The Business Roundtable published a report today entitled "How U.S. Multinational Companies Strengthen the U.S. Economy." It's full of information such as how many workers these swell companies have not yet fired all their U.S. workers. But are multinationals good for America? As I told the Financial Times, I would argue not.
- Multinational companies advocate for policies that are contrary to the economic and other interests of the majority of Americans. Standard textbook economics predicts that the current NAFTA-WTO-model of trade (i.e. opening up markets in products made by most workers, while protecting markets in intellectual property) would lead to upward redistribution of income, and empirical evidence has borne this out. For the 70% of workers without a four-year college degree, the Economic Policy Institute (using standard Heckscher-Ohlin trade models) estimates that current trade policy has cost them an amount annually in excess of their income-tax burden (around $2,000). Such policies have long been advocated by multinational companies, as one can see most recently in the line up of firms pushing NAFTA-style deals with Panama and Colombia. (http://www.latradecoalition.org/portal/latc/default)
- Multinational companies do not uphold their end of the social contract. U.S. states originally chartered corporations to undertake projects that the government (for whatever reason) was ill-equipped or did not wish to perform. But ever since passage of the 16th Amendment, Congress has had to fight tooth and nail to get corporations to pay their fair share of taxes, instead of simply deferring the repatriation of their income in overseas tax havens like Panama to get out of their social obligations here at home. (Side note: this Panama FTA will give the 350,000 subsidiaries of foreign firms based in Panama the right to challenge U.S. public-interest regulations as "expropriations," claiming U.S. taxpayer dollars in foreign tribunals, for measures not considered expropriatory under domestic U.S. law.) According to the Government Accountability Office, many multinational firms have engineered their global operations so that they face an effective tax rate of virtually zero. In short, many multinationals want the benefits of U.S. citizenship (access to preferential bailouts, recognition of corporate charters) without living up to their responsibilities.
- Multinational companies have pushed a model of deregulation and global supply chains that socializes risk and privatizes profit. We should never be facing a situation where entities are too big or too globally interconnected to fail. The prevailing multinational business model relies on supply chains that are stretched too thin, across too many countries, such that even isolated occurences (earthquakes, say), can have outsize global economic impacts. This model has also relied on carbon-intensive international shipping that scientists now recognize is one of the fastest growing contributors to global warming. This model of deregulated and overextended supply chains with considerable negative social externalities did not happen by accident: it was the outcome of years of multinationals contributing to politicians' campaigns so as to roll back prudential measures. My colleagues at Essential Information recently completed a large report on the nexus between corporate campaign donations and deregulation.