Government help for foreign owned companies

Posted by admin on 10 December, 2008 under Business news | Read the First Comment

The Anglo-Dutch steel firm Corus, which is owned by the Indian steel company Tata has asked the government for help to avoid redundancies.

There a number of issues at question here, not least whether governments should be bailing out companies in capitalist economies, as it goes against the capitalist grain. Already we have the banks knocking at the governments door for cash and we now have banks partly owned by the government (not least owning just under 58% of the Royal Bank of Scotland) and the car manufacturers on both sides of the pond looking at bail-out cash.

The worry is of where all this will end and how much of tax-payers money will be spent in propping up companies in this economic situation. As it is the UK government has already borrowed heavily and even more now with tax cuts at the same time as increased spending!

The other issue at question here is that we, the tax payer, are being asked to put in cash to a foreign owned company, which somehow does not seem right! If however Tata are prepared to give up shares in the company in return for cash then fare enough, however, the government will still be playing investor/entrepreneur with tax payers money and with a company that is not actually a British company.

The US car manufacturers are requesting bail-out cash and US congress will be voting on a $15 billion (£10 billion) package as early as today (Wednesday 10th December 2008) for the big-three car companies, which includes Ford, Chrysler and General Motors. In return for this cash the US government is expected to take non-voting shares in the companies and details some strict financial recovery plan for the companies.

The key question to ask is whether or not these companies were already struggling before the credit crisis amid foreign competition from places like Japan, and whether this bail-out cash will be a short-term fix for a larger problem.

As each day goes by we see more and more how the sub-prime lending disaster in the US is impacting more and more and I think that world governments and in particular the UK and US are finding themselves in new territory.