Accounting for National Business Models

We have previously established our position which is to argue that generating a surplus (for liquidity) and ongoing recapitalizations (for solvency) are a central financial feature of national business models. In this chapter we unlock national business models to explore the risks attached to maintaining ongoing capitalization where this runs ahead of GDP and operating surplus, and where financial adjustments are transmitted, amplified and made porous by accounting systems. Our starting point is to situate national business models within an institutional context: corporate (financial and non-financial), government and households. We consider the extent to which cost structures in these institutional sectors are transformed and argue that the arithmetic identity of assets ≡ liabilities conceals variable motivations and calculations embedded in corporate financial, non-financial and government-directed business models. We try to answer a series of questions. To what extent are the capitalizations of national business models grounded in a transformation of surplus (liquidity)? How are different institutional sectors able to inflate balance sheet capitalization ahead of surplus? And what role does accounting play in transmitting and amplifying adjustments within the financial system of national business models?