Maybe it’s because the news is so heavily dominated by economic issues and the possible fates of European countries – waking up to the Today programme is becoming more and more like having someone murmur a Financial Times leader column at you through your pillow – but the ‘countries are just like companies’ analogy seems to be going viral. There was an example recently at Inc – Understanding the Euro Crisis: Imagine Italy Was Your Business – that was very wittily written, and actually quite a good way of explaining the interconnectedness of the European economic situation to anyone that’s been living under a rock since 2008.
Explaining things in ways that the unfamiliar can readily grasp is a proven pedagogic technique that I’m not decrying. But oversimplifying things so people think they’ve grasped something they’ve completed misunderstood is a different kettle of fish. It can be done comic effect, such as Alan Coren’s commentary on the density of the Belgian population –
For the same reason, the sprout was developed by Brussels agronomists, this being the largest cabbage a housewife could possibly carry through the teeming streets.”
but an awareness of the dangers of being taken seriously is a handy thing in any comedian.
If you want to make a comparison between even the largest corporation and a national economy, you might want to be aware of a barrier to entry. Paul Krugman – Professor of Economics and International Affairs at Princeton University, Centenary Professor at the London School of Economics, and 2008 winner of the Nobel Memorial Prize in Economic Sciences – beat you to it 15 years ago. His 1996 Harvard Business Review article, A Country Is Not a Company, is now even published as a Harvard Business Review Classics paperback. (In the interests of keeping your costs down, you can read the text free online.)
Citing many counterblasts against a simplistic analogy (complexity, business and economics are different disciplines, economies are closed-systems, nation states are infinitely more diverse than even the largest corporation, the feedback loops or business and economics are fundamentally different …), it reads mostly as a talisman against hubris – a leadership malaise we’ve explored before. There’s also an element of a professional economist defending his discipline against another:
In the scientific world, the syndrome known as “great man’s disease” happens when a famous researcher in one field develops strong opinions about another field that he or she does not understand, such as a chemist who decides that he is an expert in medicine or a physicist who decides that he is an expert in cognitive science. The same syndrome is apparent in some business leaders who have been promoted to economic advisers: They have trouble accepting that they must go back to school before they can make pronouncements in a new field.
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. […] 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.”
Beyond Prof Krugman’s well-argued points, it’s also worth saying that a country isn’t just its economy: it’s a language, a complex web of social cultures, customs and habits, a cuisine, a cultural history … These things can’t simply be bought and sold: we might make a buck or two on it, but we can’t sell Shakespeare to the Chinese even if we can sell them books, t-shirts, open-top bus tours of Stratford-upon-Avon and so on. If the figures showed that Cornwall was under-performing, we couldn’t just put it up for sale. Nor could we merge Derbyshire with Devon, or acquire Corsica. Well, not without some stern commentary from the rest of the world. And even if Greece were to be declared officially bankrupt, the Greeks would still be – well, Greek.
It’s one of those scenarios where there’s a lot of fun to be had with the analogy. I thought about joyous flag-waving and how people spend a fortune on little plastic ensigns whenever a major international football tournament breaks out. It struck me that I couldn’t – at least offhand – think of a company whose staff would dash to a shop to spend their own money on a company flag to wave spontaneously or use as an impromptu bedspread, and how companies have to engineer that kind of thing. And then I remembered not just Nicolae Ceaucescu but also the co-ordinated planning behind the crowds that greeted Tony Blair’s first election victory. (As Buzzle.com commented in its profile of the former PM, he “not only lived in interesting times, but has stage-managed many of them too”.)
Others attempt to focus on individual aspects are just as fraught: what counts as recruitment at one level winds up as immigration at another – and then gets caught up in arguments about relative skill levels, the potential damage of applying caps and much more. I tried thinking about the national equivalent of an EVP, and got no further than thinking ‘maybe it’s be some kind of Quality of Life’ index before my head hurt. Other elements of talent management don’t fair even more smoothly: how exactly would you implement a national version of an employee engagement survey? It’s not as if you can decide that anyone not cheering on the national team will be exported, however you might feel about ‘the cricket test’.
Prof Krugman returned to his original theme in a recent New York Times article, underlining his point thus (amongst other underlinings):
[…] companies — even if they have relatively decentralized management — are top-down organizations in which people do what they’re told. Market economies are free-for-alls, in which the job of policy is largely to provide incentives to do things (and yes, that’s true even if we’re talking about monetary policy and fiscal stimulus).”
But I’ll leave the final word to the Office for National Statistics, whose Business Demography 2010 Statistical Bulletin (download as a PDF) has just been published. If watching the news – or waking up with Evan Davis – is getting you down, give a few minutes to ponder how’d you feel if the prospects for the national economy were in line with the following:
The UK five-year survival rate for businesses born in 2005 and still active in 2010 was 44.4 per cent. By region, the highest five-year survival rate was in Northern Ireland at 54.0 per cent, while the lowest was in London at 39.7 per cent. By broad industry, some notably high five-year survival rates include health with a survival rate of 58.3 per cent and education with a survival rate of 55.5 per cent. Hotels & catering was the lowest with only 33.6 per cent of businesses surviving for five years.”