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Everybody better off, or just those who were holding ownership of unsafe businesses? Isn't the whole point of capitalism that failing businesses fail so that ne

Everybody better off, or just those who were holding ownership of unsafe businesses? Isn't the whole point of capitalism that failing businesses fail so that new and better businesses can take their place? Yeah it sucks for those people that failed, but their continued existence, despite not being profitable or stable, stands in the way of new and better business rising in it's place.

snowwrestler 8y ago
> Isn't the whole point of capitalism that failing businesses fail so that new and better businesses can take their place? Yes, and that's why Chapter 7 bankruptcy exists. Not every failing business can opt for Chapter 11. Chapter 11 gives businesses that can still succeed an opportunity to do so, without having to make the time-consuming full round trip through liquidation to startup to scaling to functioning business again. If it works, it benefits employees and customers who depend on the operations of the business, and it benefits the creditors and investors, since a profitable business will generate more money for them over time than a one-time liquidation would.
jackcosgrove 8y ago
If you could underline a single event in world history that could be called "the birth of capitalism", it would be the invention of the LLC by the Dutch Republic. Historically there has been no shortage of creditors using the long arm of the law to guard against moral hazard. Capitalism took off because of limited liability and bankruptcy law. Feudalism is an economy stuck in a local minimum because there's not enough new blood being entrusted with capital. Mix up the capital distribution a bit more, and yes there will be more business failures. But that capital will also find its way into the hands of entrepreneurs who are more skilled than the creditors. It's VC investing writ large: lose a little on most, make a lot on a few.

snowwrestler 8y ago

> Isn't the whole point of capitalism that failing businesses fail so that new and better businesses can take their place? Yes, and that's why Chapter 7 bankruptcy exists. Not every failing business can opt for Chapter 11. Chapter 11 gives businesses that can still succeed an opportunity to do so, without having to make the time-consuming full round trip through liquidation to startup to scaling to functioning business again. If it works, it benefits employees and customers who depend on the operations of the business, and it benefits the creditors and investors, since a profitable business will generate more money for them over time than a one-time liquidation would.

jackcosgrove 8y ago

If you could underline a single event in world history that could be called "the birth of capitalism", it would be the invention of the LLC by the Dutch Republic. Historically there has been no shortage of creditors using the long arm of the law to guard against moral hazard. Capitalism took off because of limited liability and bankruptcy law. Feudalism is an economy stuck in a local minimum because there's not enough new blood being entrusted with capital. Mix up the capital distribution a bit more, and yes there will be more business failures. But that capital will also find its way into the hands of entrepreneurs who are more skilled than the creditors. It's VC investing writ large: lose a little on most, make a lot on a few.