Should we
allow those big companies to fail? The answer in most cases is no. This answer
is made based on subjective and objective reasons. When a company grows large
enough, it naturally gains some sort of market power. They are much easier to
finance themselves. Moreover, when they fail to pay back their debts, banks
usually will give them some money to keep them alive. Why? Because once these
big companies fail, it will destroy bankers' careers and damage banks. In
addition, some companies are so large that their bankruptcies could leave
thousands of people unemployed on the street, which any government never wants
to see. Because of the damage to individual and public interests, when a big
company is at the edge to fall, the financial companies and the government will
use their resources to keep it alive and hope for a miracle. This is a highly
inefficient use of resources. Moreover, such environment encourages firms to
grow big and abuse their power. The worst thing is interconnection is built stronger
when financial companies use their resources to save a company from bankruptcy,
once this company fails to avoid bankruptcy then the financial companies which bail it
out will suffer as badly as the bankrupted company. Because the financial
industry its own interdependence and its connection to other parts of the
economy, a domino effect will hurt the entire economy. Many markets should not
have natural monopolies due to their characters; however, due to the current
environment, many firms blindly expand their business fields and cause
massive inefficiency. Therefore, it is important to build an environment to
encourage the owners and investors to split their companies into a few of
smaller but more efficient companies.
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