Bankruptcy: The Most Important Job-Creation Tool

How do I get there?

Simple.

Jobs are created in the private sector, not the public (government) sector. If somebody has a government job, the money to pay for that position came from the private sector. No private sector at all, no jobs at all. Except under socialism and communism, and the problem with socialism, according to Margaret Thatcher, is that eventually you run out of other people's money.

Therefore, if you have a job and you can feed your family, thank an entrepreneur. And thank bankruptcy.

Because an entrepreneur, the guy who assembles the assets and the employees of a business, isn't totally stupid.

He will take risks; his risk is failure. And if you're running a business and you guess wrong, or the business environment changes, you get to FIRE a bunch of people, and many entrepreneurs would rather drink molten lava.

Our economic system is driven by a profit motive, and it provides the highest standard of living in the world for the largest number of people.

All that could change overnight, of course.

But back to the topic: an entrepreneur is the guy who decides that the world needs a better juice drink. So he assembles the lease for the juice bar location. He interviews the potential employees. He begs Aunt Martha for the seed money, and then the SBA, and puts up his house for security. He works 20 hours a day for the first year, because he can't afford enough employees during that rough, rough first year.

Then he loses the farm. He guesses wrong. The business tanks. Remember, the average self-made American millionaire goes broke FOUR TIMES before he gets to keep it.

What would happen if people went to jail if they didn't pay their debts?

That's not a crazy suggestion, since for much of history, there have been prisons for debtors, and there still are in some countries.

Those countries typically don't have a vibrant economy.

Because an entrepreneur is smart. And if the risk of building a business is that he's going to get to go to jail if it doesn't work well, that will reduce the number of businesses being built very quickly, and also the number of jobs that businesses build.

So let's track it again: while banks may believe that bankruptcy is bad, it's really very good for the economy. Because it's hard to put together a business (no school does a good job of teaching you how to start and run a tiny business; sorry, Harvard). Therefore, an entrepreneur has to learn on the job. And risk a business failure every single time.

Because there are big risks in running a business (the SBA and the bank foreclose on your house, sue you for big bucks, and you get to tell all the friends you hired over twenty years that they have to go find somebody smart to work for), your third wife leaves you because she only liked your jet ski, and a bad time is had by all.

But a clever entrepreneur understands that if he files a bankruptcy, and can then assemble the seed money, and find employees and train them better, and find a better location, and advertise on the internet this time, and work 23 hours a day instead of 20, HE CAN MAKE IT WORK THIS TIME!

And he's right. Eventually he'll get it to work, and there will be more productive jobs creating widgets, or giving better haircuts, or building better mousetraps, or serving more and better crayfish etouffee, or teaching speed reading.

But he won't do it unless there's some way to get out from under and start over. And you really, really want an entrepreneur to be able to start over, after he's learned some of the lessons about running a business that they don't teach in school.

If you want your kid to find a job.