Read it at The New York Times
America Isn’t a Corporation
by Paul Krugman
Professor Krugman poses the question,
"Why isn’t a national economy like a corporation?"
And then gives the wrong answer,
"For one thing, there’s no simple bottom line. For another, the economy is vastly more complex than even the largest private company."
The chief reason that a national economy is not like a corporation for the US is that the national government is the currency issuer and everyone else is a currency user — US state and local governments, firms, and households, as well as the external sector doing business with the US using the dollar.
The federal government holds a currency monopoly as the monopoly provider of a non-convertible floating rate currency of issue. MMT provides understanding of what this entails monetarily, fiscally, financially, economically, politically (policymaking) and socially (results of policy choices).
3 comments:
according to Romney or should I save Rummey? Corporations are people and gubbaments are not.
The difference is obvious:
(i) Government can't sack its staff. All it can do is get them to move departments.
The only way government can get rid of its staff is to get another private corporation to hire them.
(ii) Governments 'earn income' from all transactions in an economy, Corporations only from the transactions they are involved in.
(iii) Sovereign governments own or control the central bank - which is the only bank in the system with no capital restrictions. Therefore the cost of capital to a government is zero.
Therefore the cost of capital to a government is zero.
The is the real kicker. Government can fund anything it chooses as long as it stays within the bounds of available real resources.
Most of the jabber in the field of economics boils down to why government "should" not do this even though it can, excepting military, of course. Some of the arguments are moralizing ones, like loss of individual incentive and responsibility and others are consequential, usually involving putative inefficiency, like "waste fraud and abuse." The "road to serfdom," you know.
The result is the huge unrecoverable quantifiable cost of idle resources going to waste and degrading, and the unquantifiable cost of loss of quality of life, not to mention untold human suffering that could have been prevented through more appropriate allocation of available resources.
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