Post #22-Take the Money and Run: The Privileged World of the Multinational Corporation (Part 2)

I ended the last post by suggesting why governments do not constrain their global corporations from behaving disloyally—specifically, by avoiding fair taxation and exporting jobs.

No explanation of government reluctance to challenge global corporations would be complete without considering how often corporate leaders are appointed to government decision-making positions, enabling them to deregulate themselves.  Well known is the long history of US oil executives’ involvement in shaping oil policy starting right after World War II, when reliance on cheap Middle East oil began. Most of us will recall Dick Cheney’s secret meeting on energy policy with oil and gas executives as the first George W. Bush administration took office.  Check the backgrounds of any president’s cabinet and you’ll find it’s mostly populated with corporate lawyers and business leaders, not NGO or union directors.  Such built-in bias is commonplace, and is usually explained away with a question: Who knows more about business than a business leader?  Indeed.

The latest example is Obama’s appointment of Jeffrey Immelt, chairman and CEO of GE, to head the Council on Jobs and Competitiveness.  Here’s a guy whose company pays taxes (when it pays at all!) far below the 35% rate, has more workers and earns more money abroad than at home, and has one of the corporate world’s largest cash holdings (www.rooseveltinstitute.org/in-the-news/obama-picks-jeffrey-immelt-ge-ceo-run-new-jobs-focused-panel-ge-sends-jobs-overseas-pays). “Jobs and competitiveness” to Immelt clearly mean only one thing: invest abroad and shed jobs at home.

I took a look at the membership list of the Council on Jobs and Competitiveness.  (If you ask, I’ll send you the list.)  No surprise to find that of the 25 members, more than 15 are CEOs or presidents of multinational corporations, such as DuPont, Citigroup, Intel, American Express, and AOL. (Six are women.) Two unions are represented: UFCW and AFL-CIO.  Nearly every corporate member is on the board of one or more other major corporations or banks, and several hold or once held a position on another government council.  My point is not that this group, which is merely advisory and only one of several like it in the US government, is the secret key to understanding government policy making on the world economy.  Rather, what I think is important is how representative the group is of the tight government-business relationship that pervades official Washington, now and always.

These gatherings of the clan, whether behind closed doors or in the open, reflect the political problem ordinary citizens face in our democracy.  Regardless of the party in power, policy making caters to the concerns of big business, which today especially means global business.  As more and more manufacturing and services move abroad, opportunities at home shrink—and for small and medium-size businesses as well as for workers.  Talk about promoting “competitiveness” is a diversion; it is a code word for shrinking work forces here and finding greater profitability there.  Let’s not be fooled.

Senator Bernie Sanders isn’t fooled. At a hearing with Federal Reserve chair Janet Yellen, Sanders recited the awful statistics on inequality in America. He then asked Yellen: ““In your judgment, given the enormous power held by the billionaire class and their political representatives, are we still a capitalist democracy or have we gone over to an oligarchic form of society in which incredible enormous economic and political power now rests with the billionaire class?” Yellen agreed with the trend toward a billionaire-dominated country, but essentially threw the ball back to Congress to do something about it.

So what do you think?  If corporations are persons with the right to contribute virtually unlimited funds to political candidates and causes, as the Supreme Court decided in the Citizens United case, shouldn’t they have to pay their fair share of taxes just as we do? Evidently, few people in government think so.

P.S. Some readers are aware of a dense economics book that has joined the liberal hit parade: Thomas Piketty’s Wealth in the Twenty-first Century.  Its thesis, that wealth has far outpaced wage growth in the past and is doing so again today, has conservatives crying “Marxism” and (as Paul Krugman suggested in his New York Times column of April 25) searching for a credible way to justify the idea that “wealth is earned and deserved.”  (For one friendly conservative review of the book, see the Wall Street Journal at http://online.wsj.com/news/articles/SB10001424052702303825604579515452952131592.)  So I guess my recent posts on inequality, including the two on MNCs, are in keeping with a moral as well as political critique of the concentration of wealth in America that is finally gaining traction.

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6 Comments

  1. The oligarchy has the power, and is increasing military, science, and technology control to ensure that governments have less power than they do. They have to be sure that they can maintain that power should any population or government be able to muster a revolt. They are adding insulation to all their wires of control to be sure there can be no damaging short in the lines, then they can ‘short out’ other lines at will.
    Democracy be damned.

  2. Mel,
    I agree with the thesis of Piketty, Krugman, Sanders, Yellen, etc echoed in your posts, that the concentration of wealth and power acts against the interests of the rest of us. But what policies can effectively dilute or countervail this power? How do we redirect the resources (i.e. wealth) back to the country or society so as to stimulate innovation, to renovate infrastructure, as well as to provide for the public well-being, order, fairness, peace, climate change, etc. We need to invest resources in education, health care, employment, immigration, food, housing, and so forth, not in hotels, shopping centers and other investments of the wealthy class.

    The corporations threaten that if taxed or regulated, they will move more resources overseas. But the money must go somewhere. I don’t have a global answer to beat them and to steer these resources into socially desirable ends. But at the local level we can win some battles. Here’s an example.

    In Santa Monica’s 9 square miles, along with thousands of residents, I oppose mega development proposals for new mixed use centers and ocean front hotels that are strangling the town. Approximately 40 high density projects await approval. The final straw was the City Council’s approval last February of a huge project at the former Papermate plant on Olympic Blvd and 26th street. The developer, Hines Corp of Houston, is one of the largest in the world. The residents formed a non-profit, Residocracy.org, to oppose City Council decisions on development. Residocracy collected signatures to place a referendum on next November’s ballot, to reverse the Council’s approval. Last Tuesday night in a dramatic session, the Council voted to reverse their former decision. The project is now stopped. In reality Hines must wait a year before submitting a revised proposal and go through another multi year approval process. It boiled down to one council member reversing her vote, due to public pressure. I have also been working to oppose the expansion of the Miramar Hotel owned by Michael Dell.

    These outrageous mega scale development infect desirable locations all over California, in the rest of the country and overseas. One of the most in-your-face efforts is the LG Corp plan to build its headquarters in Englewoood Cliffs, NJ, despoiling New Yorkers’ views of the Palisades across the Hudson.

    The people must work for more tactical victories, project by project, law by law.

    Best wishes, Bob

  3. “All politics is local,” and “thinking globally, acting locally” are sound advice. Your experience demonstrates that once again. It’s extremely difficult, not to mention expensive, to try to confront corporate interests. Yet from time to time local-level action, often initiated by one or a few individuals, does succeed. Congratulations to the folks in Santa Monica, and you. for persisting and, so far, winning. Many small tactical victories add up.

  4. Well said professor. Yes. I agree – if corporations are “persons,” they should have to pay their fair share of taxes!

    Not sure if this article will come through, but Abby Snay was invited by Obama to come to the White House in March to talk about job creation. It was very exciting to meet with Obama and Biden and she felt somewhat encouraged by their words – let’s hope their actions follow!

  5. One of the policies we can advocate, is to persuade local government to stop bribing companies with tax windfalls and other incentives paid for by the people, to open shop within their boundaries. Companies have become very good at this sort of extortion. It seems absurd that local governments, state vs. state, city vs. city, bid against each other in order to entice a company or developer to locate within their jurisdiction.

  6. Bribery is indeed the proper word. These companies put communities in a bind, of course. Worst part of the deal, beyond taxpayer subsidies, is that the companies are not typically held accountable for actually producing the jobs they promise. By the time reality sets in, it’s too late.

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