REWARDING RULE BREAKERS

It is one of those usual rainy afternoons in Manila; heavy downpour causing flash floods during rush hour followed by traffic mayhem afterwards as people tried to get a ride after the rain and cars barely get moving at all due to both the floods and as well as due to public transports blocking the road. At any rate, in the worst of this kind of situations, monstrous traffic could extend for kilometers and a normally 30 minute travel could take as long as two to three hours. Traffic was so slow that one felt that it would be faster just to leave your car in the middle of the road and just walk home. Just when you think that you’re in a traffic nightmare already, you suddenly noticed vehicles usually jeepneys and tricycles but also other vehicles as well breaking from the “established traffic column”, overtaking virtually everybody else by travelling at the opposite lane and before you know it, what was once a 4 – lane 2 – way traffic (with no concrete barrier in the middle) has now in effect become a 4 – lane one – way traffic, which completely blocked the flow of the opposing traffic. As a result, somewhere down that lane, the same thing happened with the opposing traffic and whala! We have a gridlock! And what was expected to be a 2 – 3 hour traffic nightmare has now morphed into a traffic hell wherein cars barely crawl from their place. It take some time before a traffic cop came along and untangle the mess and guess what he did to solve the “crisis”? He lets the overtaking vehicles occupying the opposite lane to go first so as to “create an opening” for the opposing traffic to “flow” and eventually, traffic “normalizes” (as in reverting back to the “old” 4 – lane 2 – way traffic) and the flow “smoothens”. The traffic cop never even bothered about confiscating the licenses of these “rule breakers” and yet alone punishing them for creating the mess in the first place. What this story illustrate to us is that once a “rule breaker” or a “trouble maker” acting upon their self – serving interest and trying to grab a “fleeting” opportunity manages to “clog” the system to such an extent that the system breaks down entirely and that these “clog” of a rule breakers are so vital and strategic that they became the “key” to the solution to the mess that they created in the first place. As such, it became practical to reward these “clog” of a rule breakers by giving to them the gain they so desired (which in this case, getting to go first ahead of everybody else who diligently lined up in traffic) just in order to get the system back up running again. Of course, such scenario aren’t exclusively seen in Manila’s traffic during the rainy season, for the recent financial crisis plaguing the world is also an exemplary case in point. Here, we have a handful of financial institutions whose unbridled greed has managed to bring the entire global financial system to it’s knees and yet, instead of going the way of dinosaurs for being similarly “stupid”, we have to bail them out from the mess that they single handedly created because failure to do so would spell “the end of the world” as we know it (by “the end of the world”, think of it as the 21st century version of the Great Depression of the 1930s). Under “normal” market conditions, a company that makes a big mistake has to pay for it’s mistake big time; a company that commits a costly error has to pay dearly for that error and a company that happens to make a huge, momentous, and critically mortal “bubu” has to pay for it with every cents it had to the extent of going belly up. That’s, the law of the market. Well, at least that is true for “small” companies that don’t cause critical “strain” to the well – being of the economy. For companies that are too large, too vital, too strategic, too “important” to fail, the laws of the market are simply inapplicable. Being too large however, doesn’t necessarily exempt them from the laws of the market, a company must also be a “vital clog” as well as in the case in point. If AIG were allowed to fail, then, we would see the unwinding of derivative positions worldwide precipitating a catastrophe of incalculable proportions as funds from bank deposits, from retirement savings, from governments would just disappear. Or if the US government failed to bailout Wall Street, the credit market would be utterly destroyed forcing us to pay everything in cash (including global trade) and thus, drastically reduce the scale of economies worldwide (one reason why economy grows is because of credit as one can purchase and eventually sell more from what little capital they have). Yet, it is these very same companies that are the very reason why we’re in such a mess in the first place. And therefore, we “reward” these companies by bailing them out without “punishing” them in the way we punish lesser companies with little clout. Rewarding rule breakers are not really fair nor right but in scenarios wherein they are the “vital clog” to the smooth functioning of the system, “rewarding” these rule breakers are the most pragmatic thing to do if not the best solution to the problem. Even so, it is still hard to swallow and is still distasteful.