by Joel Schlossberg
http://c4ss.org/content/29571
“Economic Patriotism”: The Last Refuge of a Tax Scoundrel
In mid-July, US Treasury Secretary Jack Lew proposed that Congress prohibit US-based companies from moving offshore in search of more favorable tax climates, citing an ostensible need for a “new sense of economic patriotism.”
The resort to “patriotism” theater stands out as the most egregious aspect of legislation whose retroactive status would blatantly violate the Constitution’s prohibition on ex post facto laws.
Underneath the veneer of common interest between the government, big business, and the general public provided by the legitimizing ideology of “patriotism,” there is and always has been a symbiotic corporate-state alliance parasitic on the latter. The state provides corporations such favors as liability shields, regulations keeping out new competitors, and labor laws preventing workers from holding out for higher wages. In return, the corporations — as Martin Short’s satirical lobbyist Nathan Thurm put it when pressed to defend the vast amounts of corporate welfare received by his clients from the government — “give a lot of that money back.”
Crucially, corporations collect such revenue for the state by passing their tax burdens on to the consumer via stealth de facto “taxes” hidden in the above-free-market-level shelf prices of their products. Thus, any tax on corporations initially favoring Washington eventually comes out of your pockets and mine.
The corporate-state symbiosis is so close that it’s difficult to keep track even of which members of the elite are part of which entity and when. Charles “what was good for our country was good for General Motors and vice versa” Wilson went from heading GM to spearheading the interstate highway system as Secretary of Defense. Supposed muckraker Lew is himself a perfect example of that revolving-door phenomenon, his career alternating between various departments of the federal government and Citigroup — including (ahem) its subsidiaries in Bermuda, the Cayman Islands and Hong Kong.
It is true that the corporate-state alliance has been strained by the panoply of neoliberal economic policies. But “globalization” requires doing away with borders only very selectively, when it suits corporate purposes. The American superstate and its international “trade partners” are more than willing to ignore borders when corporations benefit by moving goods from low-cost labor centers to high-profit sales centers. But that same state and those same partners consider borders of paramount importance when it comes to capturing the tax revenue that pays for all the perks their corporate symbiotes depend on for their continued existence.
Thus, corporate attempts to avoid paying taxes deserve little sympathy, since they amount to offloading the bill for the perks they still receive from the state, instead footed by the public directly. But the appropriate response is not to redouble efforts of the decaying nation-state to tax them, but for the public to refuse to be bamboozled into being the “patriotic” third leg propping up the corporate-state stool.
As the example of Wilson proves, corporate influence skews the implementation of even public services as seemingly neutral as roads in a direction that benefits corporations first and the public second. Thus, the means to fund essential public services is not “economic patriotism,” but consistent free markets and free trade.
Note: This article was written in collaboration with Thomas L. Knapp.
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Large business enterprises (large “corporations”) are leaving the United States – the whole point of the article (if it has a point) is that American taxes on business are absurdly high and that it is absurd to demand that businessmen stay to get looted as a matter of “patriotism”.
Yet then (without a blush) the article assumes an alliance between big business and big government (which the above proves not to be the case) – although at least we are spared the false history that the Progressive era policies (the policies of T. Roosevelt and Woodrow Wilson were a net gain for “big business” (actually they were a net loss), and we are spared the false history that Franklin Roosevelt’s 1930s were a good period for most “big business” enterprises (when actually the random and contradictory interventions of the New Dealers paralysed the investment of most of even the largest business enterprises).
We are also given the myth (originally invented by the Soviet NKVD back in the interwar period – in their efforts to mislead people about Mussolini’s Fascist Italy) that “Corporatism” is an alliance between business and government – actually (like German “War Socialism” during the First World War) it is the control of business by government (it is not an alliance).
And please spare us the modern Marxist (Karl himself did not use this language) language about “neo liberal” policies.
None of the above should be taken to mean support of government road schemes (although the last President to suggest that if a new road was really economically justified it would be paid for voluntarily was Warren Harding, that does not undermine the point – as Warren Harding was not as the establishment historians have presented him). Nor should the above be taken as support for the Central Banks and their “low interest rate” policy – which is indeed “welfare for the rich”.
Not a new point – after all Richard Cantillon was making it back in the 1700s (but still true today).
Paul – Any advanced state requires a substantial tax base,. The only questions to be decided is how substantial and how is tax to be raised?
Extreme libertarians claim that “taxation is theft” and envisage their ideal society as one in which every necessary social expenditure – yes, even extreme libertarians tend to grudgingly admit that the public provision of defence, justice, diplomacy and suchlike are necessary – should be funded from voluntary contributions. Pleasing as the idea of a world without taxes is, all of history is resolutely against it and our experience of human nature tells us that altruistic behaviour has severe limits.
No society beyond the tribal has ever survived without some form of overt forced contribution and even tribal societies place onerous social obligations on people, such as sharing food and the provision of hospitality to strangers, which are scarcely voluntary because of the fear of social ostracism. We also know for a fact that where people are left to make voluntary contributions, for example to charity, the vast majority either contribute nothing or very little.
Most societies which have ever existed, and that includes most which currently exist, have had no state sponsored welfare provision and in such societies voluntary aid has always proven to be completely inadequate to meet the needs of the poor and unfortunate. The first country anywhere to avoid serious and regular famines was England, which was also the first country to have national welfare provision as a legal obligation as a consequence of the 1597 and 1601 Poor Laws. No coincidence.
It would take an optimist of Herculean faith in the malleability of human beings to imagine that a society of any sophistication would work if it was solely based on voluntary contributions to provide those things necessary for the general good.
If you want to know the way taxation works I suggest my http://livinginamadhouse.wordpress.com/2010/10/05/the-principles-of-taxation-a-guide-for-politicians/
The link between the absence of famine and welfare is tenuous indeed. It is generally recognised that Europe has been free from famine due to economic development and trade. No amount of shuffling money about from one person to another can conjure food out of thin air.
Ian B – Famine continued in many parts of Europe into the 19th century. Famine ended in England by the early 18th century.
“We are also given the myth (originally invented by the Soviet NKVD back in the interwar period – in their efforts to mislead people about Mussolini’s Fascist Italy) that ‘Corporatism’ is an alliance between business and government ”
The piece doesn’t even mention “corporatism.”
Actually Mr Henderson taxation is more like extortion than theft – the state does not sneak its hand in your pocket and then run away, it demands the money with the threats.
That is not an “anarchist statement” (I am not an anarchist) – it is simply a statement of the truth. One can argue that it is a “lesser evil” – but arguing that it is not an evil will not wash.
Quite correct Ian – for example the great death in Ireland (in the 1840s) came AFTER the Poor Law was adopted, If passing laws and collecting taxes could create wealth then we would all be rich indeed. The Royal Irish Police (another new institution at time – in Edmund Burke’s time there was no such thing) did indeed go round on horse back (with rifles on their backs) collecting the new Poor Law Rates from property owners (in Ireland the landowner, not the tenant, was responsible for the payment of the tax – also in Ireland, even to this day. there is no such thing as an unarmed “bailiff” [the standard English way of collecting local taxes from people who do not pay] as in Ireland [North or South] an unnamed person coming to your door and trying to take your possessions, would be killed, or at least severely beaten – a friend of mine in County Antrim was threatened by an English company with “we will send the bailiffs in” – they could not understand that Ulster there is not such thing, or the cultural reasons why such an English institution would be impossible) – but this just made everything worse.
Higher taxes just reduced private employment opportunities and led to people flocking to the government make-work projects – such as the famous (or infamous) “roads to nowhere”.
The people who flocked to these projects tended to die of disease (large numbers of people cramped together)……
Surviving the potato blight depended (in large part) on where you lived (not what the government did – contrary the myths the London government did NOT have bad intentions, but it blundered about as governments tend to) – Ulster was less dependent on the potato than the South (less of a peasant plot economy), but some counties in the South were less dependent also – for example the counties of the east (such as county Wicklow) where the Ftizwilliam and Gratton families had long tried to move their estates away from peasant plot farming – it was too late to do this once they potato blight actually hit, but the Fitzwilliams and Grattons and co had been moving away from this for many decades before the blight hit).
It is a myth that government welfare and “public works” were not tried in Ireland – they were tried (and hard). But they failed – utterly. Indeed one third of the population either died or emigrated.
On the other hand France (which we now associate with statism) had no real government welfare for most of the 19th century (right up to the 1890s I believe) but was not a land associ8ated with either famine or mass emigration.
The Rev. Chalmers (Glasgow) proved that even a big British city could get by (even in times of economic crises) without government welfare. The passing of the Scots Poor Law (1845) was basically an ideological thing (plus “well the English have one – and have had since Tudor times, so……”).
Still the English Poor Law reform (the New Poor Law of 1834) did save money (and thus enable the rates to be cut – at least in rural areas), even though only one in three of welfare claimants were actually sent to a “”Workhouse” (there were always twice as many people on “out relief” as there were on “in relief”) – the threat that you MIGHT be sent to one was enough.
Thomas – quite right.
The term used in the article is “corporate state” or “corporate state alliance” rather than “corporatism”.
First the article shows that this “alliance” is a myth (that American business enterprises are actually being driven from the country by the level of taxes and so on – that the Marxist idea that the business controls the government is false), then it proceeds as if the “alliance” was real.
By they way……
Even under English law the company that threatened the friend of mine (rather to his amusement) would not have had a leg to stand on even under English law – the simple fact being that he did-not-owe-them-any-money (the bastards were trying their luck).
Still threatening “we will send in the bailiffs” in relation to a part of the world (Ulster) where they have no legal existence and could not (culturally) exist anyway, was “interesting”.
I was put in mind of all this by a conversation I had with a near neighbour a few hours ago.
He is being threatened by the local council with the bailiffs over unpaid taxes (the case is drivel, he has paid them money, but local officials are doing this sort of thing to a lot of people – they want to make the party in office, full disclosure people like ME, look bad before next May’s election, because they [the officials] tend to support the other political party).
“Just do not open the door to them D…. – they have no legal right to break it down, their words are just empty threats”.
Look of total horror on the poor man’s face.
You see (to most English people) not opening the door to people who want to take your stuff (over bills you do not owe anyway) would be “making a fuss”.
Better to sit on the floor in an empty house (with nothing but the clothes on your back) than “make a fuss”. Even contesting the matter in the (sadly all too often rubber-stamp) courts is “making a fuss”.
I am as bad (in some ways) as other English people.
For example, I was once knocked down (and bashed the back of my head on the road – “now we know why you are so dumb Paul”) by a motorcycle on a crossing (the light was in my favour).
The motorcyclist was totally at fault – he had run a red light and knocked me down (injuring me – leg, arm, head).
But what were the words that came out of my mouth as I staggered to my feet?
“I am terribly sorry – I hope I have not damaged your motorcycle”.
“Thomas – quite right. The term used in the article is ‘corporate state’ or ‘corporate state alliance’ rather than ‘corporatism.'”
In fairness, I’ve see a lot of “anarcho-capitalists” confusing corporatism
“First the article shows that this ‘alliance’ is a myth (that American business enterprises are actually being driven from the country by the level of taxes and so on – that the Marxist idea that the business controls the government is false), then it proceeds as if the ‘alliance’ was real.”
1) The idea that the business controls the government is hardly “Marxist” in origin. Marx’s daddy wasn’t even a gleam in Marx’s grand-daddy’s eye when that idea took hold.
2) The observable and irrefutable alliances between states and big business in general and the US government and big business in particular are not the same as “business controls the government.” It’s a symbiotic relationship — and when one symbiote begins demanding too much of the other, it’s only natural that the short-shrifted symbiote will look to other prospective partners.
Thomas – it is obvious that it is not a “symbiotic” relationship.
Of course some business enterprises will benefit from a specific government intervention. However, the net effect of all the interventions is a massive net loss. This is not just true under Barack Obama – it was even true a century ago (with a vastly smaller government), contrary to the nonsense of socialist historian G. Kolko most business enterprises (including most large business enterprises) were harmed far more than they were helped by the Progressive antics of such people as T. Roosevelt and Woodrow Wilson.
I repeat that this was with a much smaller government. The situation is much worse today (with a much larger government) so bad that it is unsustainable.
As for General Motors (the specific example given in the article) – capitalist shareowners in that business were wiped out (and the new investors are likely to be wiped out also – the way GM is going), but the United Auto Workers Union (and the politicians it backs) carry on……..
General Motors was indeed a well run business once (long ago) – but its managers made the mistake of going for Pragmatism (the big “P” is deliberate – I am pointing at that School of American philosophy) – making deals with both the UAW and the government. The deals with the government were indeed profitable for a time (although the road network would most likely have been built by the government anyway – there was little opposition to it), but the policy of making deals failed in the long run (as Pragmatism, the denial of principle, tends to fail in the long run).
Although you could come back and say I am making the mistake of confusing the interests of the shareholders (the owners – the people who lose their investment) with the corporate MANAGERS.
After all the people who are running the “new” GM now (running it towards another bankruptcy) have mostly been corporate managers for many years (the top lady at GM itself) – they do not seem to be harmed by bankruptcy at all.
If there is a “symbiotic” relationship it is between managers (not owners), union officials (mostly university types these days – not people with years of actual work behind them) and politicians.
Although this relationship can only last till they run of investors (owners) to loot with the “it will be different this time” mantra.
In Germany (which, in the post war period – at least till recently, resisted inheritance tax and capital gains tax specifically designed to undermine individual and family ownership) there is much less of a distinction between the interests of owners and managers – as they are often the same people (the manufacturing companies where a single family will own a controlling interest of the shares).
However, even in the United States and Britain (where tax law and regulations seem as if they have been designed to divide ownership and management) the scam can only carry on for a certain period of time…….
Although the matter is prolonged by most share ownership (at least in Britain) now being in the hands of institutions (such as pension funds) rather than individuals – so there are less nasty questions such as “why was Mr X paid a telephone number salary [and given a legally watertight pension pot] for bankrupting the company?”
The history of the British (not American) General Electric is instructive.
The company was well run for many years by Lord Weinstock (someone who used to personally go round checking that lights were turned off in the day time – and would turn up at night to chat to security guards and cleaners) – but then he retired and was replaced by new managers.
The new managers proceeded to waste the money built up (I am not suggesting corruption – they were just utterly incompetent) driving the company to ruin.
The managers then went on to other well paid jobs – there (in a nutshell) is the problem with how “the City” thinks and operates. Shareholder value wiped out – but with no real economic consequences for the people who had done it.
It was the same with Lloyds insurance syndicates. The “names” (the investors) were liable down their shirts (unlimited liability), but the syndicates were actually run by paid managers (who were not liable at all) GUESS HOW THAT WORKED OUT.
Traditionally the “names” (the investors) had personally run the insurance syndicates (deciding who to insure and who NOT to do business with) – but that was felt to be “old fashioned”. “Disinterested, scientific, professional managers” were brought instead. With the “names” reduced to people who just got a cheque every month – till it was not a cheque in the mail (it was a demand for everything they had – their homes, everything).
The division between ownership and control (beloved by the Financial Times newspaper and other establishment organs) does not tend to work well – not in the long run.