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Robert Reich: Global Capital and the Nation State

May 22, 2013

Global corporations are holding governments and citizens up for ransom.

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By Robert Reich
By arrangement with Robert Reich

As global capital becomes ever more powerful, giant corporations are holding governments and citizens up for ransom—eliciting subsidies and tax breaks from countries concerned about their nation’s “competitiveness”—while sheltering their profits in the lowest-tax jurisdictions they can find. Major advanced countries—and their citizens—need a comprehensive tax agreement that won’t allow global corporations to get away with this.

The fact is, global corporations have no allegiance to any country; their only objective is to make as much money as possible.

Google, Amazon, Starbucks, every other major corporation, and every big Wall Street bank, are sheltering as much of their U.S. profits abroad as they can, while telling Washington that lower corporate taxes are necessary in order to keep the U.S. “competitive.”

Baloney. The fact is, global corporations have no allegiance to any country; their only objective is to make as much money as possible—and play off one country against another to keep their taxes down and subsidies up, thereby shifting more of the tax burden to ordinary people whose wages are already shrinking because companies are playing workers off against each other.

I’m in London for a few days, and all the talk here is about how Goldman Sachs just negotiated a sweetheart deal to settle a tax dispute with the British government; Google is manipulating its British sales to pay almost no taxes here by using its low-tax Ireland subsidiary (the chair of the Parliamentary committee investigating this has just called the do-no-evil firm “devious, calculating, and unethical”); Amazon has been found to route its British sales through a subsidiary in low-tax Luxembourg, and now receives more in subsidies from the British government than it pays here in taxes; Starbucks’s tax-avoidance strategy was so blatant British consumers began boycotting the firm until it reversed course.

Meanwhile, at a time when you’d expect nations to band together to gain bargaining power against global capital, the opposite is occurring: Xenophobia is breaking out all over.

Here in Britain, the UK Independence Party—which wants to get out of the European Union—is rapidly gaining ground, becoming the third most popular party in the country, according to a new poll for The Independent on Sunday. Almost one in five people plan to vote for it in the next general election. Ukip’s overall ratings have risen four points to 19 percent in the past month, despite Prime Minister David Cameron’s efforts to wrest back control of the crucial debate over Britain’s relationship with the European Union.

Right-wing nationalist parties are gaining ground elsewhere in Europe as well. In the U.S., not only are Republicans sounding more nationalistic of late (anti-immigrant, anti-trade), but they continue to push “states rights”—as states increasingly battle against one another to give global companies ever larger tax breaks and subsidies.

Nothing could strengthen the hand of global capital more than such breakups.

Robert B. Reich, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton.

Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, Aftershock: The Next Economy and America’s Future; The Work of Nations: Preparing Ourselves for 21st Century Capitalism which has been translated into 22 languages; and his newest, an e-book, Beyond Outrage. His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org.

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