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Friday, January 13, 2012

Paul Krugman, "America Isn’t a Corporation": Indeed, If America Was a Corporation, It Would File for Chapter 11

Paul Krugman, in his latest New York Times op-ed entitled "America Isn’t a Corporation" (, informs us:

"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."

Indeed, America is not a corporation. Fiscal year 2011 was the third straight year during which the US experienced deficits of over $1 trillion. Moreover, during the Obama presidency, America has increased its debt by $4 trillion. If America was a corporation, it would file for Chapter 11 bankruptcy.

Krugman would have us know that even great businessmen do not have any special insights into what it takes to achieve economic recovery. So who possesses these special insights? Simple answer: Krugman, who once again is telling us that the US government should not reduce expenses:

"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."

Query: Did Greece, Spain and Ireland have an alternative? For example, without an emergency EU and IMF rescue package, Greece would have defaulted on its debt.

As reported yesterday by Athens News (

"Rather than pushing through blanket wage cuts on underpaid groups of employees in the public and private sectors, the IMF sources stressed that selective reductions in exorbitant salaries and closure of wasteful work stations needed to be introduced in dozens of public utilities (DEKO) and other state agencies 'in order to attract foreign investment'."

Sorry, Paul, but is there anything wrong with slashing exorbitant salaries in the public sector and closing wasteful work stations?

America is not a corporation, but it's also not Greece. Any speculation whatsoever regarding a potential US default on its debt would send the world economy into the abyss, and risking such ruinous talk by running additional trillion dollar annual deficits would be less than wise.

Krugman concludes:

"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."

Most of the blame belongs to the Republicans? I thought the Democrats controlled both the House and the Senate during Obama's first two years in office. But more to the point, what are Obama's policies? Yes, it's easier to tar the Republicans than to proffer and implement solutions.


  1. Yes, countries are not corporations (and yes, corporations are not humans). It's embarrassing even to discuss this.
    Jeff, you are proud of teaching your children that "life isn't fair." What exactly are you teaching? Life is most certainly not sports. Someone is born blind, someone is born in deep poverty, tragedy, someone is reflective in nature and is ill equipped to "fight for survival," etc.
    Corporations don't take, tolerate, accept non marching "zombies." Are you suggesting that President of the USA should start throwing the sick, the decent, the profound from the Corporate America ship into deep waters of oceans?

  2. Clearly, I wrote it in ha haste.
    - I meant of course that corporations like "marching zombies."
    - I am afraid that "life isn't fair" can be used as a justification for barbarity: "You're sick? Oh well .. life is unfair. Deep water of ocean will cure you," etc.

  3. Anonymous,

    "Life isn't fair?" It means, for example, that my daughter will not grow up to be Paris Hilton, but can still find satisfaction and self-fulfillment without such money.

    "Someone is blind"? If you are familiar with this blog, you know that I am working with a corporation -- yes, a corporation -- to develop a bionic retinal implant, intended to instantly restore vision to persons blinded by advanced macular degeneration and other retinal diseases following a 30-minute minimally invasive procedure.

    "Someone is sick"? If you are familiar with this blog, you also know that I am working with another corporation to develop new therapeutics to meaningfully treat cancer and immunological diseases (e.g., MS and rheumatoid arthritis).

    No, of course I am not suggesting that anyone be thrown overboard. I am, however, suggesting that corporations are better able than government or universities to undertake the tasks mentioned above, and I am proud to contribute to their efforts.


  4. Jeffrey, I am not going to fight.
    "I am, however, suggesting that corporations are better able than government or universities to undertake the tasks mentioned above, and I am proud to contribute to their efforts."
    I am not sure. In addition, I do think that it's actually people who undertake the tasks and I would suggest that employees who are treated fairly are more creative, efficient and productive than the ones who are abused, mistreated and served "life is unfair and don't ... envy your managerial CEO his salary (thousand times higher), you, despicable scientist."

  5. Anonymous,

    You are "not sure" that corporations are better able than government or universities to undertake these tasks? I don't mean to insult you, but you obviously have no experience in this regard and have never had to face the frustration of knowing that some people's work schedules revolve around fixed hours and vacations.

    You think "it's actually people who undertake the tasks"? True, as in an orchestra or a football team, people do undertake the tasks, but the tasks don't get done properly unless they work together.

    You would have us believe that the CEO gets paid a thousand times higher than the "despicable" scientists. Obviously there are millions of companies, and no two companies are alike; however, at the biotech company with which I consult, for example, there is no such discrepancy in pay. The scientists are given share options, and if they were not treated well, they would go elsewhere. Instead, on average, employees of this company have been with this company on average for more than seven years.

    Does the CEO receive more? Sure, a bit. But she also works around the clock, is responsible for the company's success or failure, and no one begrudges her that salary.

    Which is not to say that I am "fond" of all companies. My blood pressure rises when I reflect upon the behavior of a certain cellular phone company whose "services" I used in the past. But then I don't "like" all people either.

    Again, I don't mean to insult you, but you would be wise to study several start-ups over the course of a decade or more before letting your imagination roam wild.


  6. Jeffrey, the NYT has a great contribution to our discussion
    "The Rise of the New Groupthink"
    Finally, someone addresses the issue I've been pushing for at least a decade. As someone who witnessed the destruction of American non-profit sector by its corporatisation, I couldn't remain silent. When you see and experience the replacement of highly educated, competent and dedicated professionals with marching corporate zombies, you know something is totally wrong.

  7. Anonymous, thanks for taking the time to write.

  8. Jeffrey, you marching corporate zombie, a pity Anonymous didn't read

  9. Well, anonymous, de gustibus ...
    You like "team working," "strategically planned," "whiners, malcontents" labeling/silencing reality of American life - I don't.

    Whether or not Jeffrey is a corporate zombie, I don't know, but I can assure you there are many of them here, in the U.S. - many more than it's safe and reasonable. BTW, it's strange that in our discussion of corporate America, Jeffrey talks about start-ups. Most corporations are not start-up, their CEOs have nothing to do with starting companies and clearly have no responsibility for their own actions (fact, check a concept of a "golden parachute, for example)

    Orwell, where are you when we need you?