now tied to a company’s stock price, creating an incentive to make that price as high as possible Maybe it is time to rethink stock buybacks and delink CEO compensation from the stock performance.

  45. Timothy Heise says:

    Right on. So true it hurts. Thank you.

  46. Dan says:

    Always enjoy Dr. G. incisive essays. After the 2009 Banks bail out, the moral hazard pandora box was opened. Losses will be socialized and gains privatized. If the tax payers are at least made whole, there will be more and bigger bail outs in the future. The same sense of entitlement permeate the public sector too. Our local public schools are not holding any classes during shut down; teachers only pass out a few assignments; they get full pay. Private schools all hold Zoom classes: lectures, homework, quizzes, exams, … Private school teachers are paid less than public, and don’t receive very generous pensions.

  47. John Sturtevant says:

    Great article…Capitalism has been dead in America for quite a while IMO. That said I don’t agree that the countries you mention are all Socialist Democracies (particularly Sweden Norway and Finland) but are instead somewhat of a hybrid. The government (or “collective” as many define it) does own some of the means of production in these happy countries but private ownership dwarfs it by comparison. I’m open minded to something like that but worry that socialists will stop at nothing less than centralized control of everything. I that event, inequality and lack of opportunity would be far worse than the disaster we face today.

    • D Smith says:

      There is a saying amongst political scientists – Almost any system of government will work for a while if you’re governing Swedes.

  48. Vusi Vuma says:

    I find your views very refreshing. Living in an emerging market economy (South Africa), I see similar tendencies amongst businesses. Our inefficient monopolies in most sectors will become even more entrenched

  49. David says:

    From recent Roosevelt Institute report, “New Rules for the 21st Century: Corporate Power, Public Power, and the Future of the American Economy” “Policymakers cut regulations and taxes, which increased the power of corporations to grow by extracting wealth from workers, small businesses, and communities. Corporations got their wealth through rent-seeking rather than productive investments. As their power grew, these corporations used it to further write the rules of the economy in their favor. They not only rewrote the rules to shape and structure the private sector, but they also reshaped the public sector to serve their interests. Modern policymaking tends to rely on approaches that serve private interests, through subsidies, tax credits, and contracting. So, even government intervention in markets was “marketized.” Ultimately, we handed our government over to markets and handed our markets over to corporations. The results we see today are clear: Large corporations and the very wealthy hold concentrated economic and political power. They have also captured government power in ways that have exacerbated inequality and made government ineffective—or worse. Despite its promises, this markets-first approach has resulted in anemic economic growth, stagnating wages, pervasive entrenched inequality for women and people of color, increasing markups, and a captured government. This stands in the way of a healthy economy, an inclusive democracy, and a robust, thriving society. We can—and must—do better by writing new rules for the 21st century.”

  50. Jon G Hullings says:

    Thought provoking article. I agree. It doesn’t feel like free markets anymore. It’s one thing to prop up a restaurant owner and employees who get crushed by quarantine policy. However, propping up corporations that have used all of their free cash to buyback shares– No sympathy there. Liquidate and restructure. “”Too big to fail” was the tell that we live in a crony corporatocracy now. It’s only going to get worse. Thanks for sharing.

    • D Smith says:

      Again, this argument makes no sense. See post below. A restaurant pays its owners profits it generates. Stock buy backs are no different, it’s simply paying profits back to the owners of the company. Why didn’t the restaurant stockpile cash after their busy season to prepare for the once in a century pandemic? Neither the local restaurant or the public company is at fault for the shut down. Both are receiving relief from the government for a government mandated action. No one is getting a bail out. Everyone is getting relief (setting aside technical issues during the roll out). The large companies are using this support to keep employees on the payroll just like the restaurant. All the arguments here seem to be small = good and virtuous, large = evil and corrupt. Morality is not correlated with size, that should be a strong clue to an illogical bias.

    • Rich says:

      @D Smith actually you’re both wrong. Those corporations didn’t use free cash because they didn’t have any, they loaded up on debt and then used the money to buy back their own shares at stupidly high prices. Not only did they not reinvest in their business but they tagged their balance sheets in the process, all to reward c-suite and shareholders at the expense of the long term health of the company, and then when the Piper calls they go crawling to gov to bail them out?! Nope. Capitalism should burn their shareholders and bond holders like the dead wood that they are.

    • Rich says:

      *tagged=trashed (autocorrect)

    • D. Smith says:

      @Rich Yep, you’re right. You researched every single buyback and found 100% of them funded the buybacks 100% with debt. Good catch. They all should fail. A restaurant took out an expensive lease to open in a trendy part of town and then also took out a business loan for the build out of the new space. They didn’t start the business from the savings of the restauranteur. Now that their customer demand has been shut down by mandate we can see the foolishness of their borrowing, let the owner and chef “burn like the dead wood that they are”.

  51. John Merryman says:

    Capitalism is a pretense of market forces. We are linear, goal oriented creatures in a cyclical reality, so while markets need money to circulate, we treat it as the signal to extract from the noise of the economy. Requiring ever more to be added and ever more metastatic methods of storing what has been extracted. Since it functions as a contract, with the asset backed by a debt, sufficient debt has to be generated to back the assets. One way is to squeeze the real economy, requiring it to run on ever more debt. The other is for the government to be debtor of last resort. The capital markets couldn’t function, without the government siphoning up trillions in surplus capital. Money is an economic lubricant, not a fuel. It functions very well as a medium, but is destructive as a store. Blood is a medium, fat is a store. Roads are a medium, parking lots are a store. The hallway is a medium, the hall closet is a store. The average five year old senses the difference, but economists lack that level of insight. The functionality of money is in its fungibility. We own it like we own the section of road we are using, or the air and water passing through our bodies. It is a public utility and needs to be treated as such. If you don”t like government, don’t use their currency. We all save for many of the same reasons, so if we invested directly into stronger communities and healthier environments, as stores of value and not just resources to be mined, it would reduce finance back to the system of accounting which it is best suited. This might seem too far fetched, but we are only at the rim of the abyss.

  52. Mike Tuttle says:

    Looking at the length of some of these posts I see why Twitter keeps it to 280 characters. Great post.

  53. Ted says:

    So…The Government forces companies to shut down to prevent the spread of a deadly disease…. The companies comply and still have overhead costs stacking up…. Option 1: Let the company fail because their customers (us) are legally prohibited from using the company. Option 2: The government covers the costs of the business, that they are forcing to close, until this deadly disease has a viable treatment. National debt goes way up, Both options suck. Option 1 is an authoritarian government forcing the end of capitalism. Option 2 is miserable and very expensive, but it is the right way to handle this. Blaming this economic crisis on “buybacks” and “CEO pay” is too simplistic and naive. It’s like blaming gravity for the Boeing Max problems. The two things seem connected, but they really aren’t. I wish your article would have at least skimmed the surface about the government shutdown crushing businesses. You just glossed over mandated home isolation like it was a nothing burger. You’re articles are usually more complete than this.

    • Sean says:

      If the managers of the airlines have not learned to set aside some cash for a rainy day (s) by now then wtf ? same for most other businesses…sit-down ONLY restaurants have seen declining revenues for many quarters so…the well managed restaurants adapted and will thrive during this time….that’s how capitalism works. And those companies with scale (economies), the one’s who pay million dollar pay cheques EVERY YEAR to executives….well, they have no excuses at all.

    • Ted says:

      @Sean A rainy day?! This is a government compelled closure of all business. This is a lot more than a “rainy day”.

    • D Smith says:

      @Ted Thank you Ted for making sense. This is not just a rainy day. The argument that large companies deserve to fail because the CEOs make millions in pay is illogical. It’s just a difference of scale. Failing to prepare your airline for a spike in fuel costs? Sure fire the CEO, stockholders take a hit. Incidentally Boeing is a different story. The company was grossly mismanaged and had problems with manufacturing supervision and possible employee sabotage. Serious cultural problems top to bottom that predated the virus. Any government aid here should be treated more like a bail out. Everything else is relief from a government mandated action.

  54. Terry Forth says:

    Why’s your dad a Leafa fan? I live in Toronto and gave up on them WAY back in the Gilmour and Clark era! BTW, one well-known Texan stated something along the lines of don’t ask for handouts when the market crashes, if you you don’t like sharing (ie taxes) on the way back up. Another capitalist stated that the problem with regulators is that people will then make decisions assuming that they will be effective and trustworthy…

  55. Amit Sehgal says:

    Brilliant Scott. You are really changing alot of perspective. Kudos to you 🙂

  56. Andi Çomo says:

    Pre Covid-19, plenty of Private Equity, Hedge Fund, and Asset Managers piled into speculative Stocks & Bonds at their ALL-TIME HIGHS Then their one-way bets crashed Then they begged their boys for a bailout plan – and they got it Taxpayers pay for their mistakes. Asset managers got paid.

  57. Jim says:

    Moreover, as students and parents make decisions on admissions for this fall, why are universities not saying a word? and treating the situation as business as usual, shouldn’t they be proposing some formula to split the risk in the underlying uncertainty that we are leaving today and likely be with us in years to come?

  58. Barto says:

    before we feel sorry for Berkshire Hathaway I do recall Mr Buffett’s companies being great beneficiaries of bailouts during the GFC from memory ?

  59. bob h. says:

    I just read the article twice….will read it again til I absorb ALL of the facts & figures…..amen… & thank you !

  60. Jude says:

    1) You are not a watcher of CNBC if you think they are pro-Trump. You reveal your bias to think so. 2) Now do this post again but pretend it’s 2008-9. Same cronyism, which eventually made Jamie Dimon and Lloyd Blankfein billionaires, occurred under Obama. You reveal your bias not address so.

    • J. Jonah Jameson says:

      CNBC is a business news channel, they are Pro investor. The point Galloway made is valid and has no bias. This is an opinion piece so he’s allowed to have bias if he wants by the way. It’s his opinion

    • AM says:

      Nope. Hank Paulson – GWB’s treas sec led the crafting of the bailout and protecting his cohort. Obama failed by not throwing any bankers in jail.

  61. Dave says:

    The first difference is, restaurants ARE going to fail. At least the ones that aren’t chains. They did not have enough margins to buybacks, when they paid profits to the owners, it was so that the owners can make a living. It’s hard to stockpile cash with restaurant margins. It’s easier when you have a board and c-suit full of millionaires, and billions in revenue.

    • D Smith says:

      That’s merely pointing out a difference of scale. Quick internet search shows restaurant margins are 0-15%, airlines are 9%. Obviously Delta is larger than the neighborhood eatery. When the neighborhood eatery pays out profits, it’s ‘a living’. When the large company pays out profits it’s ‘c-suite of millionaires’. Why is the former noble, and the latter disdainful? Landry’s Inc., a massive restaurant group, has achieved almost airline like scale ($700M annual revenues I believe). It pays out enough to its owner that he can buy an NBA team. Does this deserve scorn because of its scale? Just because a smaller enterprise may fail does not mean larger ones deserve to fail.

    • Juan says:

      @D Smith Scale is more than just a mere difference. Scale like Delta allows their CEOs to be paid 169x more than the median income of their employees. I doubt any small neighborhood eaterys have that kind of pay difference.

    • D Smith says:

      @Juan So what? The CEOs decisions affect a much larger business. The stakes are much higher. So the pay is more. A high school basketball coach doesn’t get paid as much as a NBA coach. Why? The stakes are higher for the NBA coach. The scale of the business of the NBA is much larger and commands huge sums of revenue and so the pay is more for all key people associated with it. The talent should match that scale. If it doesn’t they should be held accountable. The original point was that because a company is larger it deserves to fail more than a smaller business. I’ve yet to hear a logical argument for why that should be true. Because the CEOs get paid a lot is not a rational line of reasoning.

  62. D Smith says:

    If you think airlines should fail because the government shut down the economy to stem the pandemic then you must also think all restaurants should fail too. Restaurants pay out profits to their owners instead of stockpiling cash for an event such as this. Stock buybacks are no different, it’s simply paying profits out to business owners. We certainly should not socialize losses for bad actions or poor management. But that’s not what is happening here, very different than the GFC. Additionally, as healthcare always seems to find its way into discussions about capitalism, if we want to enforce accountability and responsibility and not socialize loses then to be consistent a universal healthcare program should come with mandatory diet and exercise regimens for coverage of associated preventable health conditions. This obviously would not be popular. Prosperity leads to entitlement, we want our behavioral freedoms without paying for the consequences of our actions.

    • Wyatt says:

      I’m a huge fan of this take

    • Sin No Moar says:

      I have sympathy for stock buybacks executed at reasonable valuation, with responsible balance sheet management. At absurd multiples such as those (for most companies) of recent years, NO! That is not an appropriate way to maximize shareholder *value* (i.e. long term returns), and should not be rewarded with bailouts. Especially if levering the balance sheet makes it fragile. If you have excess cash and your valuation is high, pay dividends. Your shareholders can look for better investments with that cash.

  63. Alex says:

    Love the overall thesis: you can’t have profit taking on the way up and then bailouts on the way down. The excuse of “this is beyond our control” is BS. I only wish some of the passing references to socialism were left aside. Sort of distracting to the overall argument. I understand the intent is probably to advance a discussion of “what sort of system should we have if this one doesn’t work?” but it almost unintentionally makes it sound like the choice is democratic socialism vs. crony capitalism. We can find functioning (or failing) forms of their system and either can exist under in a democratic society.

  64. Gabriel Skipper says:

    Unfortunately, the replacement of capitalism with cronyism started many years ago with our country’s shift to Keynesian monetary policies. I hope I’m wrong, but I fear we might be too late…

    • Sin No Moar says:

      I agree. This article is great, but also needs to address the Fed’s huge role in this travesty, both in recent decades and in the teeth of this crisis. As an investor, I would also like it to address the problem that inflating valuations destroys incentives to route capital toward its productive uses, i.e. the foundation of capitalism. I have had zero interest in “investing” in markets in recent years, because speculating on overpriced assets based on the Fed’s next manipulation of money is not investing.

  65. Norm Conley says:

    As always, a well-written and witty article from the Prof. Tongue-in-cheek, this almost sounds like “Purge the Rot” Andrew Mellon back in the good old days of the Great Depression. Regardless, Scott makes some super-compelling points. However, I agree with commenters like Roger Penner… This particular economic catastrophe has been directly caused by the state & federal governments’ response to a biological crisis. “They” have shut down most of the economy. Time will tell whether “they” overreacted to COVID or not, there will probably never be full consensus on this. But if “they” shut everything down, it seems to me that “they” are obligated to try to remediate the effects of their actions. The capitalist/investor in me likes the purity of forcing airlines and hotel and cruise lines to restructure through bankruptcy (“purge the rot!”), but the realist in me understands that this sort of mass bankruptcy event – in which trillions of dollars worth of capital stacks enter a restructuring process relatively simultaneously – would result in a messy and painful cascade of millions of direct job losses and then millions more when these co’s vendors/supply chain are forced into restructuring. BK courts would be overwhelmed, and (as Prof knows), the legal battles between creditors and shareholders and unions would be, shall we say, quite robust during multi-year Chapter 11 workouts. And as a practical matter, who (besides “they” – meaning the government) would provide all the DIP financing to support the operations of all these massive corporations while they stagger through the restructuring process? My guess is there would be a shortage of private DIP financing capital in this scenario, which would result in full liquidations rather than restructuring. Ergo- even more job losses. P.S. crony capitalism is a bipartisan issue that dates back generations (at least since WW2). Blaming this Mount Everest-like steaming pile of mess on Trump sounds good to 50% of readers, but it is hyperbolic and inaccurate.

  66. Robert St. Cyr says:

    The idea that the stupid fail and the smart succeed has long been proven false, there is so much proof for that,…The ruling class has just shifted from royal succession to multinational control of the economy and influence over government. Socialism may or may not be the answer but we have lost the balance. Government is supposed to represent the interests of the individual so that they are not abused by the capitalists. The problem is the capitalists have bought control of the government to make sure the individual has no power.

    • Sin No Moar says:

      I agree. When managed fairly, capitalism is the best economic system for advancing standards of living for all. In contrast, *crony* capitalism is not only unfair but directly undermines capitalism’s many strengths. Unfortunately, the electorate (especially the young who have never experienced fair capitalism) is unsurprisingly concluding that capitalism is evil, when in fact it is our corruption of capitalism that is evil.

    • Ryan V says:

      Nailed it.

    • Tyler says:

      @Sin No Moar I have never thought of it in that manner – and what a great way of putting it.

  67. Roger Penner says:

    I would be a lot more sympathetic to this argument except for two things: first, authoritative government action force the shut down of the economy that it now needs to support. Second, here we go again with the myth the Scandinavian countries are social democracies. They are not. They are free market loving countries with a strong but expensive social safety net.

    • Josh Lanf says:

      Someone needs to brush up on their definitions. Start with Wikipedia. Sweden, Denmark, Germany, France, NZ, Finland, Norway, etc… all have democratic socialist policy structures, some more pronounced than others (Denmark strong …. NZ weak). Sorry you’ve been listening to Fox News. Marxist socialism is failed (Cuba, NK, Laos, and Venezuela). Free-market democratic socialism is the way forward.

    • Aldo says:

      Your argument would make sense if the USA was not the first-world country with the most inefficient healthcare system for its consumers – BY FAR. Yes, taxes are high in Canada, but, all things considered (Including taxes), their per capita healthcare costs are 1/2-1/3 that of Americans. Capitalism is still the best system imho, but it has its flaws, and how its inefficient allocation of basic services enrich incompetent medical insurance/administration executives instead of benefiting the Services’ consumers (a key tenet of capitalism and competition) is one of them. It is possible to take the better elements from other countries and leave out the ones that suck, the options are not binary. For example, no need to have the government involved in the sale and distribution of alcohol. In the case of the virus, if the government did not act, they would be responsible for the death of hundreds of thousands of their constituents. If they had not tried to shrink CDC budgets, the shutdown would likely have been unnecessary, because the country would have been prepared. Just like the time Ebola showed up. People are so thick-headed that they believe ANY form of government is bad. Obviously, critical thinking isn’t huge in schools, but it should certainly make its way into curricula – because this A or B mentality needs to end.

    • Justin says:

      @Aldo taxes are no high in Canada. Why do people repeat that. And our healthcare is excellent. And available to everyone.

    • Niko says:

      @Justin what about prescription meds coverage in Canada ? Is that program excellent in Canada ?

  68. Gustavo b says:

    Prof. Scott for president of the United States.

  69. dallasboiler says:

    I agree with your overall premise but disagree with the notion that any party or person in power are more responsible for this than another. Both Dems and Republicans corrupted capitalism in 08/09 by deciding to bailout auto companies and picking winners/losers amongst banks (letting Lehman fail, but protecting others at all costs). This time is no different. Pelosi, Biden, et al. are as supportive of corporate bailouts now (if not more so) than Trump. The real question to confront and debate is not should the government intervene (we learned that lesson in the Great Depression), but what is the most efficient mechanism to provide ultimate relief to the economy? As an example, putting an airline into Ch11 may have bigger implications this time than simply restocking the capital structure of the airline. In this instance, it would likely dramatically shrink the size of such airlines and take down Boeing with it. These are both companies that, despite their faults (e.g., stock buybacks and 737-Max issues), employ hundred of thousand (if not millions) of Americans with solid middle-class wages and healthcare benefits. Who fills the void if these firms shrink permanently (or for an extended period of time) as a result of this catastrophe; and is it better to risk the moral hazard of enriching the shareholders & executives of these companies as a consequence of trying to protect their ability to be good-standing employers? I don’t know the answer. My fiscally conservative self says let them fail and of anything provide support directly to people affected (who become unemployed). However, I don’t know which route puts our nation and our economy in better standing 20-30 years from now. Also, let’s not lose sight that we’re competing on a global stage where our competitors (friend and foe) are taking the same measures if not more drastic in relative scale. China in particular will do whatever it takes to advance its causes and dominance without an iota of regard for its people on the frontline. Our capitalism may not be overly kind to people in the lower class, but it looks like paradise compared to how China and others treat those folks in their societies.

  70. Mike Faith says:

    Yep, you nailed it again Scott (as usual). Galloway for Governor. Well, President actually, but alliteration gets more attention.

  71. Mike O says:

    I can’t tell you how much this enlightened me. I’m a guy who considers himself an ultracapitalist but believes the wealth gap and wage stagnation are too intolerant of anyone who is upper middle class or below. Especially true in NYC. But it never occurred to me that the policies (bailouts) being adopted are more oppressive to those classes than anything else. You’re right. There are no realistic opportunities for those people. And there never will be because equity holders amass wealth with zero downside and 100% upside. I could repeat more things you wrote that shook me, but I’ll just end with this: Realizing the dismal and state of our anticapitalistic policies infuriates me. This is why there are two corporations with over $1T Market cap and oh, by the way, have seen their market caps increase by $400-600B over the last year. Unheard of. It is frustrating that the whole public is behind this. They see a bailout of the companies as protection for their jobs and way of life. But as you correctly stated, as long as there is demand, companies will deliver. And perhaps if there failure or collapse is permitted, the new companies will properly hedge against these risks.

  72. Anthony Hewett says:

    Clarifying!Thank you.

  73. duano says:

    Umm..No. Coronavirus kills people. Without mercy or malice (you propose this a good thing?). Far more historic. Collateral damage? Immediate: Families, friends, neighbors. People caring for people. Delayed? The doctor down the street. The one who knows you. And your family, at times, at the expense of his/her own family, into the evening. Inherently non-scalable. Profitable specialty groups (ortho, eye) already discounted for private equity (ROI? TBD). Institutional medicine, their owners and cronies, will do just fine. When this crisis passes, and we’ve adapted to SAR-CoV-2, without PPP, independent practices will vanish. Sick? Take a number. Or FaceTime a stranger.

  74. Dan Murray says:

    What happens when countries reach there “level of incompetence?”

  75. Leon Horbach says:

    Great column as always. However, please be aware not to position socialism as an oppositie (or replacement of) capitalism. The countries you refer to (I live in the Netherlands) are capitalist economies but with well-developed social structures and policies. The two are not mutually exclusive; ideally they complement one another. I think this is something Bernie Sanders got incredibly wrong all the way through his campaign (also in terms of semantics: we are social democracies, not democratic socialists – has a different ring to it, doesn’t it? Ask FOX News).

  76. Øystein Wikeby says:

    Just to clear up the common misunderstanding of the happiest countries in the world. The Scandinavian countries are not socialist, they are social democracies, or capitalist with a safety net, if you will. The Scandinavian way of dealing with business failure would be to let the company fail but to secure the owner a dignified life which doesn’t have to be lived under the bridge.

  77. Brian Mooney says:

    Brilliant as usual from the punk Prof. Just in case you’re old man is reading, it’s whisky in Scotland, ‘whiskey’ to our Irish brethren.

  78. John Azevedo says:

    Amazing that a professor equates capitalism with moral behavior and socialism with cronyism. I’d suggest you get a second opinion. Maybe ask the people in the four countries that are the happiest in the world.

    • David Chechelashvili says:

      Maybe better to ask Soviet Union? Have you ever lived in socialism?

    • Dan Benson says:

      What he is saying is essentially a paraphrase of Martin Luther King, Jr.: “We all too often have socialism for the rich and rugged free market capitalism for the poor.” The rich man’s ‘socialism’ is the cronyism he is referring to.

    • Josh Lang says:

      I think you mis-read the essay. He is critical of a system that privitizes gains and socializes losses, leading to a system that has disproportionately rewarded the top 10% over the middle 60% (see his first graph — it say everything).

  79. S James says:

    So much common sense in this article. Reminds me how indoctrinated we’ve become. Thank you Professor.

  80. Vikram says:

    Vitriolic as always but thought provoking. Worth reading the NY Times article that’s in similar vein :

  81. Shamsher says:

    Loved the article, as usual you cut through the bullshit and shine light on sense. Tried to register on the sprint sessions but couldn’t. Any help would be very welcome. Stay safe, cos life is rich – don’t xanax it (so soon)

  82. Alnoor Jamal says:

    What this Govt and previous Govts have done is to avoid the day of reckoning at all costs!… starting from Nixon when he abrogated the Gold Standard, to the present Govt, where printing dollar notes night and day, has become a fad. Why should Capitalism take the brunt of this dishonesty? This variation of capitalism is dishonest, and has led to many more variations! The result, CRONYISUM and CRONYISTS. Do I need to say anymore!!..

  83. Scott says:

    Agreed. Except for: “I didn’t deserve to lose near-everything [with Red Envelope]. What happened wasn’t my fault…” Why was it that John Malone and his lieutenants (via Liberty Media) were ready to scoop up assets for pennies on the dollar after the hubris of the late 90s, but you weren’t? If it had been a first for Malone, maybe you could call it luck. But he’s been doing it for decades. As has Buffett. And Flatt at Brookfield. And Marks at Oaktree. And they’ll do it again this time because they’re prepared (again). And judging by page 83 of your excellent book, The Algebra, so are you. Don’t do your readers and students a disservice by being gentle on your 31-year-old business self. Trump’s bailouts are ridiculous, yes. And the not-my-fault of failure is too.

  84. Frank says:

    Agree with this – thank you for writing. To Oliver’s point, how can we try to bring change?

  85. Oliver says:

    Thank you very much. People are furious. But what now? How can we possibly fight this???

  86. Billy Bedillion says:

    Thank you for this. Speaking as a 27 year old trying to understand the world we are assuming, it seems to me that asset prices have risen over the past 40 years but wages have remained the same or lessened due to inflation. I am by no means a socialist, but from basic math, the numbers don’t add up for me or my fellow late 20 somethings. Is it Bernie we will look to? Or a similar path in the realm of drastic measures. It’s just math at this point, and it does not add up unfortunately.

  87. Bill Barense says:

    Forgot to give you props for skipping trickle P.

  88. Ron Wilson says:

    1 trillion seconds is 31,709 years. Equate seconds to dollars, or even hundreds of dollars, per second, and you get a stark visual of the accruing financial tsunami. Bailing out the air and cruise lines is stupid. Let the market work, chips fall where they may, and let the next wave of entrepreneurs buy at distressed prices and have a go of it. Prof G, you are on the mark with this one. I give your essay and “A” this week.

  89. Edward Kosinski says:

    Whats wrong with bankruptcy? Why not get rid of nonprofitable (frackers),unnecessary(cruise lines),poorly managed(airlines) businesses? Problem with capitalism is the focus is always top down-maybe Bernie correct that we should decide policy from a bottom up perspective. Thanks for another great article.

    • Sin No Moar says:

      I was with you up to “Problem with capitalism …” Operated fairly (with intervention only to assure fairness, public protection, and management of strategic risks in international trade), it is *exactly* capitalism that directs capital to places it should actually go. Rent-seekers like frackers flourish only because government and central bank interventions disfigure the incentives that drive capitalism.

  90. ccw says:

    The only sustainable source of gdp growth is growth in real incomes in the lower half of the demographic because they spend everything they make. The only way to to make that happen is to invest in infrastructure and education. Before 1970 a woman with a college degree had 4 options: teacher, secretary, nurse, and (very rarely) pediatrician. We had a captive supply of low cost teachers. After career options for women opened up in the 1970’s, the captive supply of teachers disappeared and US public education declined dramatically. On top of that, the average teacher’s salary in 1967 (random date) was 12,500, which would buy you about 6 chevys at 1,950. Today that average salary is $50,000, which will buy you about 2.5 cheap cars. Simplified analysis, I know, (hedonic pricing, and all that)–but relevant. Why are we surprised our public education is such a mess? Hard to disagree with the arguments made here. The sense of entitlement exemplified by the Varsity Blues case is a bellwether of the times.

  91. Bob Cerf says:

    The corrupt are in power. We need to be concerned about protecting our democracy. Read Paul Krugman’s article

  92. John Powers says:

    I heard him on a podcast years ago. Couldn’t believe how refreshing he was. Not the same guy. Just angry and cynical. Perfect for Swisher.

  93. Bill Barense says:

    “I worry our government has been co-opted by the wealthy…” “It will be a worse place if we replace capitalism with cronyism.” Worry? If? Dude, often dig your stuff but. Trickle down for 40 years. Bought & paid for. Bailouts are us.

    • Sin No Moar says:

      +1. Suggesting cronyism is an incipient problem rather than a (the?) direct, decades-growing cause of present inequalities, lack of opportunities, and associated backlash does a huge disservice to the fair form of capitalism to which we must return.

  94. Elle says:

    It feels weird to say this but… Thank you for your integrity. (And humor). I’m a 65 year old living below the poverty line on my $742 social security, food banks and gig work; maybe not your typical demographic. Love your show and the one with Kara.

  95. james 0 smith says:

    The countries in Europe are not socialist, and don’t describe themselves as such. I’m not sure how you can help someone if the place they work isn’t there after a mandatory shut down. I agree with the airlines to a degree and there shouldn’t be anything given away, but loans are acceptable in thus environment.

  96. Mark in PS says:

    I am hoping that some semblance of justice may be eked out of this catastrophe. I do wonder if the Democrats fear of being labeled Socialists will skew their response to the center and the status quo.

    • David B F says:

      12/04/19 Half Time show, Jim Cramer associated the Democratic Party to The Communists, we are already there

  97. phillip millar says:

    Hey Scott, did you look at how Iceland dealt with the 2008 crash. It seemed more like capitalism to me. I always wondered how banks could justify charging interest for loans and never be at real risk of default. isn’t that why they can charge interest. If they issue stupid mortgages and collect interest, if there is a default shouldn’t they lose their money? Great work

  98. RV says:

    Don’t always agree with your thoughts but that’s why I so enjoy it when I do agree. Lot’s of thoughts to consider as this Gen X’er is considering retirement from working for the man and striking out on my own. On this piece you can Drop. The. Mic.

  99. David B F says:

    This is another transfer of wealth from the bottom to the top. Next year the “Budget hawks”’ in Washington and on CNBC, etc. will be screaming to cut Medicare and Social Security because the deficit is ruining the Country. It is a disgrace that in this Country hungry people must rely on charity for food.

  100. Nirnay Patil says:

    17 million lost jobs in 3 weeks. Millions more to come. Millions of workers taking pay cuts. 53 percent population is invested in market with 1 percent Wall Street crooks taking advantage. Feds savings crooks of Wall Street. No voice for Main Street on CNBC where lies are projected daily. Shame of Feds handing out money to crooks.

  101. Nirnay Patil says:

    Wall Street crooks and liars reporting everywhere . Feds saving them while millions suffer.

  102. Livio says:

    You. Are. Correct.

  103. Andrew Heddle says:

    Scott, none of those countries is socialist, and your source article is full of non sequiturs and typos. Your ideas deserve better validation than that. Less is more.

  104. Joseph says:

    Great piece Prof G! Cronyism often precedes corruption. Which would become the norm as the scrappy/crafty ones at the bottom get hell-bent on climbing to the top to partake of the national cake.

  105. Gman says:

    1.8 T is $13,500 for every American. Instead every American gets to fund helicopter money for the wall street boys. Capitalism is so rich!

    • Sin No Moar says:

      True capitalism *is* rich, and rich with opportunities for all. The article rails against *crony* capitalism, which is something else entirely. Even the best system can be made evil and destructive by corruption.

  106. Johanna Baynard says:

    I’m wondering if you are romanticizing capitalism. Nothing new will happen until the brutes in Washington are gone! Their immoral behavior must be made illegal. Until that happens, capitalists can dream on! Only people who go along with Republicans are making any money right now, that’s because they are in control and they are lying, cheating and stealing to keep it so. I am sick to death of anyone who imagines that a little bit of charity or a little bit of capitalism will solve things. The truth is that nothing will change until we get the republicans gone.

  107. James L Somers says:

    Prof. Galloway, the last line of this essay: “It will be a worse place if we replace capitalism with cronyism.” Well, hasn’t that already happened? Don’t the examples you cited here make that point loud and clear?

  108. Kevin O'Marah says:

    RIP it up my friend. I love to hear the ring of big ideas.

  109. Richard Logan says:

    As always the article is spot on. We live in a World where men are greedy, fearful, implacable, without self control ….leading with less wisdom and no thought for the future. We are reaping the whirlwind!

  110. Ben Harbert says:

    So true! The people behind this government logic were probably also behind the rise of participation medals for all children. But seriously, why is 80+% of this stimulus package debt bomb not even touching Main Street?!

  111. Mike Razzo says:

    “To be clear, socialism may be a better way to go, as evidenced by the study showing 4 of the 5 happiest nations are socialist democracies.” This is rich and not true at all. You used “socialist” very loosely. As for not letting the airlines to go bankrupt, sure lets have another Bear Sterns/Lehman situation. That ended so well for those employees. The whole thing is a domino effect. You can’t let the entire sector go under because of a pandemic. You know this.

    • Jim says:

      Funny how everyone who votes Democratic is a socialist but nations that heavily tax every citizen to pay benefits to every citizen are not socialist. Using “socialist” loosely seems to be only allowed when describing the crimes against humanity as practiced by non-Trumpies.

  112. Michael v Conley says:

    Bless you Scott. A guy who, for me, is really rich, talks of reality and how capitalism can function without destroying the middle class. Sorry to see Trump become a dictator with the help of the senate, keeping all the rich guys(mostly) from experiencing the risk that goes with reward.

  113. Mike Lyons says:

    Scott: Right on as usual. Being stupid in America seems to be a prerequisite for citizenship unfortunately. The current administration being people’s exhibit 1.

  114. Eraj says:

    Kudos to you Professor! “Dara, pay your “partners” before picking up the pen again.”

  115. Tom Kindlick says:

    I guess my wife and I are the classic co-opters, at 66 and 65 years respectively. We actively give the excess the government refunds back to us in the form of Social Security, CARE payment(s), Federal and State tax breaks and rebates and gift them to our relations, who are reducing their costs NOW with the $$$s we provide to buy homes, or pay down mortgages, or fund their children’s 529s. I would rather I (we) control these funds now rather than to permit future bureaucrats to access it at their whim. So we’re guilty as charged. And damned right, we’ll keep doing it until we can no longer do it.

  116. Tim McGlinn says:

    Hells yeah. Also amazeballs and is happening now: in a feeble show of solidarity with his/her rank and file, an executive for a company in a soon-to-be-bailed out industry announces with fanfare that he/she will forego his/her salary for a period of time. Left unsaid is the fact that said salary comprises less than one-tenth of total executive compensation! So, like, taking a pay cut of 10%? What a team player! I used to have to read all manner of proxy statements for my job. For fun, I would sometimes try to reverse engineer a level of company performance that would be so awful as to produce a level of annual CEO compensation that was less than $10 million. In many cases it was disgustingly difficult to do so. The language in the proxies says comp is “at risk” but that is not the reality. I have no issue with people getting stinking rich, but there ought to be a genuine risk-taking element to it, not “fuck-it, its-a-recession, just–take-the bailout-and-reload with-more-performance-share-and options” bullshit.

  117. Chris says:

    “socialism may be a better way to go, as evidenced by the study showing 4 of the 5 happiest nations are socialist democracies”. These Nordic countries are NOT socialist, and you should know better than to repeat Fox News memes. Socialism means that the government owns the means of production and distribution of goods, capital, land, etc. These 5 happiest countries have capitalist economies, but – sensibly, morally – ensure that healthcare and education is provided, or heavily subsidized, by the government.

  118. Erin says:

    Love this post Prof G. As Don Cherry would say, you are a beauty.

  119. Mark says:

    I fucking love you Scott! When are you running for President?

  120. George says:

    Isn’t one way to push the rewards of the market down to the bottom tiers to super-heat the economy so that demand for low-skill labor exceeds supply and prices (wages) for that sort of labor rise? Seems like that was starting to happen, with unemployment at record lows and wages at the bottom starting to move up. So corona has messed up that plan. But if you like the plan and want to get back on it, isn’t there something to be said for bailouts that enable those employers to stay intact, maintain employment as much as possible, and quickly rehire post-pandemic? If your complaint is that the corporate leadership and shareholders are benefitting more than the workers, maybe there’s a way to address that directly. Make eligibility for bailout funds contingent on having/achieving certain pay ratios between management and labor? Require shareholder concessions?

  121. Guy Johnson says:

    You compare CEO pay to an Uber driver’s comp. Wouldn’t a fairer comparison be to a NFL QB, a left-handed MLB pitcher, or a three-point NBA hotshot?

  122. Patrick M Scholz says:

    Amen brother, amen!

  123. Ed Tibljas says:

    Leafs games go hand and hand with Xanax

  124. Kassandra McDougald says:

    Scott, please continue to share and broadcast your insight. It restores my faith weekly that everyone in this place as not gone mad and at least one other person can see through the bullsh&$. I look forward and always appreciate your non-sugar coated outlook.

  125. Bob Rogers says:

    We are on the same page with tuition. Our last child is headed off to college this fall and was accepted to several out of state universities. We told her to select an in-state school as Zoom classes seem inevitable and she can save the money for graduate Zoom classes.

  126. Cking says:

    You’re a fucking a genius! I’m in

  127. George Emerson says:

    Scott, you are an evil genius. You’ve infiltrated capitalism like a sleeper agent…or a coronavirus. Your honest caustic wit is Waugh-ian in its class-traitorism 😉 However, if I dare to critique the ProfG on lack of context: there’s a tendency for your historiography to be 20th century. Reach a bit further back (and cite your Harvard peer, Prof Sven Beckert’s Empire of Cotton) and remind your students that the launch pad of capitalism and the “industrial revolution” was the mortgage (aka seed or venture capital) system that funded cotton labor raw production, i.e. slavery, and later, through Egypt and India, and today, indentured servitude, aka “the gig economy”. Also, thanks for not plundering the Trump Socialism Fund for your own short term gain. And never forget the immortal words of your senor “ProfG”, Professor Galbraith: “Nothing so creates the illusion of intelligence as a personal connection to a large sum of money.”

  128. -M says:

    When equity gets wiped it’s not just the hedge fund assholes that lose out. Lots of small retail investors too. The Donald would prob be fine with that outcome if this was his second term. However, many of those retail investors (particularly the old ones) won’t vote for him this November if their stocks are wiped.

  129. Robert Miller says:

    As a former bankruptcy lawyer and then investment banker I share many of your thoughts. In the 2008 financial crisis I never thought it was right or appropriate for the government to bail out the auto industry. They said it was to save jobs, but had GM, et al gone into bankruptcy the assets would simply have been redeployed under different owners. The new owners would need and keep the employees. People would still need and buy cars – even from a reorganized GM – and they wouldn’t know or care that the new owners of GM were their former creditors. And how did the courts allow the Bankruptcy Code to be rewritten by letting unsecured trade creditors jump ahead of unsecured bondholders? And why should the Federal government pick and choose particular industries and companies to save? I have alway suspected that a major reason for the 2008 auto bailout was to gain votes in Michigan. So I agree with Galloway that capitalism is all about letting the chips fall where they may.

    • JB says:

      I don’t know, is this a little simplistic? If the entire auto industry declared bankruptcy, their trade receivables would would certainly have taken a hit, no? Or certainly been delayed in a year of bankruptcy court. And if so, 100 small companies down the line would have been f’d. Before they declared bankruptcy, they would have fired 20% of staff, decided they still couldn’t make it and THEN declared bankruptcy. Has anyone done the research on staffing at Chapter 11 companies (not saying I have!). I agree with the entire premise of this, but strategic bailouts can make sense. Allegedly the government got its money back from the auto bailout, so seems it was well worth it.

    • Robert Miller says:

      @JB Yes corporate bankruptcies have consequences including that unsecured creditors and others usually take a financial hit. That’s capitalism – exactly what Galloway is talking about. Good times and bad times. Ups and downs. Thousands of companies in hundreds of industries have gone through chapter 11. Some don’t make it and liquidate. Most reorganize. Look at all the airlines that have gone into bankruptcy and how many liquidated – Eastern, Continental, TWA, Laker, etc. What happened? Did the industry collapse? No, the assets were redeployed by others. That’s exactly what would have happened if there was no auto bailout.

  130. Jeremy Berman says:

    Loved it Scott. Most importantly, Trumps going to throw the kitchen sink at the market and maybe some hand sanitizer as well. He just has nothing to lose, by spending his way to Election Day. We will look back on this time and say, how did we miss the greatest buying opportunity in history, when the government just gave you a guarantee floor.

  131. Thomas says:

    Great column, I agree with all of it (except that Airplanes are made from aluminum, not steel — agreed they have recycled air ;-). I listened to the whiny tone of the CNBC host plaintively whining to Chamath Palihapitiya like a cut rate Jim Cramer. Palihapitiya’s reply “they don’t get to summer in the Hamptons.  Who cares!” was perfect, and of course just prompted more whining from the host. Interestingly the other guests that spoke up, all fund managers I believe, supported Palihapitiya. Socialist self dealing for the wealthy assett and equity holders is infuriating!

  132. Chad says:

    I enjoy reading your thoughts. I don’t agree with all, but I do very much agree with your sentiment here. Great post!

  133. Chris Kerr says:

    Great analysis and writing, as always. Regarding your graphic on the airline CEO compensation – it’s actually more egregious than just salary/listed compensation. Ben Hunt has produced a report on the airline CEO fleecing of shareholders by looking at their corporate share buybacks and commensurate stock option selling over the past several years – worth your time: You’ll experience some confirmation bias while reading it, and you’ll also see that listed compensation is small potatoes relative to what they’ve really taken out of these companies.

  134. Randy says:

    Good points, but why the Trump trashing? Of course he deserves it. But, so does 95% of the DNC. Seems like your politics mix the message. Who supported Hillary? Wall ST banks Golfed for favors with Obama? Hedgies. And, that Soros guy. That said, I disagree with Federal bailouts. Airlines deserve Chap 11 or even 7. Union backers/Socialist would cheer, well until they realize that they are unemployed and the lavish benefits (check out what Longshoremen or airline pilots get) are gone. In Capitalism, the Uber driver makes a choice. He/she balances pay for costs for benefits, and chooses. What is wrong with that? There are MANY videos and blogs that tell them the economics of their job situation sucks, yet they still do it. Capitalism and free will. Both are important in America.

    • Jim says:

      Soros is not the bogeyman. Unions are not socialism, they are simply a way for an individual to stand up to overwhelming capital advantage. This country was stronger when the unions were strong and the rich were taxed at 90%. Most Uber drivers have no options available besides the ready cash that Uber gives them. Having to pay the rent tends to focus the mind. I think you mistyped Obama when you meant Trump in regards to golf for payoffs. Only one of them is honest, and it’s not Trump. Airline pilots hired for the last 20 years are working at 1/4 of what the previous generation made. Many live in campers on the airline employee parking lots because they can’t afford rent. And I wonder if you got the point of the article- the airlines will keep flying, the employees will get paid. It’s the shareholders that get wiped out. BooHoo.

  135. Bruce Schena says:

    Another beauty Scott. Thanks. Oh, and technical point; airplanes are Aluminum tubes, not steel. You confused them with submarines.

  136. Steve says:

    Great 2:30 interview on this exact topic,

  137. Gerry Reihsen says:

    One of your deeper and more beautiful posts. Beautiful for the futility of its naive expression as much for the truth of the expression itself. (You’re usually much more a curmudgeonly realist.)

  138. Brooklyn Joe says:

    A crisis is a wonderful thing and a shame to waste.

  139. Stew Berry says:

    You are absolutely right. We need to allow the capitalist market to cleanse itself. Socialism is never the answer, for with it comes Government Parentalism which in essence is the continuation of the focus on protecting the wealthy. This plague will be over and hopefully the un-fretted drive to establish a slave class in the newly developing countries under the guise of globalization will end. Let the newbies enjoy inexpensive fossil and allow them to build real competitive engines that not only make the things that we don’t want to make, but to do so for proper pay, benefits and health and Labour regulations that means we compete based on quality of output not quantity for low cost. Our universities are full of high paying foreign students who will not return to their own countries because we give them green cards to stay. We subsidize them with grants and forgivable loans. We tell the world we are being magnanimous however it is the greatest theft of the most important asset these countries have the brain power to grow and prosper. Let house crumble and let the young rebuild it.

  140. ปรีชา​ says:


  141. Daniel J Wixted says:

    Thank You Scott. You Nailed it.

  142. Tom Griffin says:

    If I keep dropping syrup on you Prof, my currrent wife might ask if Galloway is to our current marriage might be her to my last marriage. You are so fucking good, Prof. Stay healthy.

  143. John Dineen says:

    “Hunger games on the way up and the hallmark channel on the way down”. I love it. So much to agree with here. Brilliantly written too. Maybe you’re being a little unfair to your Uber co-contributor though. After all it is US government policy to ‘outsource’ socialism to your corporates. If your government pass the buck, can you really blame the corps for doing likewise? Great read.

  144. John Arnott says:

    I think you repeat a common miss-perception about capitalism that there must be a loser. No, you can win while raising others with you (the tide raises all boats), you do not have to tread on them to succeed. That is simply nasty behaviour that will come back to haunt you – see Mr. Trump. Also, democracy – as practiced in NA – is not democratic at all. The rich do everything possible to disenfranchise the poor and vulnerable on racial, ethnic, geographic, economic, and any other basis you care to mention. Bernie Sanders may not be the right messenger but our societies must surely go in that direction, or the one percent will simply become one person. Isn’t that what WWII was fought against?

  145. Bradley Dressler says:

    Agree with most of what you say except a large number of us disagree with the Coronavirus response. If you won’t let me work in order to conduct an irrational policy of delaying the inevitable to protect the same old rich people you decry, then you have to compensate in some fashion. Otherwise institute compassionate policies to protect the weak medically and financially and let everyone get on with their lives. No bailouts required

  146. Caroline says:

    Thank you for acknowledging that we are not and IMHO never been (maybe pre 1929) a free market capitalist system. We’ve been in crony capitalism ever since companies began lobbying and currying favor with politicians for favorable policies. However, to play devil’s advocate, shouldn’t business get a bailout with taxpayer funds considering corporations are taxed and therefore taxpayers? And because of this structure corporate employees like myself are in indirectly taxed twice? Always enjoy your articles and perspective!

    • Caroline Dallas says:

      Should also add that I completely agree that companies should be allowed to fail. It grated in 2008 to hear that there were entities that were ‘too big too fail’ and I’m sure that is why they didn’t bother preparing for the next crisis because they knew Uncle Sam would bail them out. I was raised to understand that big risk equals big reward and vice versa. People like to glorify the reward part and shove the risk part under the rug or make excuses for their failure. At the end of the day more and more people are looking for freedom from failure, not freedom to succeed or fail. The former leads to mediocrity as there are no winners or losers but a regression to the mean. The world isn’t perfect but I strive to be (and admire those) who are willing to risk lows for the highs. Please keep posting your excellent content!

  147. Rick Perkins says:

    Scott, I appreciate your perspective and I agree that another business bailout in less than a decade is a bad move. However, I find it interesting that the same mistake made by the Obama administration after the 2008 economic downturn is not part of your historical account. I recall recommendations that the Obama administration should have provided the same payout amounts to homeowners limited to be spent on reducing or paying off mortgages. A bottom-up bail-out would have benefited the bottom, middle and the top. It appears what American has is not a CNBC/Trump leadership crisis, but decades of failed Federal and State government leadership. Don’t you think your aim is too low? Isn’t time for a real government “for the people, by the people”?

  148. andy says:

    Scott, You should at least address the fact that you said cruise lines and airlines were good investments in a newsletter just a few months ago. Now they’re poorly managed? Also, the 96% buyback stat is a disingenuous use of weighted averages because it includes companies that lost money over last 10 years in the denominator. Delta, which you called out specifically, was in-line with corporate averages when it comes to buybacks.

    • Hemant says:

      Sure, maybe some of the data might be skewed. The essence of the narrative is that don’t pretend to be pure free market when it’s not, currently. If corporations are people and missing a payment dings your creditworthiness at an individual level, the same principles apply at the enterprise level based on the above premise. You’re following the same path of most empires. Let’s be enterprising on the way up, once the silent majority captures the majority of the capital markets let’s lock the doors and don’t the send the elevator back down again. Human nature has stood the test of time, has not and will not change.

    • Andy says:

      @Hemant I agree that it is still interesting content and am only calling Scott out on these points because I want his arguments to be completely buttoned up. I enjoy reading all his newsletters.

    • James says:


    • James says:

      @James Yes I believe the Carnival Cruise recommendation was a few weeks ago. It doesn’t take away from the rest of the argument but a mini mea culpa is in order. He assumes blame for a divorce which I applaud-a bad stock recommendation is relatively minor.

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