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Government As A Corporation? Nope.

I’ve heard this meme over the past three decades, and the emptiness of it never diminishes.

Paul Krugman apparently agrees:

America Isn’t a Corporation

If business and the free market really could meet all of our needs, government wouldn’t exist.

It is because government steps in to moderate the excesses of the market and set the rules and create a level playing field that capitalism can thrive.

Unfortunately, the idea that government should be run like a government is part of the conventional wisdom — of people who don’t think too hard about it.

Krugman remarks:

But there’s a deeper problem in the whole notion that what this nation needs is a successful businessman as president: America is not, in fact, a corporation. Making good economic policy isn’t at all like maximizing corporate profits. And businessmen — even great businessmen — do not, in general, have any special insights into what it takes to achieve economic recovery.

Why isn’t a national economy like a corporation? For one thing, there’s no simple bottom line. For another, the economy is vastly more complex than even the largest private company.

In fact, running government as a business has some terrible consequences:

Consider what happens when a business engages in ruthless cost-cutting. From the point of view of the firm’s owners (though not its workers), the more costs that are cut, the better. Any dollars taken off the cost side of the balance sheet are added to the bottom line.

But the story is very different when a government slashes spending in the face of a depressed economy. Look at Greece, Spain, and Ireland, all of which have adopted harsh austerity policies. In each case, unemployment soared, because cuts in government spending mainly hit domestic producers. And, in each case, the reduction in budget deficits was much less than expected, because tax receipts fell as output and employment collapsed.

Currently, it is Willard MittGordon Gekko” Romney who is claiming that his extensive portfolio of firing people makes him uniquely qualified for the presidency.

Poppycock.

He’s even tried to compare his actions at the now-infamous Bain with Obama’s bailout of the automobile industry.

Like many observers, I was somewhat startled by his latest defense of his record at Bain — namely, that he did the same thing the Obama administration did when it bailed out the auto industry, laying off workers in the process. One might think that Mr. Romney would rather not talk about a highly successful policy that just about everyone in the Republican Party, including him, denounced at the time.

But what really struck me was how Mr. Romney characterized President Obama’s actions: “He did it to try to save the business.” No, he didn’t; he did it to save the industry, and thereby to save jobs that would otherwise have been lost, deepening America’s slump. Does Mr. Romney understand the distinction?

In an era when huge private corporations have led to the largest economic calamity in our lifetime, you would think politicians would be leery of drawing comparisons.

The major problem with this mindset is that it misses the real issue:

We’re in the mess we’re in BECAUSE government got too cosy with business and let corporations remove regulations and determine government policies.

It failed.

And if we are to learn from the example of Europe, cutting spending and jobs to save “the bottom line” is a self-inflicted wound to our economy and the stability of the nation.

-Chris

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January 13, 2012 - Posted by | Uncategorized | , , , , , , , , ,

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