The Sapura bailout. Tales by an unknown blogger. No 70.

1. As details about the 1b bailout of Sapura comes slowly, I will come up with the appropriate response.

2. A bailout by any other name is a bailout . Saying it's for paying vendors, insults our intelligence.

3. Now, call me a neo classical dude, a Friedmanite, Austrian school Hayek stooge or just a pain in the ass confused economist, be my guest. Stepping in to save Sapura on account of saving vendors, is the government -saved jobs fallacy.

4. What it does is to prevent the efficient allocation of resources by rewarding poorly and badly managed company and punishing the good ones .

5. When the US government bailed out Chrysler, it didn't do it for lee iacoca ( cola,). No siree, it says that because it wants to save jobs and vendors.

6. The American consumers don't use or consume the parts supplied to Chrysler, the steering wheels, gears, door knobs, glass screens etc. in other words, consumers are asked to pay for things they don't need, on their own. If they can afford it, they buy completed cars assembled by Chrysler.

7. What happened to Sapura , happened to Chrysler in the 1970s. The government thought it's saving Chrysler by bailing it out. To cut the long story short, the US government didn't.

8. Similarly the Malaysian government is using the save jobs fallacy to bail out Sapura. It's doing it the wrong way.

9. The government should allow Sapura to fail because its poorly and badly run. Let new owners take over and run it well. Vendors can choose to do business with new owners. As to old owners take a class action against them.

10. Hey, our economy has been described as a free enterprise system, market economics.

11. The lynchpin of that system, is profit and loss. Not profit alone. Sometimes the loss part is more important as it endures poorly and badly run companies are weeded out. Like Sapura.

12. Success can be a bitch..if intervention in Sapura is successful, it might embolden policy makers intervening in other industries even when it's not warranted. Then night as well have businesses run by government officers

13. Bailouts would distort the market. By propping up an inefficient company, would encourage other companies to also behave irresponsibly knowing uncle non would be there to help.

14. By allowing unviable companies to fail, would be good for the market. It allows capital to flow to more productive uses.

15. Not holding that against Sapura, it's just business. Then, there is the moral hazards argument. Companies would take unnecessary risks knowing if they fail, some do gooders and special interest groups in the government will come helping .

16. I am not faulting Anwar for citing bumi matters. That's for politicians to do. I am just presenting cogent economic reasons. Although I am a politician, I am also interested in economic reasoning.

17. Playing the race game, is the favorite pastime of UMNO politicians and Malay supremacists. Hidup melayu!

18. We cannot reward the inefficient and punish the competent .

19. One final stupid question.. pardon my ignorance. If the 1b is for the vendors, register them. Pay them directly. Don't pay sapura.