Chapter 7 Bankruptcy Is Good For The Economy

Bankruptcy helps capitalism work.  Not a thesis you see everyday, but jpeg

Megan Mcardle’s new book, The UP Side of Down:  Why Failing Well

Is The Key To Success points out that the American bankruptcy law

system is one of our advantages in global capitalism.

In a certain sense, the genius of America’s economic system is that it is so forgiving.  The United States is far and away the bankruptcy capital of the world.  Most of us don’t realize how uniquely generous it is.  But it’s a system that fosters innovation and risk taking, entrepeneurship, and helps folks who make mistakes, even bad ones, get back on their feet.  everywhere else, bankruptcy is a stigma, an enduring disgrace, a permanent stain.  here it’s just as likely to be the doorway to a business empire.  By wiping old debt off the books, we help the economy by speeding up the redeployment of capital – both human and financial.

(as quoted in Cato’s Letter from the Cato Institute)

Yeah, what she said.  America, the home of second chances.

More successful (now) people than you can name have bankruptcies in their history, like Larry King.  Some, more than one, like Donald Trump.

For small time entrepeneurs, easier personal bankruptcy mitigates the considerable risks of starting a business.   But that’s not the only way easier bankruptcy laws encourage entrepeneurship.  Taking entrepeneurial talent and strapping it to old debts is an enormous waste of a scarce resource. . . . 

Second chances.  Why should one mistake ruin a lifetime?

Why should we have to be right the first time?

I have not read the book yet, but ordered it.  (as you can through my Amazon affiliate link on the lower left page)

The second or third or even fourth idea might be the winner.  And the entrepeneur is learning things from businesses that fail and go into bankruptcy.

Economic failure is NOT a moral judgment, that you are a bad person.  To most of us, anyway.

Failing well is learning from our mistakes.  If you keep opening restaurants that end up in bankruptcy, maybe you are not learning.

American bankruptcy law, especially Chapter 7 bankruptcy, is about getting a fresh start.

Sure, there are consequences; you do not have a good credit rating unless you pay bills on time.

But there are also bad consequences, for everyone, if we do not let failed business and individuals file bankruptcy.

Small businesses provide most of the jobs in America, and we need to let the people who fail in them to file bankruptcy, so they can start another business.


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