Too Yummy To Fail?

Hostess is bankrupt. Bye bye to Twinkies, bye bye to HoHos.

The fault at this point seems to be with the union employees who, while showcasing their public school-imparted understanding of economics, insisted that it would only be fair if the company would pay them more than they were able to. Shockingly, this didn't work.

To be fair, as the line between government and private enterprise becomes ever more blurred, they may have expected Hostess to be declared "Too Yummy To Fail" and bailed out.

Even now, it is only a matter of time until a well intention-ed MSM pundit decries the bankruptcy of Hostess as yet another failing of America's greedy free-market capitalism, and a ringing endorsement of the need for government to put a check on unscrupulous business practices that take advantage of America's most beloved sugary snack foods.

Nonsense.

Let me propose two solutions.

1)

A bureaucracy.  let's call it the Patriotic Board of Patriotism, that decides when, something is just Too Important to the American cultural or commercial landscape to be allowed to perish. The PBP would take control of the factories from Hostess and operate them with the full resources of the federal reserve printing press the US Government, at an efficiency to rival Amtrak or maybe even the USPS, until such time as a suitable private sector investor can be found (i.e. never).

2)

Hostess will sell off buildings and equipment to the highest bidder, including naming rights to their products. Hostess' market share is now up for grabs. Everyone knows this. Existing or new manufacturers will need to increase their production to make up for this. They either currently have capital (buildings, equipment, etc.) capable of making up this production increase or they can purchase it.

Taking in to account the state of their current capital (depreciation, maintenance costs, etc.) they can calculate at what price it would make sense for them to purchase Hostess' used capital. If it is cost effective, it will be bought. If it is not cost effective, it will go to the next best use, which may well be selling it as scrap.

So what we will end up with is new or current manufacturers, who have their financial house in order (as demonstrated by their solvency), using either their own excess production capacity or capacity made up of formerly Hostess capital, making some of the exact same products*, **, ***.

So, with solution 1, we have a taxpayer (involuntarily-) funded
product with all of the management efficiency we've come to know and love from the government, or 2, in most cases an equivalent product at an equivalent price from manufacturers with healthier financial histories.

It comes down to choosing an inefficient and involuntary solution just to satisfy the emotional urge to do something visible, or choosing a voluntary solution with the most**** efficient outcome.


* Products which were not profitable for Hostess have a lower probability of being profitable for the new owner of the naming rights.There is therefore a lower probability of these products surviving the bankruptcy.

** For those who feel that all of the formerly Hostess products should be made regardless of profitability  you must be willing to either pay a premium, or deal with it, because (other than in the context of using an unprofitable product as a //loss leader//) it uses more resources to make an unprofitable product than is received in exchange for it.

*** For those who worry that a company will buy naming rights and then produce an inferior product, simply vote with your wallet. Either the producer will step up their game, or a competitor will step in to meet consumer demand.


**** Most efficient is not the same as perfectly efficient. It is simply more efficient than any other plausible option.