Well we all keep cribbing about the Government, and ofcourse this has been going on and will go on for many many years. But since the past one year the world has been looking at all companies in a different light, we are seeing companies restructure, de-leverage themselves (remove their debt), and a lot of strategic rethinking. The Governments across the world have done a lot in terms of financial stimulus, bailouts and many more things.

The important question however is that have we ever tried to evaluate the performance of a Government like a company? A company has a balance sheet and so does a Government. A company has earnings from its products, a Government should collect money from taxes. A company issues debt for extra funding, and so does the Government. A company can sometimes run into losses, but a Government almost invariably runs into losses. But why?? Shouldn’t a Government be able to match its assets and liabilities on its balance sheet? why does this fail?

I know many people will say that the Government spends money on aspects such as building schools, hospitals, city infrastructure, roads and the entire civic life. It also maintains an army, defense systems, foreign policy, embassies and the country’s entity. It also maintains many many other aspects and all these require money! And I completely agree with all this but what I don’t understand is that why aren’t taxes sufficient to cover all these expenses? and if they are not then doesn’t it show inefficiency on the part of the Government?

I believe the Government failure is highlighted by a couple of aspects. Firstly the Governments have not been able to create an efficient taxing system. Indian Government is not able to tax the people correctly and a lot of people don’t pay taxes. Governments around the world have various problems and are basically unable to tax people correctly (If they are taxing them correctly then I applaud them on this aspect). The second aspect is spending! I would assume that in the beginning there was just income tax and corporate tax. Slowly someone must have introduced VAT (Value Added Tax) to ensure Government gets money at every step. Next was council tax, road tax, commercial car tax, and so many taxes that the count has become unbelievable. I believe it will be a very good exercise for all of us to just calculate for 1 year the amount of money we pay in various taxes! The third aspect of Government failure is where they are initially not in deficits and then turn into deficits and unable to come out of it.

The world around us is questioning a lot of aspects today and I would request all of us to also question the Government monopoly across the worlds as well. The deficits and therefore the leveraging that the Governments are running is unsustainable. When a company defaults its only the shareholders who are wiped out, but unfortunately when our Governments will default then it is our currency which will face the brunt.

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