GLOBALIZATION: THE ECONOMIC THEORY THAT TURNED OUT TO BE MORE DAMAGING TO THE AMERICAN PEOPLE AND AMERICA THAN THE LAST WALL STREET SCAM. HOW THE INTERNATIONAL COMPANIES SHORT CHANGED THE AMERICAN ECONOMY.
Filed under: APPLE TAX POLICIES, Globalization, Globalization Consequences, INFRASTRUCURE, JOB LOSS, MICROSOFT TAX POLICY, OFFSHORE PROFITS, REVENUE LOSS, TAX AVOIDANCE, TAXES, Uncategorized
FOXCONN FACTORY CHINA: THIS WILL BE THE FATE OF AMERICAN WORKERS IF IT HAS NOT HAPPENED ALREADY
Globalization, in theory, sounded great when it was sold to the American people by their elected officials. “We will do what we do best and our Global trading partners will do what they do best and the whole World’s standard of living will rise by the efficiencies created.” What we witnessed was the transfer of American manufacturing jobs to other countries with cheaper labor and the standard of living for many Americans decreased.
American businesses in search of cheap labor and to avoid essential regulation either opened factories overseas or contracted with foreign manufacturers to make and assemble their products to be later sold to the American consumer and elsewhere. Thus middle management jobs and lower level jobs were lost, diminishing the income of the average American in a consumer based economy. People without jobs or lower paying service jobs consume less or as in the case of the real estate melt down borrow to maintain their standard of living. But things are worse than that.
We were told not to worry the efficiencies gained would make American products more competitive, globally, and our society would reap the gains. However the gains from the extra profit was not reinvested in the United States in the form of research and development or even in new plant and equipment to help make the American worker more competitive. This hasn’t been happening.
The example of Apple is but one. It designed and developed the iPhone and iPad here but manufactured and assembled them in Taiwan and China for sale world wide as well as the United States and still does. We witnessed in the Media the suicides in the factories where these products were assembled in China caused by the exploitation of Chinese workers.
However it goes beyond jobs, capital was globalized also and rather than repatriate profits and pay taxes so the social services that created the environment that helped the United State continue to be the incubator of new ideas and technologies they manipulated the profits on a global scale to avoid taxes.
For instance the basic idea of the internet was developed by the U.S. Government out of its defense research.Private industries picked up the ideas and technology and created the commercial applications that became the leading edge of our economy at no cost to them. The quid pro quo was expected to be that the government would be repaid out of the taxes on the increased profits. Yet companies like Apple, Microsoft, Yahoo, Amazon and others transfer funds legally from one country to another to avoid taxes or minimize taxes owed to the United States government and its people thus shortchanging the government that underwrote the basic research.
The effect is a loss of revenue to fund or pay for the administrators, civil servants, police, firemen, teachers, schools, highways, communication systems, social welfare systems for the aged, poor and disabled, future research and other civic endeavors that make our society run.
Would Apple be in Cupertino California if the highways, airports and all the other civic services we take for granted like the Food and Drug Administration were not of the highest quality? This is a callous and a basic breach of the social contract by shortchanging the public on tax revenue leaving those who have been hurt by Globalization and the non global business sector to shoulder the costs of society.
Microsoft was willing to pay a price above normal to acquire Nokia with off shore funds. It justified this by saying if they bought the company with repatriated the funds it would have had to pay taxes and so to avoid this they acquired a foreign company with untaxed off shore funds. Media estimates say they paid way above market for Nokia. The big loser in the deal was the American government and of course the American taxpayers.
Globalization of our economy was improperly implemented in the first place. (Perhaps government funded research should be patented or copyrighted and then licensed to those who create and market the commercial application of the technology.) Maybe this is hindsight but it is not too late to correct this situation.
The American economy has been damaged not only by the loss of jobs but by the loss of reinvestment of profits in research and development, by the sequestration of investment capital offshore and the minimization of tax revenue needed to run the infrastructure essential to a cutting edge economy based on technology underwritten by Americans in the first place. In the meantime our cities, counties, states and federal government are experiencing revenue shortfalls.
Rather than impoverish Americans these companies should be reinvesting in our economy, training new American employees that meet their hiring standards and in general acting as good citizens and not as pirates.
Barack Obama: The Audacity Of Hope. Chapter Eight: The World Beyond Our Borders. Book Review. Foreign Policy And Its Evolution From Isolationist To Globalization.
In this chapter Obama discusses the history of foreign policy. He notes that George Washington counseled against foreign entanglements. Indeed we mostly didn’t during the late Eighteenth and Nineteenth Centuries. Jefferson made the Louisiana Purchase and the Country was concentrated on expanding its borders from coast to coast. In 1898 we fought the Spanish American War and annexed Puerto Rico, Guam and the Philippines. President Monroe had declared the Monroe Doctrine regarding foreign intervention in the affairs of Central and South America. However America remained distant from World affairs until World War I. Then we became a World power and took our place on the World stage. President Wilson played a major if not a decisive role in the Treaty of Versailles and formed the League Of Nations but our Senate failed to ratify the treaty and we never became a member.
After World War I we withdrew from World affairs and let our military languish. During this time we saw the rise of Fascism in Japan and Germany and Communism in Russia.
World War II led us back on the World stage. Afterwards We took an active role in the rebuilding of Germany and other countries in Europe and also Japan. We formed security and trade alliances around the World to contain the Soviet Union and the threat of World Communism. We watched as colonialism faded and our European Allies turned to Democratic Socialism while we remained a Capitalistic Democracy. The World divided into to The Democratic Nations, Communist Nations and the Third World composed usually of the poorest of nations.
We had a blue water navy which kept the sea lanes open and we built a massive military force armed with nuclear weapons to keep the threat of Communism at bay.
Up until this time the threats to our country came from other countries. The Soviet Union collapsed from our external pressure and the internal flaws of Communism. The Soviet Union being the greatest World producer of oil saw the price of oil drop to about $10 a barrel and the Soviet Union no longer had the economic resources to sustain its empire and it collapsed no longer to be a super power.
During the 1990’s under Clinton we were the World’s sole superpower, but failed to take adequate note of the rise of terrorist enemies who were not organized on a country basis. They fought an asymmetric type of warfare different from the clash of armies like we saw in WWII, Korea and Vietnam. We had to change our military and intelligence services to confront the threat of bombing and killing against randomly selected targets.
In addition to terrorism we now face a new nuclear threat by rogue states like North Korea and Iran who in the case of Iran also support terrorist groups.
We are the sole superpower in the World, in 2006 our defense budget was more than the next 30 countries combined, and the world looks to us to solve its problems. Under Bush II we had a go it alone attitude which alienated many of our long time allies.
Obama in 2006 saw the future of Foreign Policy as we being the World leader but we would seek the consensus of our Allies and others in any action we undertook military or otherwise. When action was under taken we would try to form a consortium of countries involved in the problem as we have done in dealing with N. Korea and Iran on nuclear problems and with our Allies in Iraq and Afghanistan.
Since the World is a much smaller place now because of technologies like the internet and jet travel we cannot rely on the two oceans to protect us from foreign violence. Also with the advent of Globalization the World is more united on an economic basis. Obama sees the rising economic power of China as an opportunity to broaden trade and improve the welfare of other people. However he notes that billions still live on a subsistence level without adequate schooling, medical services, sanitation, food and other services we take for granted in the West. That is the challenge to bring these poor countries into the orbit of the trading nations of the World so they can improve their livelihood and also make the World a safer place to live. It is in the back alleys of these third world countries that terrorist plots are hatched and because of unsanitary conditions new diseases and viruses’ emanate that threaten the rest of the World including the United States. (About 20% of the World controls 82% of the wealth and the lowest 40% share about 5 or 6 %.)