FacebookTwitterGoogle+RedditEmail

When Multinationals Say Adieu

No one blinks when the editor of a magazine called Multinational Monitor (that’s me) suggests that multinational corporate interests diverge from and frequently contradict those of regular people.

But it’s another matter when the questioning comes from BusinessWeek.

“Multinationals: Are They Good for America?” is the cover story in the current issue of the weekly chronicler of business. The answer to the question, from BusinessWeek’s chief economist Michael Mandel, is a little bit of “on the one hand, on the other hand,” but the ultimate conclusion is: Not particularly. The article emphasizes that the success of U.S.-based multinationals — the corporate sector best positioned to handle a U.S. recession and benefit from the declining dollar, because it sells so much in other countries — is not doing much to help the U.S. economy, by the measures that matter most.

In favor of multinationals, the BusinessWeek article cites research indicating they are more productive, pay more and are better managed than their domestic counterparts. U.S. multinationals also tend to base research and development in the United States, providing high-paying jobs.

But while multinationals are more efficient by many measures — and BusinessWeek does not discuss whether they are efficient because they are multinational, or whether efficient firms grow to become multinationals — they don’t deliver on many of the things people want most from an economy.

Most importantly, multinationals have a terrible record on job creation. U.S.-based multinationals cut more than 2 million jobs in the United States from 2000 to 2005, BusinessWeek reports. Foreign multinationals also cut jobs in the United States during that period, reducing U.S. employment by 500,000.

This is not just an issue of moving to lower-wage, lower-cost locales. As compared to large companies doing business just in the United States, multinationals provide many fewer jobs overall — counting jobs both in the United States and abroad — relative to their share of sales and profits.

But a lot of the explanation for the reduction in multinationals’ jobs in the United States is about the companies shifting jobs to lower-wage locations (and sub-contracting, an issue BusinessWeek does not discuss). “Instead of ramping up American operations to sell into the global markets, giant U.S. companies such as General Electric, IBM and United Technologies took their operations overseas,” BusinessWeek’s Mandel writes.

“In effect, U.S. multinationals have been decoupling from the U.S. economy in the past decade,” he concludes.

The free-falling U.S. dollar should encourage global producers to invest increasingly in the United States, which will become progressively cheaper as the dollar falls more. But BusinessWeek cautions that tax considerations, among other issues, will slow this process.

This leads to a second key issue the BusinessWeek article raises: multinationals’ tax avoidance strategies. “Moving operations overseas gives a multinational an almost infinite number of legal and quasi-legal strategies for reducing U.S. corporate income taxes.” Among the time-worn strategies the article references: transfer pricing (so that U.S. subsidiaries overpay for products from other country subsidiaries, thereby locating revenues and profits in low-tax jurisdictions); transferring intellectual property to subsidiaries in low-tax jurisdictions, and making U.S. subsidiaries pay high royalties; and borrowing in high-tax jurisdictions to take advantage of interest-rate deductions.

A third problem BusinessWeek identifies is the ability of multinationals to blackmail (my word, not BusinessWeek’s) countries, by demanding concessions in exchange for locating production sites.

The article focuses on the semiconductor industry, as an area where research continues in the United States, and where there is a prospect of expanded manufacturing. It then quotes industry leaders who brazenly declare that the United States has no choice but to shower companies with tax breaks and incentives.

“We have to choose to compete on the investment level and match other countries’ offerings on incentives and tax breaks,” George Scalise, president of the Semiconductor Industry Association declares. “If we don’t do this, it will be very difficult for us to maintain our leadership in technology and innovation.”

Echoes Hector Ruiz, CEO of Advanced Micro Devices: “It’s not corporate welfare. [This is] a competitive world.”

What Ruiz doesn’t say is that the competition is rigged. In the multinational corporate-dominated world, the competition is between countries (and states and towns), and the people who live there. No matter which of these jurisdictions manages to outbid the others, the same companies still win.

ROBERT WEISSMAN is editor of the Washington, D.C.-based Multinational Monitor and director of Essential Action.

 

 

 

 

 

More articles by:

ROBERT WEISSMAN is president of Public Citizen.

January 17, 2019
Stan Cox
That Green Growth at the Heart of the Green New Deal? It’s Malignant
David Schultz
Trump vs the Constitution: Why He Cannot Invoke the Emergencies Act to Build a Wall
Paul Cochrane
Europe’s Strategic Humanitarian Aid: Yemen vs. Syria
Tom Clifford
China: An Ancient Country, Getting Older
Greg Grandin
How Not to Build a “Great, Great Wall”
Ted Rall
Our Pointless, Very American Culture of Shame
John G. Russell
Just Another Brick in the Wall of Lies
Patrick Walker
Referendum 2020: A Green New Deal vs. Racist, Classist Climate Genocide
Kevin Zeese - Margaret Flowers
Uniting for a Green New Deal
Matt Johnson
The Wall Already Exists — In Our Hearts and Minds
Jesse Jackson
Trump’s Flailing will get More Desperate and More Dangerous
Andrew Stewart
The Green New Deal Must be Centered on African American and Indigenous Workers to Differentiate Itself From the Democratic Party: Part Three
January 16, 2019
Patrick Bond
Jim Yong Kim’s Mixed Messages to the World Bank and the World
John Grant
Joe Biden, Crime Fighter from Hell
Alvaro Huerta
Brief History Notes on Mexican Immigration to the U.S.
Kenneth Surin
A Great Speaker of the UK’s House of Commons
Elizabeth Henderson
Why Sustainable Agriculture Should Support a Green New Deal
Binoy Kampmark
Trump, Bolton and the Syrian Confusion
Jeff Mackler
Trump’s Syria Exit Tweet Provokes Washington Panic
Barbara Nimri Aziz
How Long Can Nepal Blame Others for Its Woes?
Glenn Sacks
LA Teachers’ Strike: When Just One Man Says, “No”
Cesar Chelala
Violence Against Women: A Pandemic No Longer Hidden
Kim C. Domenico
To Make a Vineyard of the Curse: Fate, Fatalism and Freedom
Dave Lindorff
Criminalizing BDS Trashes Free Speech & Association
Thomas Knapp
Now More Than Ever, It’s Clear the FBI Must Go
Binoy Kampmark
Dances of Disinformation: The Partisan Politics of the Integrity Initiative
Andrew Stewart
The Green New Deal Must be Centered on African American and Indigenous Workers to Differentiate Itself From the Democratic Party: Part Two
Edward Curtin
A Gentrified Little Town Goes to Pot
January 15, 2019
Patrick Cockburn
Refugees Are in the English Channel Because of Western Interventions in the Middle East
Howard Lisnoff
The Faux Political System by the Numbers
Lawrence Davidson
Amos Oz and the Real Israel
John W. Whitehead
Beware the Emergency State
John Laforge
Loudmouths against Nuclear Lawlessness
Myles Hoenig
Labor in the Age of Trump
Jeff Cohen
Mainstream Media Bias on 2020 Democratic Race Already in High Gear
Dean Baker
Will Paying for Kidneys Reduce the Transplant Wait List?
George Ochenski
Trump’s Wall and the Montana Senate’s Theater of the Absurd
Binoy Kampmark
Dances of Disinformation: the Partisan Politics of the Integrity Initiative
Glenn Sacks
On the Picket Lines: Los Angeles Teachers Go On Strike for First Time in 30 Years
Jonah Raskin
Love in a Cold War Climate
Andrew Stewart
The Green New Deal Must be Centered on African American and Indigenous Workers to Differentiate Itself From the Democratic Party
January 14, 2019
Kenn Orphan
The Tears of Justin Trudeau
Julia Stein
California Needs a 10-Year Green New Deal
Dean Baker
Declining Birth Rates: Is the US in Danger of Running Out of People?
Robert Fisk
The US Media has Lost One of Its Sanest Voices on Military Matters
FacebookTwitterGoogle+RedditEmail