In the last twenty years corporate bankruptcy has been pushed out of the shadows of legal and corporate marginality into the spotlight of daily business news. Its financial and human repercussions are enormous. In many advanced economies, including Britain and the United States, corporate bankruptcy has variously emerged as a new strategic device for corporate managers, as a new frontier for highly expert lawyers and accountants, and as a matter of new urgency for governments and officials who want to encourage entrepreneurial risk-taking while they lower tariff barriers, but preserve jobs and protect home industries.
Bankruptcy is a defining characteristic of a market economy: it demarcates the limits of extending credit, confronting risk, entrepreneurial venture, and corporate self-determination; it engages all sectors of the economy; and it expresses fundamental conflicts at the heart of the capitalist political economy between labor and capital, owners and managers, debtors and creditors, and the state and the market.
Not only have major corporations in the United States become casualties (for example, W. T. Grant, Continental Airlines, Federated Stores, Macy's), but entire industries, such as steel, the airlines, retail clothing, high technology, communications, and savings and loans, have existed under a pall of financial failure. The number of concerns seeking shelter in Chapters 10 and 11 of the bankruptcy code rose from 1,435 in 1970 to 5,458 in 1980, then trebled to 17,465 by 1989, and reached a high of 24,029 in 1992 before falling back to 11,168 in 1995. The liabilities of failed companies skyrocketed from $1.89 trillion in 1970 to a high of $96.8 trillion in 1992 falling again in 1995 to $29.4 trillion.1
In Britain rates of insolvency have risen to historic highs, punctuated quite dramatically by company failures from Rolls Royce through the____________________