The Quitter Economy

Companies are liquidating; homeowners are mailing in the keys. Have we given up?

By Daniel Gross
Posted Saturday, Jan. 24, 2009, at 7:57 AM ET

"Everything Must Go!" blares a bright-yellow sign at the Circuit City store on Broadway and 80^th St. in Manhattan, N.Y. The revolving doors whir with curious customers looking for bargains. As can be inferred from the huddles of dejected employees wearing bright-red Circuit City polos, this store will soon be closing, along with the other 566 outlets of the nation's second-largest electronics retailer, leaving 34,000 people unemployed. Circuit City must liquidate some $1 billion in merchandise by the end of March.

There was a time, not so long ago, that a company like Circuit City would have stuck it out by filing for Chapter 11. A Chapter 11 bankruptcy filing gives companies breathing room from creditors in order to regroup and relaunch. Circuit City started down this path in November, but in mid-January it decided that rehab was too tough and threw in the towel. Sharper Image, Linens 'n Things, retailer Steve & Barry's, and the department store Mervyn's all filed for bankruptcy with the intent of reorganizing. And all have wound up liquidating. "The reason we're seeing liquation rather than bankruptcy from so many retailers is because people are hopeless," says Dean Baker, co-director of the Center for Economic and Policy Research at the Economic Policy Institute. "We're still looking at a very bad year in 2009 and probably most of 2010, so it's very difficult to be optimistic about reorganizing and coming out of it stronger."