A stark inequality persists in how financial failures are handled. Corporations and the wealthy elite benefit from confusing legal protections and “restructuring options” when they default on payments or declare bankruptcy.
Banks enjoy safeguards through government-backed mechanisms and regulatory leniency.
Meanwhile, the middle class and ordinary citizens in most countries face bureaucracy, intimidation from recovery agents, repossessions and limited recourse. This disparity raises fundamental questions about fairness, the role of government, and whether the rule of law truly its true mission to serve the masses, or perpetuate privilege.
Purpose of Banking
One of banking’s and other approved money lending entities’ expansion purposes was to give ordinary people access to credit in non-exploitative terms. But the reality is opposite. Exorbitant interest rates, fees, abusive agents for the ordinary. Professional managers, gentle emails, favorable terms for the rich.
Corporate entities are provided a structured framework for resolving defaults. Only expensive lawyers can decode the provisions and draft responses.
This law allows companies to undergo resolution processes where creditors take control, often leading to restructuring rather than outright liquidation.
Peaceful Bankruptcy
Promoters shield their personal assets by structuring them through a web of companies, leveraging limited liability principles. This opportunity is out of reach for most of the population.
In high-profile cases like Vijay Mallya of Kingfisher Airlines or Nirav Modi of Firestar International, promoters wilfully default and flee the country.
Their debts linger on with personal accountability proving difficult to enforce due to complex corporate veils. Banks, as major creditors, are often bailed out or supported by government interventions, even protecting their massive non-performing assets (NPAs).
For the majority, lenders swiftly repossess assets Homes, vehicles, or savings can be seized without the luxury of negotiation or restructuring timelines. This leaves them no equivalent “safety nets.”
Rule of Law is Meant for the Rich
Rule of law was designed and meant to protect the masses from arbitrary power, whether from kings or elites, ensuring timely equality and justice for all.
In practice, it favors the economically privileged by embedding protections that prioritize corporate stability and economic growth over individual welfare.
Laws streamline corporate resolutions to minimize economic disruption. If the core purpose of rule of law is to level the playing field, shouldn’t safeguards be universal?
Without change, the system risks subverting its own ideals, trapping the underprivileged in cycles of debt while the elite restructure and rebound.
The Government’s Role: Enabling Inequality for Economic Gains?
Governments enable these disparities to foster investment, job creation, and GDP growth. Tax revenues from corporations and banks are substantial, so the reluctance to impose harsher deterrents is to avoid scaring off lucrative deals and foreign investments. Higher fines or stricter enforcement on defaults deters business activity. Opportunities in sectors like infrastructure or manufacturing will be fewer and increase job shortages, affecting the majority.
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