Tags: bailout | tech | sector | Japan

Governments Without Money Are Now Bailing Out Tech Sector

By    |   Friday, 19 Oct 2012 07:39 AM

Bailouts were originally targeted at the financial sector in 2008, as a global credit crisis made it impossible for companies to fund operations. Taxpayers soon learned that companies like GE and General Motors extended financing to their customers and also needed help to survive.

Next, taxpayers learned that the United Auto Workers union, doing business as GM and Chrysler, needed a bailout.

This strategy of using public money to fund private corporations was not confined to the United States. Governments around the world have supported various ventures in the past few years in an effort to decrease the number of unemployed.

Now Japan is demonstrating that unprofitable companies in profitable industries can be bailed out, as the country finalizes a plan to pump $2.5 billion into Renesas Electronics, the world’s largest maker of microcontrollers.

Bloomberg reported that the customer list for Renesas includes Apple and Nintendo. The company is expected to lose more than $1.8 billion this year, after losing almost $6 billion in the last seven years.

Japan has spent more than 20 years struggling with slow economic growth and the near constant threat of recession. This latest bailout shows no sector is immune from economic pressures, and governments around the world are willing to spend cash they don’t have in an attempt to preserve jobs.

Small manufacturers are meeting industry needs profitably, and large companies often fail to adapt to changes in rapidly moving industries. Governments have a poor track record when it comes to picking winners in any industry, and Japan’s intervention is probably only going to delay the inevitable demise of the world’s largest microcontroller manufacturer.

This short-term delay, financed with deficit spending, will cost taxpayers billions now and will then delay growth for years as future taxpayers pay the bills.

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MichaelCarr
Bailouts were originally targeted at the financial sector in 2008, as a global credit crisis made it impossible for companies to fund operations. Taxpayers soon learned that companies like GE and General Motors extended financing to their customers and also needed help to survive.
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2012-39-19
Friday, 19 Oct 2012 07:39 AM
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