bankruptcy [was: Neoclassical bizarreness!!!]

[Jim Devine <jdevine03@xxxxxxxxx>]

On 9/20/05, David B. Shemano <dshemano@xxxxxxxxxx> wrote:
> I agree that the article was quite good.  However, I did not follow why the story supports the notion that deregulation did (does) not work.  Why is bankruptcy evidence of systemic failure?  Why should the shareholders of airlines, as opposed to any other industry, be guaranteed a rate of return?  Why should the employees of airlines, as opposed to any other industry, be guaranteed employment and a specific level of wages and benefits?<

To Marx, bankruptcy (in the sense of going out of business, not the
technical definition) was central to his predictions about the trend
of a capitalism unfettered by a powerful labor movement or a
democratically-run state (as like nowadays). It was a symptom of
systemic _success_ (from a capitalist point of view). Accumulation
coincides with the concentration and centralization of capital and
increasing inequality between classes, as the smaller and weaker
capitalists are driven out of business and into the proletariat. This,
he predicted, would lead to increased societal tension and eventually
class antagonism.

To Jack London, "Bankruptcy [was] a peculiar institution that enabled
an individual, who had failed in competitive industry, to forego
paying his debts. The effect was to ameliorate the too savage
conditions of the fang-and-claw social struggle." [Chapter 8, note 4,
of THE IRON HEEL.] This suggests that bankruptcy laws would moderate
the empirical expression of Marx's prediction. But it also indicates
that bankruptcy would be a symptom of capitalism's normal workings.
Instead of debtors' prison, there is bankruptcy court.

In the airline biz, bankruptcy of major carriers is a symptom of the
workings of Marx's prediction. The airlines (e.g., Southwest, JetBlue)
that have succeeded in driving down wages, benefits, and even safety
costs drive out the ones that have treated their workers with a
modicum of decency (rather than as interchangeable parts), likely
because of pressure from unions.

As for societal tension, this can be seen in the attitudes we've seen
from employees at United Airlines (an airline that's been under
financial pressure for quite some time). When my wife once asked a
"customer service agent" whether or not she'd be late to her plane,
the agent tartly said "how fast can you run?" This is just one
example.

Doug Henwood has presented stats that indicate that the "deregulation"
of the airline industry hasn't really cut ticket costs in real terms.
I know that the _quality_ of air flight has not improved. Au
contraire. The seats are more crowded. There's no real food. They seem
to have reduced the number of bathrooms per customer.

Since bankruptcy laws simply slow down the trend, maybe we should
follow the libertarian lead and get rid of them. To Marx, they delay
the development of capitalism, while to libertarians it prevents the
attainment of the True Efficiency that the Invisible Hand blesses us
with. Further, it seems to me that the bankruptcy lawyers have been a
coddled caste at the expense of the public. In return for exalted
salaries, they help ameliorate the allegedly savage conditions of the
fang-and-claw social struggle. In this new Gilded Age, this is at best
an anachronism: only those who are well-connected and noble should be
protected from their creditors. The unemployed lawyers could easily
get jobs as wardens or guards in debtors' prisons. ;-)
--
Jim Devine
"Segui il tuo corso, e lascia dir le genti." (Go your own way and let
people talk.) -- Karl, paraphrasing Dante.