Success can begin with bankruptcy
In Britain entrepreneurs have always been a bit of a joke. As Dragons’ Den contestants suggest, they are Caractacus Potts figures with eccentric schemes that almost never see the light of day. Britain treats strivers with an aristocratic distaste, believing that it is much worse to have tried and failed than never to have tried at all.
The opposite is true in Untied States. In fact, the most enterprising country in the world is built not just on aspiration, but on failing with maximum efficiency. In The Ascent of Money Niall Ferguson visits Memphis, the bankruptcy capital of the United States. “The remarkable thing,” he observes, “is how relatively painless the process seems to be… Most borrowers who run into difficulties in Memphis can escape or at least reduce their debts, stigma-free and physically unharmed.”
American law encourages entrepreneurship. That means giving people a break when their plans go wrong. As a result, risk-takers are not punished, but protected. Which is why businessmen like Ford, Disney and Heinz are household names today, even though all three of them went bankrupt before making it big.
Equally, on a corporate level, the American legal system tries hard to keep companies alive. The management team of an insolvent corporation will often stay in place and work to bring their organisation back into the black. For example, when American Airlines filed for bankruptcy last year, the aim was not to wind up the airline, but to seek protection from its creditors. The proceedings are a means of resolution. This would be hard to achieve in Britain. Over here if a company goes into administration, the board of directors are replaced. What’s more, following insolvency, directors can be disqualified from running another company for up to 15 years.
However, the British and American systems are becoming more similar over time. The real change that’s needed is not legal, but social. In Britain we think of bankruptcy as not just a professional disaster, but also a moral failure.
In Victorian society, thrift was a virtue and profligacy a sin. Charles Dickens’s novels frequently depict debtors' prisons as shameful, hopeless places. Dickens knew what he was talking about: at the age of 12 he was forced to leave school and work in a shoe-blacking factory because his father has been sent to Marshalsea, the Southwark debtors' prison. The experience haunted Dickens’s writing, and years later he confessed that “my whole nature was so penetrated with grief and humiliation that even now, famous and caressed and happy, I often forget… and wander desolately back to that time of my life.”
Debtor’s prisons are long gone, but the stigma has never really left. Coupled with that, in Britain today individual debt is rarely accumulated for business ventures, but for personal consumption. As a result, our spirit of enterprise has been snuffed out. This has got to change, which will mean getting over our elegant distaste for people on the make.
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September 19th, 2012 17:15
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