The American model has seldom looked so tarnished. America’s unemployment rate is 10%. Soup kitchens are doing a flourishing business in New York and other great cities. Companies that were once a byword for swashbuckling entrepreneurialism have bitten the dust. But in one respect at least America remains a beacon for the rest of the world, its treatment of corporate bankruptcy. This may sound ludicrous. America’s excessive appetite for risk helped plunge the world into recession. And America’s consumers are defaulting on their debts at astronomical rates—and expecting the rest of society to pick up the bills for their profligacy. But countries that want to avoid unnecessary corporate carnage would nevertheless be foolish to ignore the American example. America’s enlightened attitude to corporate bankruptcy is designed to put economic resources back to productive use as quickly as possible. This means distinguishing between potentially viable companies and terminally ill ones. The potentially viable can file for "Chapter 11", which lets them restructure under court supervision. The terminally ill can file for "Chapter 7", which focuses on liquidating their assets and distributing them among creditors. It also means putting pressure on the courts to deal with bankruptcy as quickly as possible. Chrysler and General Motors were both in the hands of "new owners" within 45 days of filing for bankruptcy. It also means treating bankrupts relatively leniently, not as sinners to be flagellated but rather as unfortunates who should be given a second chance. America’s generosity to capitalism’s losers has served it remarkably well. It has not only prevented companies such as United Airlines and General Motors from going into premature liquidation, throwing thousands of people out of work. It has also helped provide America with its entrepreneurial edge. Bankruptcy is an occupational hazard for entrepreneurs; even those with plenty of business experience under their belts fail much more often than they succeed. America’s leniency towards bankrupts encourages novices to start their own businesses and allows people who have failed to start again. The good news is that a growing number of countries are following America’s lead. Britain has introduced a succession of Enterprise Acts since 2002 that are designed to make it easier for failed entrepreneurs to start new businesses. The credit crunch has speeded up the price of reform. The World Bank’s annual "Doing Business" report provides a wealth of examples of improvements. Many governments are trying to shake up their lethargic legal systems in order to speed up bankruptcy proceedings. The reforms also touch upon the more fundamental question of trying to save viable businesses from premature liquidation. Dozens of countries are trying to give companies more opportunities to reorganise before they finally reach for the revolver. France and Germany were among the first to do this. But the idea has also spread to Eastern Europe and Asia and may even be reaching the bankruptcy-averse Muslim world (last year ten Middle Eastern and North African countries signed a joint declaration on planned reforms). Moving towards a more enlightened treatment of bankruptcy will not be easy, particularly for poor countries with inefficient legal systems and retributive attitudes to debt. The World Bank reports that the majority of reforms have taken place in rich countries, since 2004, 59% of them have improved their systems compared with 33% of poorer countries in East Asia, 22% in Latin America, 16% in the Middle East and 13% in South Asia. And poorer countries have an enormous distance to travel. In rich countries, bankruptcy proceedings take less than two years on average. In South Asia they take an average of four- and-a-half years. In many countries—Turkey is a notorious example—legal fees can eat up almost all the value of a business. It beats flagellation. Attitudes to debt are also difficult to change. America threw off the old world’s hostility to failed businessmen along with British rule. Back in the 1830s one of the things that most struck Alexis de Tocqueville about the country was "the strange indulgence which is shown to bankrupts", which, he said, diverged "not only from the nations of Europe, but from all the commercial nations of our time. " The generous provisions of Chapter 11 only reinforced a longstanding legal prejudice. In 1934, for example, the Supreme Court declared that bankruptcy laws ought to "give the honest but unfortunate debtor.., a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt. " True, giving a clear field to the honest but unfortunate also opens the way to all sorts of chances. America’s generous treatment of corporate bankrupts has been widely abused by common spendthrifts—so much so that Congress tightened the law in 2005 to restrict access to the system. Britain’s attempt to emulate the American example has also led to an epidemic of freeloading. In 2006 only about a quarter of the people who filed for bankruptcy could remotely be described as entrepreneurs. That is irritating, but governments should nevertheless continue to rehabilitate bankruptcy. Making it easier to close a business may not sound as inviting as announcing yet another "enterprise fund" or "innovation initiative", but it is more vital to reviving the world’s moribund economy. In the short term enlightened bankruptcy laws reduce unemployment by keeping viable companies alive. In the longer term they boost rates of entrepreneurship. The best way to get more people to start businesses is to make it easier to wind them up. The word "profligacy" in Paragraph 2 probably means