That’s a nice fairytale. Let’s be honest here, PE firms exist to make partners rich, not to reallocate misused capital and force people to get a productive job

That’s a nice fairytale. Let’s be honest here, PE firms exist to make partners rich, not to reallocate misused capital and force people to get a productive job. Their mechanisms are described by the OP and may sometimes result in those things but those are not the goal or the motivation. Bankruptcies are a necessary evil but they are always awful, traumatic experiences for employees, and often PE will force reorgs, acquisitions and layoffs not because they are best for the economy or employees but because they are best for the new owners.