A dinner conversation with friends last night veered into the realm of things economic, and my wife and I brought up the topic of bankruptcy. The small development where we live has its own well and water company and we received notice that a local grower had filed for bankruptcy, leaving a moderately large unpaid water bill. It is unclear how much, if any, of these funds will be recovered. The owner that filed for bankruptcy, as I understand it, has three other relate companies that are solvent, and he is otherwise not under financial duress. This businessman and family are well respected members of the community with unsullied reputations. The magnitude of the loss to individuals in our community is not large, on the order of several hundred dollars per household, so it’s more the principle of the issue than economic hardship that piqued our angst.

As a strong proponent of capitalism, it bothered me (when the effects of the wine had worn off)  that I found myself coming down on the side of, if not the reinstitution of debtor prison, a rethinking of the corporate/bankruptcy paradigm. When considering such matters in the sober light of reason, three things need to be borne in mind:

  1. John Adams’ statement, “Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other,” applies equally well to the institution of capitalism. Capitalism ultimately can be no better than the people practicing it, and regulations will always be woefully inadequate when trying to legislate morality.
  2. Perfect is the enemy of good. Debtor prisons may have, to an extent, deterred scurrilous behavior, but the consensus was that it trapped more well-meaning but unfortunate souls and had more unwanted economic repercussions than the benefits afforded.
  3. Watch out for the law of unintended consequences. If we did ever decide to abolish the concept of corporations as legal entities separate from their human owners and relegate the right to bankruptcy protection to the trash bin of human error, like the aforementioned debtors’ prison, the ripple effect would likely augment to an economic tsunami. While such a change might deter rogues from using the system in legal, but arguably immoral, ways, it would simultaneously stifle risk-taking and economic growth, and make us noncompetitive in a world economy.

Capitalism isn’t perfect; it’s just the most perfect system we’ve been able to devise, and it can ultimately be no better than its practitioners. In a global marketplace, assuring that players will, in the aggregate, be upstanding citizens is a monumental, perhaps insurmountable, task. I’ve argued in the past that socialism is inherently flawed, and capitalism is not, but can be corrupted. Proponents of the former ideology may say I’m being intellectually dishonest. But I have two things on my side: history, and human nature.

I maintain that socialism is a losing game, and capitalism is ours to lose, depending on how we game it.


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One Response to “PLAYING THE GAME”

  1. Sue Says:

    I’m glad to see your comments. My opinion is that the family in question doesn’t have as unsullied a reputation as you believe. This is a small town and folks don’t always reveal what they know.

    Clearly, bad eggs among capitalists have far more influence than they deserve. Bankruptcy should never be an okay thing, but this kind of activity is far too common. The conversation made me wish I’d brought my brother who runs his own business and has been hit by hundreds of thousands of dollars of loss due to the more or less routine filings of bankruptcies by unscrupulous capitalists in the mining industry.

    Your neighbors are only copying the giants. Corporate greed is here to stay.

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