Society encourages cash irresponsibility

Nov 23 2005 By Bill Midgley, The Journal

I think it was Mark Twain who first claimed that he started each day by looking at the obituaries to see if his name was there, and if not, then get on with the affairs of the day. Perhaps an apocryphal story and one which has been attributed to many others since.

Whilst I must confess that I only rarely look at the deaths column in newspapers (perhaps for the same reason) I am addicted to studying in great detail the lists of bankruptcies which appear all too regularly, perhaps (again) to see if my name is there!

What alarms me, however, is that there seem to be more bankruptcies than deaths at the present time - an indication of the attitude that we now have as a society towards debt, but also of the ease with which individuals can now free themselves from the former stigma of being declared insolvent. It is not all that long ago that bankruptcy was very often the end of a promising career for an individual, particularly small businessmen who may have been let down by one customer, or where a risk turned out to be a step too far in the early days of a business.

Certainly I was very much an advocate of the American system whereby one bankruptcy at least may be seen as tolerable although it should not blight an individual's flair and skills for the rest of a working life.

However, we now seem to live in a society where bankruptcy is to be encouraged, particularly among individuals who have deliberately spent beyond their means and are now encouraged to seek what is an easy way out. Yet shorter periods of any restraint upon such individuals, which are now likely to happen, will only encourage further such deliberate over-spending and an avoidance of responsibility.

Let's acknowledge that we all pay the cost of those who do not meet their own responsibilities, and indeed there is often a marked knock-on effect which means, in turn, many of the small traders are pushed to the verge of bringing in an insolvency practitioner. There has to be a hard line drawn, and a reasonable period of time, before any bankrupt can hold directorships, borrow money, or become involved in the normal financial transactions that are available to the broader community.

Debt advisers who recommend bankruptcy as the easiest and first course of action are acting irresponsibly at best, with little regard to the effects that such a course of action may have upon the prices which we ultimately have to pay. Likewise, those lenders who offer high levels of credit or cheap loans without taking due note to whom they are making such offers again have a responsibility which they often fail to acknowledge. It is those organisations who will complain the loudest when their customers fail to repay their debts.

In a time where Corporate Social Responsibility is being promoted to all businesses it does mean that businesses as well as individuals must accept the appropriate level of such responsibility for their actions, and, if necessary, be prepared to pay the often high price which should be demanded of them.

Bill Midgley is President of British Chambers of Commerce.