THE recent failure of Thomas Cook raises interesting questions about business and the “free market”.

How do companies manage to rack up debts of £1 billion and more?

That Thomas Cook had £1.7 billion debt is astonishing. It’s something that people by and large cannot comprehend.

There’s a saying that if you owe £1,000 and you’re struggling to pay it back, it’s your problem. If you owe a billion, it seems that the problem resides not with the people who run up the debt, but with everybody else connected with the business.

While I understand the idea of a free market place, how competition helps to reduce prices and how profit can let business expand, the problem for me is that time after time, the free market fails.

There are no profits, just payments to shareholders.

Expansions appear to be built on debt and the cut throat approach to reducing prices seems geared more to eliminating competition to dominate a sector than helping consumers.

Years ago, I worked in the jewellery trade. I was a salesman selling watches and gemstones in the West End of London.

The company I worked for owned many shops, some trading under different names. Within a square mile, the company had at least four different shops with different names, layouts, fixtures and fittings. They looked like competing companies, but generally sold the same jewellery.

This was my introduction to “big business” and how they control the market place. Prices were “fixed” between the different shops and we all had certain discounts we could offer, but we were also told what products from other shops we couldn’t undercut. In a sense, the market was “fixed”.

Genuine competition came via one or two other jewellers.

I remember selling an expensive watch to one customer. It was so new on the market the company only had two available in central London.

The shop I worked at didn’t have one in stock. When the customer came in, I reassured him we could get the watch from our central vault – that was sales speak for “from the shop down the road”.

He agreed to return after two hours.

I was dispatched (on a bus) to the other shop, a branch of a “different” chain of jewellers.

I filled out the transfer paperwork, jumped back on the bus and came back to my shop. The customer came in and, after a while, he suddenly realised he’d seen the watch before.

He’d noted a tiny blemish. He’d tried the same watch on that morning.

After some bluff, bluster and quick shine on a polishing machine I convinced him it was a different watch and sold it to him.

I couldn’t let on that the two shops were linked and shared stock. It was all smoke and mirrors.

People thought they had choice, but the reality was they didn’t have much. They didn’t realise different shops were all owned by the same company.

Their money went to one company regardless of where they shopped.

The costs, prices, discounts, offers etc. were all tightly controlled and designed to manipulate the customer to buy certain products at certain times sometimes in certain shops.

This was in the 1990s, when Gerald Ratner proclaimed that one of the popular products his jewellery shop sold was “total c**p” – he claimed his words were taken out of context, but it killed the business.

His business model was pile em high, sell em cheap. It worked, to a degree.

So many companies it seems are close to the brink, nursing huge debts. Many seem to have lived a life continually in debt with no prospect of a profit for many, many years.

Amazon, for example, was infamous for trading for several years while building up huge debts. Uber, the on-call taxi company also makes losses and has yet (as far as I’m aware) to make a profit.

But of course, businesses and economists will look at my simplistic view of profit and loss and say that I don’t understand how big business works.

That may well be the case. I may be naive and ignorant of big business, but ultimately is running businesses on huge debt ever good, moral, ethical or even sustainable?

My father never ran his business on debt.

He told me that debt was not how you run a good business. He used to quote Mr Micawber’s famous saying “Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness.

Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” Perhaps big business should strive more for Micawber’s happiness and think harder about the potential there is for inflicting misery on the workers who lose their jobs when business trades on huge debt.