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
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
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
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
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
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.
(c) 2012 New York Times