"Not only our future economic soundness but the very soundness of our democratic institutions depends on the determination of our government to give employment to idle men" -Franklin D. Roosevelt; profound insight from arguably the most successful American President in modern history. Not only was he the only one to Preside for a 3rd term, his reign oversaw the Great Depression and World War II, triumphantly.
Irrespective of individual inclinations towards Keynesian or Laissez-faire, the undeniable primary objective of a democratic government, in fact its very survival is creating an environment, directly or indirectly, which promotes honest employment for everyone as far as practicable.
Stagflation in the 70s handed the economic policy baton from Keynesian (state intervention) to Laissez-faire (virtually no governance) disciples and how they fared can be gauged from Alan Greenspan's statement, "I made a mistake in presuming that the self-interest of organisations, specifically banks, is such that they were best capable of protecting shareholders and equity in the firms".
Not only were they incapable of protecting their equity, they almost succeeded in relegating the Great Depression of 1930s to second position. Curiously, while pursuit of one school of thought resulted in the sub prime crisis, pursuit of the other gifted the world with the Euro Debt crisis. Apparently the pundits still need to discover the golden mean between the two extremes of economic thought. In this melee, is it not then far more appropriate to manage national assets in national interest for profit?
The above preamble may appear superfluous considering that this series on profit, in the previous VI parts, had already identified the need to manage national assets for state profit and at this juncture the spotlight was supposed to be on powers and role of the Ministry of Profit. Nonetheless, one can never be too cautious when etching ideas that conflict with popular views. Free markets and democracy are thought to go hand in hand, the question is; if one fails does it suggest that the other is bound to flounder. Conversely, if tyranny is unacceptable does it by default suggest that state intervention is fallacious as well?
Adopting a conciliatory approach, both factions will tend to agree that the ideal economic or for that matter political system is somewhere between free market democracy and well socialism. After all some regulatory framework is imperative for markets to operate freely, without a credible judicial system, trust is a subterfuge. Nonetheless, whatever the system the universal objective is profit.
Simplistically, bottom line, profit, is the result of two variables, revenues and costs. Personally, revenue enhancing strategies are progressive while cost control is regressive. In any case, if the objective is to remain in business, there is a limit to cost control.
Borrowing to meet costs, on the other hand, is a recipe for disaster. At the individual and corporate level, borrowing, assuming the existence of gullible lenders which also suggests that one believes in Santa Claus, in times of financial catastrophe would be calamitous.
The state, on the other hand, with its capacity to cunningly create credit out of thin air, can virtually borrow itself to bankruptcy, and then some. Unbridled debt inappropriately employed is malignant. There is no harm in borrowing at any level, more so at the state level, as long as it is spent on profit generating projects. This sentiment was aptly articulated by Harry Truman while commenting on Keynesian economics "Nobody can ever convince me that government can spend a dollar that it hasn't got".
The above pearls of wisdom suggest that spending a dollar is ultimately linked with earning it, preferably prior to squandering it. At the state level earnings is perhaps a complicated terminology. Enhancing taxation may not necessarily increase revenues since everything is inter-linked and this strategy might adversely impact growth, amongst other variables. Conversely, reduction in taxes may or may not augment growth and consequently tax revenues. To tax or not to tax is the immortal unsolved riddle.
Macroeconomics is a labyrinth from which a Theseus is yet to emerge.
In business parlance, an enterprise is profitable as long as it continues to grow in value. Value on the other hand is inextricably linked with the earning capacity of any enterprise's possessions, its net assets. If the axiom that the whole is equal, greater if one agrees with Aristotle, to the sum of its parts holds in this case, we are back to our earlier hypothesis that national assets are the drivers of state profit. Additionally, we had arrived at the conclusion that profit-makers are needed to extract optimum returns from these national assets. And finally in order to provide and enabling environment we had conceived rather borrowed the concept of the Ministry of Profit.
Before moving ahead from this juncture, classifying national assets is also exigent. Everything within, above or below, the territorial rights of the state are national assets. This includes the populace, land, land produce, minerals, water, air space, onshore, offshore, underground, under sea, over space, literally everything tangible or intangible. The moot point is how these assets are managed. Should the state be directly involved or is it better off outsourcing to the private sector, this indeed is a delicate balancing act. Once again individual preferences dictate where the line is drawn.
Evidently, minerals are a national asset, which all nations jealously protect and directly manage, as far as practicable. Question is why only minerals. For instance in our case, where remittances are critical for managing trade imbalance, should we not be overly jealous and protective of our human resource. With more than 7 billion people needing sustenance, should agricultural produce not be the state's priority.
The general perception is that state cannot survive in a competitive business. But in the long run, well short of death, there is a winner, who then enjoys a monopoly. How competitive is the market for cola drinks? In essence, the solution probably is that the state should shy away from businesses where its colossal machinery can adversely interfere with prices in the domestic markets. Even in such cases, the state needs to extract its fair share. By the way, manipulating international prices in a monopoly situation is apparently legal!
Brainstorming on the exact criteria for identifying businesses relevant to the state's objective of making profit is for the time deferred. The discussion will obviously need to revert to this aspect in a later part. For the time being, suffice it to say, national assets are like family possessions, you don't throw them away.
Sometimes it is useful to glance at the rear view mirror to confirm one took the right turns. If nothing else, this part has strengthened the resolve to continue. With this in mind, Part VII will focus on the authority needed for the conceptual Ministry of Profit.
A final footnote, comments and healthy criticism are the lifeline of any discourse. Readers are again invited to send comments on syed.bakhtiyarkazmi@gmail.com.