How does bailing out massive industries with millions or even trillions of dollars compared to the general population help improve the economy?
In: Economics
It’s pretty straight forward, Say Johnny has a lawn mowing business, and lost all his money when the weather turned really cold and all of the grass died and no one needed their lawn mowed (Covid-19 quarantine). Meanwhile, a lot of the other kids on the block used to work for Johnny mowing lawns. Some others sell lemonade and others bag groceries at the store. The kids are spending less money overall because they have less work. If the parents intervened they could elect to bail out Johnny’s business and all of his employees (and suppliers of gasoline and fertilizer) would benefit. They may even buy more lemonade from down the street because they have more cash, but the other kids wouldn’t see as much from that targeted investment. Every dollar spent on one kids business is a dollar that may not be spent on another, so while it all helps, the rewards may fall unfairly on all of the kids as a whole.
Some industries are seen as so essential to the economy or material to so many related industries, like the airlines ( all business relies on them), that the government may step in to prop them up to withstand this period of recession. Their employees, investors, customers, vendors, advertisers, and all related industries are all benefitted. And they’re all also members of the general population, and their money spends as well as the general population, so it all helps. It just may help them greatly and barely help you at all.
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