NO EXIT IN JAPAN

Japan's stronger firms have responded relatively quickly to the recession, in marked contrast to the dithering during the "lost decade" of the 1990s. However, it's certain that efforts to keep their struggling companies afloat are hurting them. All of this does enormous harm, says the Economist:

• Tellingly, the shut-down rate of companies in Japan is around half that in America and Britain:
• And the number of corporate insolvencies is expected to increase in Japan this year by only 15 percent, despite the depth of its recession, compared with more than 30 percent in Western Europe and 40 percent in America.

Keeping struggling firms alive fossilizes industry structures and hinders the development of a more flexible labor market and a business environment more supportive of new-company creation -- two areas where Japan is also sadly deficient.

Furthermore, Japan's experience -- a downturn followed by years of stagnation -- serves as a reminder of the importance of destruction in capitalism.

Instead of continuing to prop up struggling companies, Japan and other countries need to let them go under, so that new, better ones can be created...

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