Bob's Links and Rants

Welcome to my rants page! You can contact me by e-mail: Blog roll. Site feed.

Wednesday, October 20, 2004

Corporations are Criminals

It's in their charters! They can actually be sued by stockholders if they don't steal every penny they can. And they do, regularly. And states and local communities continue to compete with each other for the opportunity to be fleeced.

My first blog post on this topic was back in April, 2002. Since that was in my pre-Blogger blog days, I don't have a good permalink to it, so I'll just copy it here:
This nonsense has got to stop! The state of Ohio has offered Ford an $83 million incentive package to build Mercury SUV's at its Avon Lake Assembly Plant near Cleveland. GM recently threatened to move assembly of its silly Chevrolet SSR (V8 powered two-seat roadster pickup mutant) unless Lansing, Michigan agreed to lower pollution standards. Politicians in Montgomery, Alabama were ecstatic that Hyundai agreed to build a 2000-job assembly plant there for only $133 million in state and local bribe money. That's $66,500 per job! Corporations have pitted city against city, state against state, and with NAFTA and WTO, country against country in a bidding war for jobs. Ralph Nader, in his book "Crashing the Party," describes a recent case where Daimler-Chrysler squeezed millions out of Toledo and Ohio to locate a Jeep plant in Toledo. Entire neighborhoods were destroyed to build the plant, and an economic downturn resulted in far fewer jobs being created than were promised. I don't know all the answers, but it sure seems like corporations should be paying states substantial fees for the privilege of doing business within their borders, not the other way around. There is now more real competition between Michigan, Alabama and Mexico than there is between Ford, GM, and Daimler-Chrysler. This benefits the shareholders and executives of the corporations to the detriment of the citizens of the states and countries. We need to realize that we have more than enough stuff and that economic activity and jobs aren't the necessities--food, clothing and shelter are.
(It had links in it, but they no longer work.)

I ranted about this topic again here, here, here, and here.

I bring this up because the NY Times has an article today about two communities, Galesburg, Illinois and Putnam County, Florida, which offered huge tax incentives to get corporations to locate there, only to leave a few years later. Galesburg lost a Maytag refrigerator plant to Mexico, and Putnam County lost a telemarketing center run by Sykes Enterprises. Galesburg is divided over the issue of whether to fight: District Attorney Paul L. Mangieri wants to sue Maytag to recover some of the excessive tax breaks they were given:
Much of the money, he said, came from a purse that would have gone to schools in this economically fragile community.

"We gave Maytag these incentives, and they accepted them," said Mr. Mangieri, a Navy veteran who grew up in a small town not far from here in western Illinois. "We did it based on faith and trust. If we don't do anything now, it sends a message that we lack the resolve to treat the rich and privileged the same as everybody else."
But some in Galesburg don't want Mangieri ruining their opportunity to be screwed again:
After initially cheering their prosecutor for trying to regain some of the money used to keep Maytag, some people say they are afraid that they may scare off future employers. They question whether suing to reclaim tax breaks will hurt the community even more, adding that they have to pay companies to compete and that it is the cost of doing business in a vulnerable town.

"Maytag's leaving town has devastated our community," said Jeff Klinck, a car dealer and the former chairman of the economic development office here. "But I don't think any good comes from revenge. We want to move forward, not move back."
While it appears that Putnam County won't be suing Sykes, many residents aren't happy:
In Putnam County, Mr. Keyser was so incensed at Sykes's receiving cash and tax breaks that he sent a mock bill to county officials asking for a tax break of $25,000 for the one new employee he hired at his law firm.

"It's universal blackmail out there," Mr. Keyser said, "with corporations all playing the same game."
I think he's almost exactly right, although like many he uses the word "blackmail" when he really means "extortion." (Blackmail involves a secret; there's nothing secret about what these corporations are doing.) Nowhere in the Times article is it really suggested that anything be done on a national or global basis to put an end to this madness. This stuff was going on since way back when I was a kid, with non-union southern states luring auto plants out of Michigan. Then NAFTA made it easy for Mexico to lure factories out of the US entirely, and now Mexico is losing plants to countries with even lower wages. The constitution gives Congress the right to regulate interstate commerce. If Congress were actually working for the majority of the people, they would aggressively use this clause to support higher wages and benefits and to discourage corporations from jumping around the country (or world) searching for low wages. Instead, Congress works for the corporations, and therefore has let this wasteful and destructive nonsense go on for decades. The scariest part is that most Americans, and probably lots of people in other countries as well, seem to believe that the NAFTA-WTO version of "free trade" is actually a good thing. It seems as though this belief may last until the last worker in the last sweatshop on earth, a casket factory in the Sudan, breathes her last breath. I mean, who are you going to believe? The politicians and the pundits, or your own lying eyes?

Obviously, corporate-friendly policies have not brought economic security to communities that have paid through the nose trying to get it. I surely don't know all the answers, but I think the key to real economic security lies in having broad diversity locally. Pretty much all necessities should be produced locally, including a variety of food crops. The advantages of economies of scale and reduced management and marketing costs, all associated with large multi-state and multi-national corporations, accrue almost exclusively to the stockholders. When Maytag moves into your town and hires all of the people who used to work in a wide variety of businesses, that town's economic health is now tied pretty exclusively to the market for refrigerators. Dave Pollard's blog How to Save the World has an excellent article on the advantages of local versus global production. I especially like this chart which compares our current corporate-centered red cycle with the more people-centered green cycle which America was approaching in the middle of the last century and which we should strive for again:

As it says in the blue box, the key is to impose duties and tariffs on importing anything that can be produced or done locally. It then becomes much less of a race to the bottom.

[Update] Rick reminds me of the film The Corporation, which unfortunately I haven't seen yet. It was shown in Ann Arbor for a week back in June, and is supposed to be back here at the Michigan Theater from October 24-27. The DVD is due out next March. People I've talked to say it's a great eye-opener.