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Will Liabilities Prove To Be Our Downfall?

February 15, 2011

The Economist recently ran an article that discussed the major reasons for the economic success of the western world. Among them it highlighted the emergence of the limited liability company, an institution which was for many years unique to this region of the world.

The article highlighted the importance that limiting risk has to the development of entrepreneurialism and the commercialization of innovation.

So will current legal practises associated with the allocation and management of risk destroy western enterprise and innovation? As lawyers push increasingly for expanded liability – consequental loss, unlimited damages etc. – are they hastening the decline of the economies they serve? As politicians (many of them also lawyers) seek to ‘de-risk’ society, are they crushing social enterprise and endeavor?

This link between liability and economic development seems important to me. I see many examples where ill-considered risk allocation results in significant damage to business health, prosperity and competitiveness. I think it is a serious issue which should be the subject of much wider debate.

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