Prem Sikka, missing the point again

It\’s amazing that an accounting Professor gets this so wrong.

The fledgling economic recovery requires that more spending power be placed in the hands of normal people and small businesses. All political parties should look at the operations of the insolvency industry, which is enriching itself at the expense of normal people.

The point of an insolvency, of a practitioner in it, isn\’t to get back as much as he can for the creditors.

Sure, it\’s a nice thing to do, they have a duty to do it as well. But that\’s not the actual reason that we have the system of bankruptcy and so on at all.

The aim is to get the productive assets out of some limbo where they cannot be used into a position where they can be. We simply don\’t want productive resources, whatever they are, labour, buildings, piles of steel or whatever, to be sitting around while someone tries to get the best price for them, or while there are arguments about who owes what to whom and so on. We want them flogged off and being used by someone else as fast as possible.

For the very definition of wealth creation is the movement of productive assets from low productivity uses to higher ones.

Insolvency methods are therefore the tail end of the process: it\’s the bankruptcy and the reallocation of the assets that is the important part and thus the part that we concentrate upon.

9 comments on “Prem Sikka, missing the point again

  1. That is odd isn`t it , you wonder of some of the people who write are adults sometimes . he is right about supprting small business though and theer are two screaningly obvious things a small business like ours needs

    1 Less Regulation
    2 Less Tax

    I do not understand this aparent requirentn for endless credit , if your model cannot survive without that sort of borrowing then it deserves to die I `

  2. Hmmm. Insolvency people are usually disgustingly expensive, let’s be honest about that.

    With things like Lehman Bros, surely it would have been cheaper to keep on the regular staff for another two or three months to wind everything down, rather than sacking them all and bringing in a load of expensive but totally untrained outsiders to work out who owes whom how much.

    And what Newmania says.

  3. “..more spending power be placed in the hands of normal people and …”: what’s this, a homophobe?

  4. this being “productive resources, whatever they are, labour, buildings, piles of steel or whatever, to be sitting around while someone tries to get the best price for them”

  5. I like, and agree with, TW’s theory but, in practice, the predominant driver of the insolvency market is the banks. And not much resource is going back into productive use. It is, rather, going to back onto the bank’s coffers. It is merely another form of the banks continuing to recapitalise at the expense of the wider economy. Given their buying power, the banks are bidding down insolvency practitioner fees and I do not think anyone should assume that rampant IP activity equates to enrichment.

  6. Isn’t it interesting that Tim always sides with corporate thieves. Insolvency industry is full of abuses and the accountants dealing with my uncle’s corner shop took nearly five years to finalise it. There was no reason for the delay and they made grab for everything that he owned. It finished when all the money vanished in their fees and unsecured creditors got big fat zero. How about stepping outside your opaque comfort zone Tim and looking at life that many of us have to face everyday? Or is that too much for you?

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