Gunnar Nelson, Chapter 8, Question 2

After reading chapter 8 in Naked Economics, I have learned that the government stepping in can suppress the stimulation and growth of an Economy. I have come to learn and appreciate the effects of government subsidies through my own experiences, but came to the overall conclusion in this chapter. 

In 2009 the car company GM went bankrupt, the government decided to bail out GM, spending over 50 billion dollars in expenses. If the government had not decided to bailout GM, the company would have had to cut back on cars on their line that were not selling as well as the overall size and employment of their company would have to be re-utilized. As a result the company would be forced to produce more effectively and grow economically stronger as a result of their failure. GM would have probably turned out just fine. But as a result of the bailout, GM has an overproduction of cars and resources that are sitting in a vacant lot. This is what would happen if the government stepped in, however there are companies that are not bailed out of bankruptcy and do just fine. 

Hostess' comback in the competative world represents just that. Hostess declared bankruptcy, and around 7 months later, stores were re-stocking shelves with twinkies, ding-dongs, and mini-donuts. How did this happen? Hostess made a decision to withdraw all production and revise their employment, and running of their corporation. " The sweetest comeback in history" has been attributed to economic a corporal running decisions without subsidies or a bailout from the government.