A company shutdown can be a good thing.(Enterprising: Business as an act of creation)

Mitsubishi, Japan's fourth largest automaker, sits in the midst of a scandal that makes the corporate malfeasance at Enron, Worldcom, and Parmalat look trivial. The conglomerate, one of Japan's 20 largest companies, appears to have systematically hidden serious mechanical problems with many of its cars and trucks for over a decade. Scores of deaths are alleged to have resulted and Japan's normally placid press is having a field day.

While the magnitude of this scandal alone makes it significant--even Enron's massive accounting fraud didn't kill anyone--the fact that Mitsubishi still exists as an independent automaker that could engage in such a deadly cover-up points to an even deeper problem with the Japanese economy. Unlike economies of the English-speaking world--and even some of the more entrepreneurial sectors in Europe--Japanese economic policy makers have done everything possible to avoid job churn and the creative destruction of failing enterprises. And this, more than anything else, is responsible for the scandal.

Consider the facts: The U.S. and Germany each have two major domestic automakers, and there's one German-American combine. France, Italy, Canada, Australia, and the U.K. don't have any internationally competitive domestic automakers. (The later three, in fact, don't have any domestically owned automakers at all.) Japan, with an economy about 40 percent the size of the E.U.'s or the U.S.'s, has eight independent motor vehicle companies.

Like most of the Japanese economy, the auto sector mixes the developed world's best companies and technologies with some of its worst. Two Japanese automakers, Honda and Toyota, build what nearly everyone agrees are the world's best overall car lineups. And they are rapidly gaining on U.S.-produced trucks.

Other Japanese auto companies like Mitsubishi, Suzuki, Subaru, Mazda, and Daihatsu (which no longer sells cars in the U.S.), are largely commercial failures. Contrary to popular perception, they do not build very reliable cars: Most major American brands do better in tests by Consumer Reports and J. D. Power. Indeed, except in a few niche segments, the second-tier Japanese manufacturers can't compete with the world's best. Most of them have lost money year ...