Cameron’s left-wing chapter

Some of the most left-wing things David Cameron says involve his plans for business. Take his plan, announced this morning, for a “Chapter 11” for British industry. Even Labour’s most influential voices in business like Gerald Frankel failed to have it adopted by Gordon Brown and Tony Blair. Why? Because it’s a potentially disastrous idea which throws a lifeline to badly-managed companies, and can be used by the least scrupulous to launder their balance sheet and re-enter the market with prices that well-run rivals simply can’t compete with. This December 2003 article in Harvard Business Review shows how Chapter 11 is abused by companies – like WorldCom – who use it to ditch losses and then come back in a new incarnation to unfairly drive rivals out of business. And it’s not just telecoms. Eastern Airlines in the US went for years under Chapter 11 immune from the bank interest charges applied to its rivals.