It's frequently said that governments are quite unlike businesses in
that they can't go broke. After all, governments can always print
more money, which businesses can't. And, if the extra money doesn't
solve its problems, then the people can be taxed more. But then the
proposition usually peters out lamely, as if already proved. What's
not mentioned is that if a country is still not efficient enough to
produce enough exportable goods or services to produce an income
(from which, taxes), then some or all of its people find their
standard of living going down. And when this happens, the price of
food as a proportion of the average wage packet goes up. And if these
prices go high enough for long enough then some people start starving
to death because, by then, its government won't even be able to
afford sufficient subsistence welfare benefits. If this continues
long enough then the population of a country either disappears
completely or, at some stage, another country invades it for its
unused resources and absorbs the remaining population in one way or
another, or simply slaughters it.
Is this an extravagant picture? Not at all. It's happened countless
times throughout history. It just seems remote to us, accustomed as
we are to high standards of living in an advanced country and with a
welfare system for unfortunates to fall back on. But, at various
levels, the above process is actually going on right now in many less
advanced countries around the world. Even in the case of advanced
countries and as recently as the last century or two in Europe, there
have been more than a few genocides of various sizes and more than a
few chops and changes of territorial boundaries, including a few
total disappearances of nations.
There is, therefore, no essential difference in the workings of a
government and the management of a business except in time scales.
While a business may fail quickly over a period of a few years, a
country might take generations or even centuries to disappear as a
recognizable entity. In order to continue to survive, both
governments and businesses need good financial housekeeping as a
minimum, but also enough outstanding skills so that products desired
by others can be sold and exchanged. And, out of these exchanges,
profits are made. In the case of governments, profits take the form
of positive balances of trade. In the case of businesses, profits
take the form of dividends paid to shareholders.
On the face of it, this profit-making is a dilemma. In both cases, if
half the entities (countries or businesses) are producing profits
then the other half will have losses. And this surely, is
unsustainable -- that is, if we want a long term future for most
people. We need balances of trade (between countries) and profits
(between businesses) to balance out at zero for all or, ideally, to
zigzag forward in only relatively small steps. Businesses achieve
this by competing so hard that profit levels are driven downwards
and, sooner or later, the most inefficient go bankrupt. This happens
constantly, with the result that, today, the average lifetime of a
business before going bankrupt or being absorbed by another more
efficient business is no more than about 10 to 15 years. The new more
efficient businesses carry the baton further before they, too, are
overtaken by innovative efficiencies in production and marketing.
While this mode of balancing is acceptable in the case of businesses
it's no longer acceptable in the case of governments because the
weapons of war that are now available, such as nuclear bombs or, even
more so, sophisticated computer-hacking, are becoming far too
dangerous, at least when used between the major powers. They can
bring down such an immediate response that the initiator can quickly
suffer as much destruction as the original recipient. Thankfully,
although we presently have massive imbalances of trade around the
world, warfare hasn't been resorted to yet.
So if this type of equilibrium is not the answer for governments,
what is? It is that every country, with its own natural and
geological advantages should maximise them by specializing the
education of its children accordingly. Economists call this
"comparative advantage". It can then sell its most efficiently made
products. Unfortunately state education got off on a bad foot. The
first state schools were started in the 19th century for the benefit
of army officers' children in Germany. These schools then quickly
spread to all children in order to produce obedient young men for
factory life (and for mass armies if necessary) in Germany and
England. State imposed education for the masses then spread quickly
to all West European countries and America, and thence to the rest of
the world.
In doing so, state education over the past 150 years has generalized
somewhat by moving away from producing biddable people for factory or
army life. But, supervised by bureaucrats who generally know little
of the daily life of business, state education has never been able to
teach the really appropriate skills that are needed at any particular
time in the life of an economy. Those have been taught at a very
small minority of private schools which then supply something like
90% of all the important decision-takers in both government and
business, and even about 50% of a country's research scientists.
America, for all its faults, is still the most experimental country
in the world. It scoops well over half of the Nobel Prizes in the
sciences. It already has the best meritocratic system for college and
university entrance with scholarships for the poor. This is fine for
teenagers who have already been well educated at (usually private)
school but, until recent years, the SAT exam couldn't compensate for
bad or inadequate parenting in early childhood or for poor
aspirational levels of education in many, if not most, state schools.
These deficiencies are now being attempted to be overcome by parent-
and local community-initiated charter schools which are not under the
authority of governmental bureaucracy or trade union regulations.
There is already sufficient evidence that at least some of them can
lead to far higher skill attainments (particularly in the most
deprived local communities) and this is why England and some Nordic
countries are now starting fee schools.
These new non-state schools are already giving evidence of levels of
personal creativity in children that have hitherto characterized the
fee-paid private schools. If advanced governments keep faith with
this new democratic initiative in the coming years then this will be
the best, if not the only, strategy for at least Western Europe and
America which, at present, face seemingly overwhelming economic
pressure from countries such as China, Japan and South Korea. In the
longer term, the latter countries are going down the wrong avenue.
Although a proportion of their children win hands down in
international tests they all suffer from intensive rote-learning
methods of teaching in their schools. The result?
However, their children grow up to be far less innovative than is now
necessary in today's world. Technologically, their business are still
copycats of Western. Even Japan, which has been the longest in the
industrial and state educational field, still hasn't produced any new
scientific or technological sector. Also, there is no sign so far
that South Korea or China are going to be any more innovative. Their
governments know this well and wring their hands wretchedly but they
can do little about it in the shorter term because cultures takes
generations to change and all three are steeped in it.
The West, however, which has now largely lost any discernible,
overall culture left over from the agricultural era, manages to
supply almost all the new ideas for more efficient economies. We now
have a chance of taking up the latest manifestation of social
innovation wholeheartedly. When the local school down the road can
supply the sort of young people who are as fully socially confident
and speciality-skilfull as those in the most expensive private
schools then they will have a chance of sharing the most interesting
and useful jobs as well as producing the appropriate efficiencies
that we need to gain for a sustainable world.
Ending on an encouraging note . . . for a change!
Keith
Keith Hudson, Saltford, England http://allisstatus.wordpress.com/2011/08/
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