It's actually a core and well supported part of capitalism - people hire more when firing is easy, lenders are more willing to lend in industries with repo men, etc. It's kind of morbid, but rich ecosystems like the Amazon mostly exist because dead stuff is rapidly recycled. The economy is no different: slowing down the cycle is incredibly distortionary.
Yeah, private equity is a natural response to business failing in the wake of a bubble, but bubbles themselves are market distortions caused by insane valuations.
Highlighting the value of reclamation just draws the heat off of the irrationality of the tech bubble. Amazon isn't a rich ecosystem, it's oligarchic.
And, indeed, any systemic failure in a capitalist economy gets explained away by saying that some cadre of vultures will exploit arbitrage until the gap closes. No one really questions the systemic failures per se. The economy happily creates this surplus in full anticipation of it being scrapped and fed to vultures. Banks repossess cars and capitalists think "working as intended" instead of "there's so many delinquent car loans that there's an industry of repo men and maybe that's significant." This criticism extends similarly to the tech bubble.
That is, if people being fired from these miserable startups is good for the economy, wouldn't them not having worked there at all have been even better?
Thats true if we already had a way of knowing they would fail but we don't. Startups are how you try new ideas to find the good ones. Do having them work there and fail creates informational value.
This is exactly the point. It's very hard to know which ideas will work, and which teams are best suited for the task. The beauty of the VC model is that it starts companies on the cheap. Many companies fail, and those people can go chase either the companies that won, or new startups. It's much better than a world where you have a couple monopolies with grand strategic plans that don't actually get anything done.
The East Coast Monopoly mindset was why Xerox PARC had money to create things, but never got anything done with them.
Employers are more willing to hire risky people if it's easy to fire them. If it is not, large vetting processes are required and hiring people reduces. Because making a mistakes costs so much. It's even worse for small businesses where one bad hire you cannot fire can bankrupt the company.
It's a reason why young people find it hard to get full time permanent jobs and are instead hired as temps instead.
