Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay its creditors. Since the beginning of the current financial crisis thousands of businesses and individuals have filed bankruptcy in America. Most of America has no protection from bankruptcy. The US government has invented a term “too big to fail” which seems to have immunized the nation’s largest businesses from bankruptcy.
Companies that have been labeled “too big to fail” directly and indirectly (suppliers) employ millions of people. Over the past year the Government contributed billions of US tax payer money to these behemoth companies to prevent them from meeting a self inflicted fate.
The recent optimism over banks seems somewhat over exaggerated considering we have already given hundreds of billions of dollars to these banks and they need 75 billion more. The treasury secretary has been quoted that he believes the banks can “earn their way out” of this crisis. Tax payer allowed these once doomed banks to raise their profit margins so they can “earn their way out” of the hole they dug themselves into (i.e. questionable credit card practices that has taken recent political stage).
The US auto industry has been dying slowly for decades. Two out of the three US auto manufacturers were pulled from the thaws bankruptcy late last year. Now one of them has already entered bankruptcy and the other is all but guaranteed to file. So this intervention by the US government just ended up being a waste of taxpayer money.
Bankruptcy is a clear case that capitalism is successful. It is Business’s form of natural selection. A business goes bankrupt when supply exceeds demand and or new innovation trumps the old. Bankruptcy makes room for new businesses that are better suited for the times. Since bankruptcy is such an integral part of capitalism and the evolution of business, what happens when you manipulate natural selection?
