The World Turned Upside Down
NPR's "Market Place" has gleefully reported that China has just revised its bankruptcy law.
The new law says that if a company files for bankruptcy, the first people to be paid from the proceeds gained from liquidating the assets of the company are the banks and other lenders. The last people to be paid from these proceeds, if there is anything left, are the employees. This is how it is in most of the rest of the world.
The old bankruptcy law put the employees at the from of the line of people to be paid from the liquidation of the company's assests. This, NPR said, was a holdover from the old system of the "Iorn Ricebowl".
"Market Place's" opinion was that by repaying the loans first enabled banks to continue to invest in new businesses.
Unstated here was that the unpaid workers were better able to weather financial hard times since a return on their "investment" -- I suppose that means their labor -- will not result in any further investment in a new business -- that is, they starve to death or something like that. Alternatively, they may muddle through by getting help from relatives or friends or just toughing it out until they can get another job. In other words, society makes up for the loss.
Is this another way of creating an externality?
The new law says that if a company files for bankruptcy, the first people to be paid from the proceeds gained from liquidating the assets of the company are the banks and other lenders. The last people to be paid from these proceeds, if there is anything left, are the employees. This is how it is in most of the rest of the world.
The old bankruptcy law put the employees at the from of the line of people to be paid from the liquidation of the company's assests. This, NPR said, was a holdover from the old system of the "Iorn Ricebowl".
"Market Place's" opinion was that by repaying the loans first enabled banks to continue to invest in new businesses.
Unstated here was that the unpaid workers were better able to weather financial hard times since a return on their "investment" -- I suppose that means their labor -- will not result in any further investment in a new business -- that is, they starve to death or something like that. Alternatively, they may muddle through by getting help from relatives or friends or just toughing it out until they can get another job. In other words, society makes up for the loss.
Is this another way of creating an externality?
posted by Godel at 9:17 PM
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