The problem, however, is that this subset of the economy (banking, investing), once past the IPO stage, is basically an entire exercise on how to make paper, not how to make wealth. The system, in overvaluing short term results, is often counterproductive. (Note Costco's poor stock price versus Enron before the collapse.) Goldman Sachs was profiting billions by having access to millisecond-level trading capabilities. ( http://zerohedge.blogspot.com/2009/07/is-case-of-quant-tradi... et al) This is a case of a society becoming good at creating paper, not wealth.
And that is the point. Short sellers are capitalizing on the ability to create paper, not wealth.
In theory, that's what they do. In practice they are credited with utterly destroying several companies that might have been able to survive otherwise. No one knows for sure if they would have made it, but they had absolutely no chance to survive with short sellers in the mix. The stock market often encourages a herd mentality which isn't necessarily based on reality (e.g. the dot com bubble of the mid-90's). Short sellers have a way of sending that herd mentality into overdrive.
If your company is on solid footing, it shouldn't matter if your stock price is zero (that'd be great, actually; you could buy back your whole company). Your argument is functionally equivalent to saying that any number of unfunded and dead startups could have made it if only they'd gotten a $5M Series A round. They didn't because investors didn't think it was a good bet. Public companies that need cash infusions to survive face the same situation -- they are at the mercy of their prospective investors. There is nothing wrong with this.
They're not destructive as so much telling informations via price mechanism.