Whenever anyone says governments should be run like businesses, it’s worth remembering that most businesses sooner or later go broke. The business sector is a sort of weathervane in a hurricane for economics.
Any level of search for business bankruptcies by sector will unearth a lot of information. That never seems to have an impact on policy or anything else. Whether you’re in food or in corporate fantasyland, all is as it should be.
In the US, bankruptcies are across the board, in every sector. Last year saw a 15-year peak in bankruptcies.
High levels of economic stress don’t help. Business margins are vulnerabilities. If you’re suddenly paying tariffs you didn’t have to pay, or there are supply issues, the bullets are on their way.
Of course, it’s not that simple. Inflation, debt pressures, interest rates, and knock-on extra charges from freight and other tourist attractions also help. There are also inescapable charges like cost of living, just in case you try breathing.
The Great Garbage Scow of Capitalism seems to have hit more than one iceberg. One of those icebergs is finance, the new four-letter word for all occasions.
It’s easily arguable that many businesses don’t really understand finance. They obviously don’t understand debt and equity manipulation. Private equity is now being referred to as a virtual serial killer of businesses.
According to Private Equity Stakeholder Project, private equity was involved in the majority, that’s 64%, of 2025 bankruptcies. Nobody’s surprised. Private equity seeks to maximize value out of equity and sometimes debt. There are cases of private equity lending to businesses in which they own stakes to the point of bankruptcy. Private equity can then own the debt in the form of assets.
Pretty simple. Not illegal. Not good business, either. People can be talked far more easily into deals they don’t understand than deals they do understand.
Apparently, MBAs don’t come with built-in Applied Practical Cynicism as a mandatory requirement.
We need to generalize at this point.
The economic effects are far worse and much longer-lasting. The collateral damage is people, associated businesses, revenue, and a gutted market in commercial property and supply chains.
We’re not necessarily talking about dumb businesses or dumb people. We’re talking about people who think they’re doing their jobs. We’re also talking about businesses subjected to a constant barrage of deals. Mainly bad deals. Bad deals sell. All you need to do is agree.
The US economy can fairly be described as in a state of shock. It wasn’t that great for quite a while. The 2008 Great Financial Crisis knocked the stuffing out of most of the private asset insulation America was using for cover.
The sub primes disaster short-sold the entire American economy right in its heartland. Some of that debt was so toxic that it’s still stinking even now. That was the Sacred Finance Sector at work.
We’ll leave out the ridiculously leveraged zombie companies on the stock market. It’d take too long. Unmanageable debt is the destroyer of wealth.
Turning debt into a commodity can only work one way. Junk bonds are bad debt, and nobody ever got rich with junk bonds, either.
Bankruptcies are an inevitable byproduct of rampant, unregulated debt, but so many? Across all sectors? Someone has to be making money out of these constant disasters, surely?
The other factor is, of course, the corporate necrosis known as corporate America. The influence of American business cannot be overstated. A dumb idea in the States invariably becomes standard global practice. Third World loans were another money-making fad for a while. Now it’s mainstream.
Big rents started in the US. So did pass-the-parcel debt. The world is now indebted up to its ancestral cliches. At this rate, you’ll be able to use your DNA, or preferably your descendants’ DNA, as collateral.
Wanna borrow a few catastrophes?
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Disclaimer
The opinions expressed in this Op-Ed are those of the author. They do not purport to reflect the opinions or views of the Digital Journal or its members.
