FacebookTwitterGoogle+RedditEmail

USA RIP?

by

American pharmaceutical giant Pfizer wants to become British, joining the ranks of other major corporations opening “headquarters” in low-tax-rate countries. At 21.0 percent in the U.K. versus 32.8 percent in the U.S., it’s a no-brainer. At the same time, roads, bridges, and airports – infrastructure that helped make the U.S. great more than a half century ago – is falling apart. Is there a connection?

Pfizer’s move is an old-fashioned takeover, hoping to acquire AstraZeneca for more than $100 billion, creating the world’s largest pharmaceutical group in the process. The modern part is the right to pay almost 40% less tax than legislated in the U.S. One calculation put the savings at $3.8 billion.

Another American pharmaceutical company investing in “inversion” or relocating their tax base away from the U.S. has set up in Ireland, where the corporate tax rate is a measly 12.5%. Endo has hoisted its shingle in a basement office in Dublin, where a skeleton staff is claiming “headquarters” status for its 4,100 Pennsylvania-based employees. The move is expected to save $75 million in taxes.

According to the Financial Times (April 30), Endo’s most recent major purchase was a Nespresso machine and the basement door of their new global “headquarters” doesn’t even have a brass name plate. As they would say in any of a hundred Dublin pubs located only blocks from Endo and the nearby Irish parliament, “Are you taking the piss?” Indeed, as the Financial Times further noted, the effective tax rate for U.S. pharmaceutical companies over the past decade is, in fact, “less than 6 per cent on over $100 billion of Irish profits,” less than half the official measly rate. No wonder corporations want to be tax resident in Ireland or Britain. No need to be Swiss or Cayman any more.

Inversion is all the rage for corporations looking to improve shareholder value. By listing profits in low-tax-rate jurisdictions overseas, American corporations save billions. Of course, some established companies don’t bother to move, using their own home-grown loopholes to escape the tax man. The largest corporation in the United States, General Electric, made U.S. profits of $5.1 billion in 2010, yet paid no taxes. In fact, they claimed a tax benefit of $3.2 billion. But to park almost $60 billion in “trapped” foreign profits, they want in on the international game too, hoping to acquire French power giant Alstom for tax purposes, a company Industry minister Arnaud Montebourg referred to as a “national jewel.”

Anything to keep their money from the American government. At the same time, American infrastructure is falling apart, with little will to maintain roads, bridges, or airports, not to mention a failing education system.

Government seems loath to get involved in public works, despite the past success of major nation-building projects. The FDR-inspired New Deal helped to build the Hoover Dam, a national interstate highway system, and the Tennessee Valley Authority (TVA), the nation’s largest public utility that provides almost 200 billion kWh and more than 40,000 jobs.

Depending on which side of the fence one stands, the TVA represents all that is wrong with government – top-down planning and restricted competition – or all that is right with government – organized effort and economic development. The New Deal heralded a proud new America still reeling after a decade of economic misery. In short, infrastructure helped rebuild America.

The top-down planning of NASA’s Apollo program and subsequent space missions helped bring about necessary component miniaturization needed in space, paving the way for the modern microchip revolution. Where would high-tech giants such as Intel, Microsoft, HP, or Apple be, never mind the recent Internet behemoths Google, Amazon, eBay, or Facebook, without government investment in the space program?

In a slimmed-down crisis-filled world, however, the U.S. space agency can’t even get to the International Space Station now without hitching a Russian ride (made all the more difficult with the current European border crises). In 2007, the I-35W bridge in Minneapolis collapsed over the Mississippi River, what Minnesota Governor Tim Pawlenty called “a catastrophe of historic proportions,” before acknowledging the lack of government funding in highway infrastructure. Joe Biden even recently likened passing through La Guardia airport to being in a third-world country. From New Orleans to Detroit, basic federal infrastructure is decaying piece by rotting piece.

Unfortunately, the U.S. is becoming a user-pay society, with different rules for the wealthy, elaborate gated communities, and multi-tiered levels of health care. If you can provide your own high-priced lawyers, security forces, and medical staffs, you don’t need government infrastructure. You don’t need government.

But infrastructure is a part of any national identity, as governments and people decide what’s important and strategic. In Germany, the state bars intercity bus travel to protect state-run train travel. In Canada, a multi-billion-dollar potash company takeover was deemed not to be of “net benefit” to Canada and blocked. In China, government subsidies spur on green technology to combat rising pollution. Integrated travel, mineral resources, and clean energy matter. In the United States, it seems keeping shareholders happy matters.

Pfizer has even cheekily threatened the U.K. government not to block their takeover of AstraZeneca, the 7,000-strong, London-based company they hope to outmuscle for preferred U.K. tax status, and a place to park their $85-billion overseas war chest. Known for popular performers such as Viagra, Pfizer’s own hard-on now is for reduced taxes. Forget outside innovation or the so-called R&D pipeline, the real jewel is increased share value via reduced taxes.

One wonders what Pfizer would do if the government sent them the bill for educating its workforce, providing on-demand electricity and water, or policing streets to protect their assets, important infrastructure and utilities falling short now because of vast reductions in the government tax take. By the way, AstraZeneca makes cancer-therapy drugs, not that that matters to the bottom line or shareholder profits.

When finance replaces industry as a national goal, decline follows. At the peak of the British Empire, business received preferential government treatment through an expanded circle of merchant bankers, who were no longer subject to any one government. Giovanni Arrighi noted in The Long Twentieth Century: Money, Power, and the Origins of our Times that “the massive relocation of surplus capital from industry to finance resulted in unprecedented prosperity for the bourgeoisie, partly at the expense of the working class.” In Empire, Niall Ferguson noted that of the more than threefold increase in per capita British GDP during almost 200 years of Indian rule, most of the profits “went to British managing agencies, banks or shareholders.” Over the same time, the Indian GDP per capita grew by only 14%. Basically, money any way you can get it.

To be sure, economic competition is a hazard when everyone wants the same limited resources or, in modern economic-speak, the same low tax rates. Regulation disappears, junk becomes gold, and the citizen consumer ends up with the bill. Barack Obama has gone on record saying he will tackle tax evasion, including a proposal in his most recent budget to outlaw inversion. But in fact, Obama and Co are really thinking about how to implement their own low corporate tax rate to keep pace with global competition.

The reality is that to fight low-rate tax regimes elsewhere countries are becoming low-rate tax regimes at home. It’s a fight that hurts everyone, and curbs much-needed infrastructure. Indeed, borderless corporations are defining the modern state. In the new user-pay USA, one can now expect either low corporate tax rates or a steady increase in corporate “inversions.”

Forget about new roads, modern electricity grids, and innovative changes to education. Forget about potholes on your street. Welcome to more pay for corporate shareholders. Welcome to third-world status. Sadly, the U.S. is being eclipsed by its own worst self. RIP USA (1776-2014?).

JOHN K. WHITE, an adjunct lecturer in the School of Physics, University College Dublin, and author of Do The Math!: On Growth, Greed, and Strategic Thinking (Sage, 2013). Do The Math! is also available in a Kindle edition. He can be reached at: john.white@ucd.ie.

More articles by:
July 28, 2016
Paul Street
Politician Speak at the DNC
Russell Mokhiber
Dems Dropping the N Word: When in Trouble, Blame Ralph
Jeffrey St. Clair
Night of the Hollow Men: Notes From the Democratic Convention
Renee Parsons
Blame It on the Russians
Herbert Dyer, Jr.
Is it the Cops or the Cameras? Putting Police Brutality in Historical Context
Howard Lisnoff
The Elephant in the Living Room
Pepe Escobar
The Real Secret of the South China Sea
Ramzy Baroud
Farewell to Yarmouk: A Palestinian Refugee’s Journey from Izmir to Greece
John Laforge
Wild Turkey with H-Bombs: Failed Coup Raise Calls for Denuclearization
Dave Lindorff
Moving Beyond the Sanders Campaign
Jill Richardson
There’s No Such Thing as a “Free Market”
Patrick Cockburn
Erdogan Moves Against the Gulen Movement in Turkey
Winslow Myers
Beyond Drift
Edward Martin - Mateo Pimentel
Who Are The Real Pariahs This Election?
Jan Oberg
The Clintons Celebrated, But Likely a Disaster for the Rest of the World
Johnny Gaunt
Brexit: the British Working Class has Just Yawned Awake
Mark Weisbrot
Attacking Trump for the Few Sensible Things He Says is Both Bad Politics and Bad Strategy
Thomas Knapp
Election 2016: Think Three’s a Crowd? Try 2,000
Corrine Fletcher
White Silence is Violence: How to be a White Accomplice
July 27, 2016
Richard Moser
The Party’s Over
M. G. Piety
Smoke and Mirrors in Philadelphia
Jeffrey St. Clair
The Humiliation Games: Notes on the Democratic Convention
Arun Gupta
Bernie Sanders’ Political Revolution Splinters Apart
John Eskow
The Loneliness of the American Leftist
Guillermo R. Gil
A Metaphoric Short Circuit: On Michelle Obama’s Speech at the DNC
Norman Pollack
Sanders, Our Tony Blair: A Defamation of Socialism
Claire Rater, Carol Spiegel and Jim Goodman
Consumers Can Stop the Overuse of Antibiotics on Factory Farms
Guy D. Nave
Make America Great Again?
Sam Husseini
Why Sarah Silverman is a Comedienne
Dave Lindorff
No Crooked Sociopaths in the White House
Dan Bacher
The Hired Gun: Jerry Brown Snags Bruce Babbitt as New Point Man For Delta Tunnels
Peter Lee
Trumputin! And the DNC Leak(s)
David Macaray
Interns Are Exploited and Discriminated Against
Ann Garrison
Rwanda, the Clinton Dynasty, and the Case of Dr. Léopold Munyakazi
Brett Warnke
Storm Clouds Over Philly
Chris Zinda
Snakes of Deseret
July 26, 2016
Andrew Levine
Pillory Hillary Now
Kshama Sawant
A Call to Action: Walk Out from the Democratic National Convention!
Russell Mokhiber
The Rabble Rise Together Against Bernie, Barney, Elizabeth and Hillary
Jeffrey St. Clair
Don’t Cry For Me, DNC: Notes From the Democratic Convention
Angie Beeman
Why Doesn’t Middle America Trust Hillary? She Thinks She’s Better Than Us and We Know It
Paul Street
An Update on the Hate…
Fran Shor
Beyond Trump vs Clinton
Ellen Brown
Japan’s “Helicopter Money” Play: Road to Hyperinflation or Cure for Debt Deflation?
Richard W. Behan
The Banana Republic of America: Democracy Be Damned
FacebookTwitterGoogle+RedditEmail