Robert Shiller has a novel idea for America.
He writes in the Harvard Business Review:
Here’s an audacious alternative: Countries should replace much of their existing national debt with shares of the “earnings” of their economies. This would allow them to better manage their financial obligations and could help prevent future financial crises. It might even lower countries’ borrowing costs in the long run.
Basically, Shiller thinks that America could be better managed if it were run more like a public corporation.
These shares could trade on stock exchanges and they would pay quarterly dividends of one-trillionth of the country’s quarterly GDP. According to a model developed by Shiller and Mark Kamstra of York University, these shares would’ve paid $13.22 in 2010.
Shiller’s plan is rather elaborate.
But the motivation behind all of this is largely driven by one concept Shiller has always believed in: markets. Shiller has believes that well-functioning markets can tell a lot about an asset’s perceived value.
Markets for national shares would fundamentally change the economic atmosphere. An immediate market response would accompany every new government plan affecting the future of the economy, generating a discussion of each country’s development plan, as well as a flow of international resources toward governments with plans that passed the market test.
Sure, this model might seem like a “dangerous extension of financial capitalism,” notes Shiller. But it would ultimately be the best way to determine a country’s real worth.
But in fact the enthusiastic implementation of financial capitalism has been the story of every successful nation on the planet. We should not shrink from having real markets for countries, which would track countries’ successes much more accurately than stock markets do. Stock markets represent only claims on corporate earnings after corporate taxes—an unreliable measure of a country’s success. We can do better.
(via The Reformed Broker)