Saturday, March 12, 2011

The Government as a Business

Keeping with the theme of my earlier post I discussed how the government could and in my opinion should be viewed as a business.

So, I figured that in a series of posts I could expand on that idea and discuss the merits of the current budget fight.

First, I admit, that the government is not a traditional business, it doesn't sell goods or services to customers for revenue. However as you will see you is a business none the less.

For ease, I will use GE as a standard corporate type business for comparison.

In this first post, I will use some common business terms to define the government and illustrate how it is and is not like a business.

So, here we go.

Shareholder: In a traditional business the term shareholder specifically identifies an entity that owns stock, however with the US government the Constitution gave each American citizen one share of stock. Those people who were born here didn't have to buy it, it was already paid for.

With GE stock is openly traded on the NYSE.

Common between the two is the ability to vote on leaderships and important issues.

Differences include how easily ownership is transferred.

Stakeholder: When looking at our government, it's difficult to define who the stakeholders are. Many people disagree about how much impact the USA has on the world abroad, but I think we can leave it at potentially every man, woman, and child in the world. Of course, that is not a big help in the discussion of politics and budgets, so for each topic a set of stakeholders should be defined.

Stakeholder is a term that can be applied equally to business and governments, so the same process described above should be applied to GE as well.

Product: Here is where is starts to get tough. with GE you can pick up a catalog and see exactly what products GE offers. With the government many products are intangible and hard to measure. A couple of examples include life, liberty, and the pursuit of happiness. However, one key difference between business' and the government is the motivation for creating these products.

The government provides some products due to laws (such as social security), political preference (such as bridges to nowhere), and by necessity (we'll call it fertilizer).

GE creates widgets of all shapes, sizes, and purposes to sell them for more than they cost to make; i.e. a profit motive..

Next we will discuss revenue and how each entity can move costs.

The issue of moving costs is essential to understanding how each entity works.

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