America Isn’t a Corporation
By PAUL KRUGMAN
“And greed — you mark my words — will not only save Teldar Paper, but that other malfunctioning corporation called the U.S.A.”
That’s how the fictional Gordon Gekko finished his famous “Greed is
good” speech in the 1987 film “Wall Street.” In the movie, Gekko got his
comeuppance. But in real life, Gekkoism triumphed, and policy based on
the notion that greed is good is a major reason why income has grown so
much more rapidly for the richest 1 percent than for the middle class.
Today, however, let’s focus on the rest of that sentence, which compares
America to a corporation. This, too, is an idea that has been widely
accepted. And it’s the main plank of Mitt Romney’s case that he should
be president: In effect, he is asserting that what we need to fix our
ailing economy is someone who has been successful in business.
In so doing, he has, of course, invited close scrutiny of his business
career. And it turns out that there is at least a whiff of Gordon Gekko
in his time at Bain Capital, a private equity firm; he was a buyer and
seller of businesses, often to the detriment of their employees, rather
than someone who ran companies for the long haul. (Also, when will he
release his tax returns?) Nor has he helped his credibility by making
untenable claims about his role as a “job creator.”
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.
Most relevant for our current situation, however, is the point that even
giant corporations sell the great bulk of what they produce to other
people, not to their own employees — whereas even small countries sell
most of what they produce to themselves, and big countries like America
are overwhelmingly their own main customers.
Yes, there’s a global economy. But six out of seven American workers are
employed in service industries, which are largely insulated from
international competition, and even our manufacturers sell much of their
production to the domestic market.
And the fact that we mostly sell to ourselves makes an enormous difference when you think about policy.
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.
Now, to be fair, being a career politician isn’t necessarily a better
preparation for managing economic policy than being a businessman. But
Mr. Romney is the one claiming that his career makes him especially
suited for the presidency. Did I mention that the last businessman to
live in the White House was a guy named Herbert Hoover? (Unless you
count former President George W. Bush.)
And there’s also the question of whether Mr. Romney understands the
difference between running a business and managing an economy.
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?
America certainly needs better economic policies than it has right now —
and while most of the blame for poor policies belongs to Republicans
and their scorched-earth opposition to anything constructive, the
president has made some important mistakes. But we’re not going to get
better policies if the man sitting in the Oval Office next year sees his
job as being that of engineering a leveraged buyout of America Inc.
No comments:
Post a Comment