GOVERNMENTS VS CORPORATIONS - CONT'D
Corporations cannot create wealth out of thin air, but what they can do is to create something close to that; this is, bonds. Bonds are simply contracts to repay loans at a later day for a fee (the interest). Corporations can borrow beyond their normal borrowing capability by printing and selling bonds. It is then up to each potential buyer to determine if buying said bond is merited or not based on risk and reward levels. If you do not wish to buy bonds then you don't. If you bought bonds and do not wish to hold them any longer, then you sell them. Should a corporation collapse, you may lose the value of your bonds but nothing more.
Governments on the other hand have two ways to create wealth out of thin air. The first one is to print bonds… which are oftentimes "bought" by the Central Bank with freshly minted fiat money. In this case you have no saying in the transaction even though all that printed money will eventually create inflation and decrease your standard of living. Governments many also order the Central Bank to print in order to make-up shortcomings in their budgets. The end result is the same. Even if the government does not collapse, the printed inflation will get you. You are liable with all your wealth with no control or recourse at all. You simply cannot order the government to stop printing. Furthermore, the damage that the government inflicts by printing is imposed on everybody, whether they are in favour or against printing.
Providing goods and services
The reason d'etre of corporations is to make money. Typically they will do so by providing goods and services that people want. Basically, they buy low and sell high while pocketing the difference. They serve the public trust but more importantly, the public need. They are absolutely greedy but the only way they have to satisfy their greed is by serving their customers. That would be you.
The reason d'etre of governments is unknown. Back there in the very dark ages many tens of thousands years ago, there must have been some sort of contract or agreement between a leader and a group of people probably for mutual defense. Alas, this original intention has been lost. Current "modern" governments exist in an absolute vacuum of justification or, more precisely, they are self-justifying. You may have noticed that the "modern" reasons provided by governments for their existence did not come from a public outcry or discovery but from… government imposition through the educational system! See Lost Memories. In other words, if you ask a person why should governments exist you will invariably receive the answer those people were indoctrinated with. You will never (or almost never) receive a clear, concise and well thought out personal rationale. What you get is nonsense such as "who will take care of roads" or "of schools" or "maintain health care" or "order" and so on. When asked people immediately reach for the socialistic answers they were brainwashed with.
But nowhere in those answers is the only one that makes sense: to provide goods and services at a cost we can afford. This is so because governments are inherently inefficient and can almost never beat the free market. And so governments en up providing goods and services we don't want or need at a price we can't afford. Furthermore and as a part of this "package deal" we get to be blackmailed, extorted and controlled by politicians whose only desire is to remain in power.
And now let's recap.
Corporations = provide goods and services at a price we can afford
Governments = provide goods and services we don't want at a price we can't afford while being blackmailed, extorted and controlled.
Do you see the difference? Good!
Corporations will do whatever it takes to make money. Anybody telling you that marketing and advertising and communicating with potential customers (aka suckers) is not propaganda is lying to you. This much is absolutely clear. But there is always a way out. You simply do not buy. Period. You always have the awesome choice of not buying. And in this respect all corporations are powerless. They simply cannot force you to buy anything should you do not want to buy. True, they can make life difficult to you but then again, you can always say NO! And that's that.
Governments on the other hand, they wield the awesome power of the state while bombarding you with propaganda. They can always force you to buy no matter what.
- You don't want that product? Though! Pay taxes anyways.
- You don't need that service? Though! Pay taxes anyways.
- You want to buy something else at free market prices? Though! Pay VAT anyways.
- You want to leave a country? Though! Pay exit taxes (yes, they do exist)
- You want to import something? Though! Pay taxes anyways.
- You want to export something? Though! Pay taxes anyways (yes, they also exist).
- You want this government good or service? Though! Pay user fees anyways!
And so on… you get the idea.
Both, corporation and governments manipulate but with corporations you have the ultimate power of decision. Just say NO! F&P.
With governments, on the other hand, they have the ultimate power of decision. You can't say NO!
Profits and loses
For corporations the calculations of profits and loses is simple: sales minus costs = profits. If you are a shareholder and the company is profitable, your wealth increases. If the company loses money, your wealth decreases. Simple and straightforward.
For governments there is no profit or loss calculation because they are in the business of extorting money. Therefore it is impossible for a government to generate more wealth than the wealth it extorted. This inevitably leads to the conclusion that whatever the outcome of government economic calculations may be the only thing that changes regarding your wealth is the degree to which you are extorted. Government economic calculations are always losing propositions.
But we know what you are thinking. You believe that people on welfare or socialized medicine or subsidized housing, and so on see their wealth increased every time the government makes a calculation and gives them money, right? Well, no. As we mentioned before the only thing governments do (and quite badly) is to shuffle wealth from one pocket to the other while wasting a ton of it in the process. It is true that when governments "supports" people some people will see their wealth increased. However, we must look at the net effect of this "support". The net effect is the removal of vast amounts of capital from the markets, capital that would have been used for productive purposes for the benefits of all. Instead of having more goods and services at lower prices, we have less goods and services at higher prices plus inflation! It is not fair to compare "social" programs against current conditions which were created by the existence of those social programs and conclude that they are fair! We must compare social programs against an economic state of affairs where those programs would not exist. And when everything is said and done, generalized economic prosperity always trumps social programs. The difference is that social "relief" is instantaneous (or at least it takes the amount of time it takes the government to steal your money) while economic prosperity is slow, built bit by bit by people and entrepreneurs. As the time preference of the people is now, they prefer social programs now at the expense of a disastrous future.
For corporations this is easy. Pick a good or service you think people may want, purchase at low price and sell at a higher price you believe people will afford. If the good or service is not desired, pick a different one. If the price is too high, pick a lower one.
For governments it is even simpler. Pick a good or service you think people may want, extort the money required to pay for them from tax payers, purchase at any price and sell at a lower price or give it away for free. If the good or service is not desired, don't pick a different one and continue offering this one. If the price is still too high, pick an even lower one or subsidize the production and pay for it through more extortion (taxes), borrowing and printing. This is the simplest model of all. The government makes a decision, makes people pay for it regardless of desirability or cost and politicians and bureaucrats reap all the benefits!
The very idea that somehow government so-called "business" is different from corporate business is a hoax. Governments and corporations they must both comply with natural economic rules or face the consequences. The difference is that when a corporation makes a mistake, its mistakes are mostly contained to shareholders and maybe employees and suppliers. However, when a government makes a mistake, we are all affected; voters and non-voters, government employees and private-sector employees, government suppliers and private-sector suppliers. The only real difference between governments and corporations is the extent of the damage
Note: please see the Glossary if you are unfamiliar with certain words.