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Beware Capitalist Tools

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Posted on May 27, 2013
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By Robert Reich

This post originally ran on Robert Reich’s Web page.

Forbes magazine likes to call itself a “capitalist tool,” and routinely offers tool-like justifications for whatever it is that profit-seeking corporations want to do. Recently it has deployed its small army of corporate defenders and apologists in the multi-billion dollar fight to keep the effective tax rates of global corporations low.

One of its contributors, Tim Worstall, recently took me to task for suggesting that a way for citizens to gain some countervailing power over large global corporations is for governments to threaten denial of market access unless corporations act responsibly.

He argues that the benefits to consumers of global corporations are so large that denial of market access would hurt citizens more than it would help them. The “value to U.S. consumers of Apple is they can buy Apple products,” Worstall writes. “Why would you want to punish U.S. consumers, by banning them from buying Apple products, just because Apple obeys the current tax laws?”

Wortstall thereby begs the central question. If global corporations obeyed all national laws — the spirit of the laws as well as the letter of them – and didn’t use their inordinate power to dictate the laws in the first place by otherwise threatening to take their jobs and investments elsewhere, there’d be no issue.

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It’s the fact of their power to manipulate laws by playing nations off against one another – determining how much they pay in taxes, as well as how much they get in corporate welfare subsidies, how much regulation they’re subject to, and so on – that raises the question of how citizens can countermand this power.

Consumer benefits may sometimes exceed such costs. But, as we’ve painfully learned over the years (the Wall Street meltdown, the BP oil spill in the Gulf, consumer injuries and deaths from unsafe products, worker injuries and deaths from unsafe working conditions, climate change brought on by carbon dioxide emissions, and, yes, manipulation of the tax laws – need I go on?), the social costs may also exceed consumer benefits.

Why would an economics writer for a seemingly sophisticated national publication such as Forbes deny the existence of corporate power to circumvent or create favorable laws, or dismiss the social costs that corporations bent solely on maximizing profits routinely disregard? I’ll get back to this in a moment.

Worstall then goes on to criticize me for suggesting that governments also condition market access on receiving some of the social benefits that corporations now wield to play countries off against one another, such as good jobs or investments in research and development. In his eyes, I’m committing the mortal sin of denying the economics of comparative advantage.

On what planet have Forbes’ capitalist tools been living? Many of the world’s most successful economies – among them, China and Singapore – owe their successes in part to their conditioning market access on certain kinds of jobs and investments, including research and development. That’s the way they have come to use global corporations, rather than be used by them. It’s the same approach Alexander Hamilton advocated more than two centuries ago in proposing how the United States develop its manufacturing industries.

Comparative advantage is nice in theory, but in a world where powerful global corporations are using every strategy imaginable to maximize their profits and powerful governments are strategically employing market access to develop their economies, it’s just theory.

Economics writers like those affiliated with Forbes Magazine surely are sophisticated enough to know this as well. So why are they so eager to trot out such economic nonsense?

Perhaps because so much profit is at stake that those who pay their salaries – and who have also put many academic economists on retainers – prefer that they mislead the public with simplistic economic theory that appears to justify these profits rather than to tell the truth.

My modest suggestion that governments become the agents of their citizens in bargaining with global capital should hardly raise an eyebrow. But the capitalist tools at Forbes, and elsewhere, must be worried that average citizens may be starting to see what’s really going on, and might therefore take such a suggestion seriously.

Robert B. Reich, chancellor’s professor of public policy at UC Berkeley, was secretary of labor in the Clinton administration. Time magazine named him one of the 10 most effective Cabinet secretaries of the last century. He has written 13 books, including the best-sellers “Aftershock” and “The Work of Nations.” His latest, “Beyond Outrage,” is now out in paperback. He is also a founding editor of The American Prospect magazine and chairman of Common Cause.


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