There’s many things that we don’t know much about and they tend to be the things that we don’t opine upon. There’s a (rather smaller) set of things we do know something about and we do tend to opine upon them. We would put this forward as useful general advice in fact. So it’s just too, too, embarrassing to see one of our national legislators revealing that he’s got an opinion on a subject where he is obviously entirely clueless:
USC collapsed into administration in January but was rescued days later by another Sports Direct subsidiary, Republic, as part of a controversial pre-pack deal that saw staff given just 15 minutes notice of their redundancy.
In a testy three hour exchange, Ian Davidson, the Labour MP who chairs the committee, said that while Sports Direct was legally shielded from the losses incurred by USC’s collapse, it had a “moral” duty to foot the bill for USC’s oustanding debts and redundancy payments.
“You have managed to retain all the good bits remove bad bits. You’ve done over the taxpayer as well. We have ended up carrying the debt and you’ve strolled off into sunset with the money. It’s good business if you can get away with it. It may be legal but it’s not moral,” he said.
A market economy is, in one sense, an experimental economy. People continually try new combinations of whatevers, within the technological envelope of what is possible, and see what happens. Most of these experiments fail but enough succeed that the general living standard rises over the years and decades. We like this. An extremely important part of such an experimental economy being, well, what do we do with the failed experiments?
The complaint here is that the debts have been put over into one pot while the potentially productive assets have been detached from the debts and sold on (for whatever sum) to someone who might be able to make better use of them. This is the complaint note: but this is not a bug in bankruptcy, it’s actually the entire damn point.
If we leave those potentially profitable assets attached to that debt then the value of the combination is less than zero. That’s actually what “being bankrupt” means. Those assets cannot therefore be used to do something more useful as no one will take them on. Who would take on something with a negative value, if you lose money just by walking in the door? Thus what the process of bankruptcy actually is. Separating the debts, into one pot, from the assets into another. So that those assets might, at least potentially, be used in a manner that adds value rather than decreases it. If we don’t do this then every experimental failure leaves assets that cannot be used by anyone: and the entire society will thus become poorer over time.
“You have managed to retain all the good bits remove bad bits.”
Yes, that’s the point of having a bankruptcy process.
It might be a bit much to hope for our being ruled by wise Solons but might we at least expect that our Solons do in fact have a clue?