A Country is Not a Company

ross perot

Source: Flikr Creative Commons

The media coverage of Donald Trump seems to focus on a few themes such as his strong-man image and the potential for violence at his rallies and among his followers.

These are important issues but I think there’s something missing in the maelstrom of coverage, something that is the cornerstone of Trump’s popularity with his base: the idea that, as a successful businessman he can fix the economy and “make America great again.”  It’s a throwback to Ross Perot’s refrain in 1992 that presidential economic policy involves “lifting up the hood” and fixing what’s wrong with the economy.  And, since a businessperson understands how the engine of their business runs, they can do the same thing for the American economy.

This brings me to a twenty-year-old article in the Harvard Business Review, “A Country is Not a Company.”  The main point is in the second paragraph:

A country is not a big corporation. The habits of mind that make a great business leader are not, in general, those that make a great economic analyst; an executive who has made $1 billion is rarely the right person to turn to for advice about a $6 trillion economy.

The author goes on:

Many people (not least successful business executives themselves) believe that someone who has made a personal fortune will know how to make an entire nation more prosperous.  In fact, his or her advice is often disastrously misguided.

In particular,

The general principles on which an economy must be run are different – not harder to understand, but different-from those that apply to a business. An executive who is thoroughly comfortable with business accounting does not automatically know how to read national income accounts, which measure different things and use different concepts. Personnel management and labor law are not the same thing; neither are corporate financial control and monetary policy. A business leader who wants to become an economic manager or expert must learn a new vocabulary and set of concepts, some of them unavoidably mathematical.

The article’s concluding paragraph tells us exactly what to think and do with regard to Trump’s boasts:

The next time you hear businesspeople propounding their views about the economy, ask yourself, Have they taken the time to study this subject? Have they read what the experts write? If not, never mind how successful they have been in business. Ignore them, because they probably have no idea what they are talking about.

The author, by the way, is Paul Krugman, now famous as a Nobel laureate and columnist for the New York Times.  He wrote this piece when he was starting to move away from academic economics towards public intellectualism.

Whether you’re a fan of Krugman’s columns or not, you should take some time to read this article. It rings as true about Donald Trump in 2016 as it did about Ross Perot in 1996.  When it comes to the economy, Trump doesn’t know what he’s talking about.