Anne Marie Waters
Tuesday May 19th 2020
Last week, in my economic blog, I discussed debt and with it, the power of banks. Debt has exploded over the last few decades, as banks create new money and extend loans at unprecedented levels. This does make the economy move, and many businesses would never have been born without these loans, but it is wise for us to examine all aspects of the systems of our society; we must know what is wrong in order to try to put it right. This means an honest look at the pitfalls of unregulated capitalism.
I am a capitalist. I believe in the free market and particularly, entrepreneurship and creativity. I believe in a person’s liberty to trade, to make money, and to reap the rewards of their efforts. I do however recognise that there are problems. The market has no conscience. The raison d’etre of business is to make money, and there is nothing at all wrong with that, but we cannot look away when big business holds the whip hand of power over our elected governments. This is anti-democratic, and above all, I am a democrat.
This week, I will look again (for the final time) at the content of a book I referred to in my previous blog (which you can read here). That book is ‘Grip of Death – A study of modern money, debt slavery, and destructive economics’ by Michael Rowbotham. In it, Rowbotham describes an increase in debt at all levels of society, all over the world, giving banks and lenders an unwarranted level of power. The 20th century also saw a huge rise in the prominence (and dominance) of the big multinational company (MNC); the result too has been unwarranted power.
Multinationals are large companies with outlets, branches or sales all around the world. While these companies often provide convenience, familiarity, and cheap products, it has come at a hefty price.
The first casualty is small business – entire high streets have been wiped out. Because MNCs can produce large amounts of their products cheaply, they undercut independent businesses and drive them in to the ground. There is no way to calculate how many small businesses have gone under thanks to the entrance of MNCs to their area. However, there is no doubt that these companies have disrupted livelihoods, driven people on to benefits or to lower paid work (perhaps in a multinational company).
A wider effect is uniformity; all towns have the same shops, the same restaurants, the same cinemas… towns lose their individuality.
In terms of production, companies that operate the world over can take advantage of poor (or none) working conditions legislation, paying a pittance to workers who cannot afford the product they’re busily manufacturing. Lack of environmental protections may also attract business that is damaging to localities. For example, according to Rowbotham “companies such as Shell or BP, which have cultivated an ecofriendly image in the northern hemisphere, have been heavily criticised for their environmentally damaging operations in underdeveloped nations”.
But it is the power over governments that MNCs exercise that should worry us most. They do so because of the numbers they employ. They essentially blackmail governments, using this as their leverage.
MNCs may bring employment to an area, but often the government has to pay them to do so. Let’s take an example from ‘Grip of Death’. In the ’90s, BMW were looking for a site for their new $400 million car factory. Offers had been made from 250 localities in 10 countries before the car giant settled upon a site in South Carolina in the United States. The site they wanted however already had 140 homes within it, so the South Carolina taxpayer bought the homes (and the land) at a cost of $36.6 million and leased it to BMW for $1 per year.
Furthermore, the state funded the recruitment and training of workers, as well as providing $2.8 million to send new employees to Germany for training. The estimated overall cost to the taxpayer? $130 million.
Similarly, when Ford opened a new factory in Birmingham, England, the state provided 18% of the costs.
Tax avoidance, monopoly, and customer service are also key facets of this discussion. As anyone who has had to deal with huge companies knows, it can be maddening. Long waits to speak to a representative, lack of solutions, any problems will inevitably lead to great inconvenience for customers, who are powerless when faced with a company with millions of people buying its product. Moreover, when a small number of companies dominate a particular market, the customer does not have a great amount of choice, often forced by necessity to use a service they otherwise would choose not to (such as transport for example).
Some corporations have avoided paying taxes for years, and according to the Financial Times, they have paid even less since the economic crash of 2008. FT reports that “Big multinationals are paying significantly lower tax rates than before the 2008 financial crisis, according to Financial Times analysis showing that a decade of government efforts to cut deficits and reform taxes has left the corporate world largely unscathed.”
So while others have been forced to tighten their belts, including governments, the world’s richest companies escape any burden.
Once again, I am a capitalist, I believe in the freedom to make money, but these matters have to be addressed. Are we entirely comfortable with all of the above? If we want a fairer and more moral capitalism, then it is up to us to create it, something we can only do with political power.
That’s our first task, join us.
Anne Marie Waters
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