Is a government just like a business? Not really.

3 July 2016

A day before Australia’s recent election, I replied to someone on Facebook who thought that a country is just like a business, and so you should elect a business person as Prime Minister. I don’t believe this is true, for several reasons. Let’s remember that countries act though their governments.

(i) A business has its main (not ‘only’ but ‘main’) responsibility to make a profit for its govt 2shareholders, which may be a few family members or perhaps thousands of shareholders. A country – and its federal government, which is the main agent through which it acts, has responsibilities to the aged, to younger people who are too young to be involved in its management or its decision making processes, or to the chronically sick or disabled. A business doesn’t have a general obligation to look after these people. A business may use disabled-accessible buildings, and may employ people with disabilities, but it’s not responsible for the general welfare of those groups at large.

(ii) A business doesn’t have to think about inter-generational equity. Governments do. Governments have obligations not to burden one generation at the expense of another.

(iii) If a business goes bankrupt, it normally ceases to exist (at least in Australia). The owners and the ex-employees go somewhere and do something else. Governments can go bankrupt (default on their bonds), but their populations continue to exist, perhaps in dire circumstances (e.g., Greece at present.)

(iv) It’s mostly governments that create infrastructure, and mostly businesses and residents that use the infrastructure created by governments. There are a few exceptions, but who built the roads we drive on, the airport in your city, or most of the ports around the country?

(v) Governments create the legal framework in which trade and business are carried on: misleading advertising laws, mechanisms to enforce contracts (the courts), etc. Business then operate inside the framework the government created.

(vi) Governments determine rules in which international trade takes place. You can buy a cheap lamp made in China (and a farmer can sell a bag of wheat to china) tariff free because a  government made a free trade agreement for you / the farmer so that could happen.

(vii) If countries or governments are a business, what sense do we make of activities which are inherently unprofitable – e.g. the operation of a police force? If you get bashed up tonight, do the police bill you on a user pays basis per hour to investigate your complaint? No.

(viii) Business usually operate on a one share one vote principle when electing office bearers. If I have 20 times as many share as someone I get twenty times their vote at the AGM. Could we do this in a democracy? Would
entitle me to twenty votes for someone else’s one vote? Not likely.

There are major difference between national government and a business. We should not confuse them.

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About Richard A Snow

I studied Economics at La Trobe University (getting a BEcHons and MEc). I was writing for newspapers, mostly on personal finance, from 1997 to 2006, part-time, while working as an Economist at Victorian Department of Treasury and Finance, and later as an Associate Lecturer at La Trobe university. I have a stock of older, published newspaper articles at http://richardsnownewspaperarticles.wordpress.com
This entry was posted in Economics, Protest in Russia, Richard A Snow, Richard Snow Writer, Uncategorized. Bookmark the permalink.

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