Skip to content

COST SHIFTING, TAXATION AND MONOPOLY

June 29, 2017

COST-SHIFTING, TAXATION AND MONOPOLY

We are told that corporations are always focused on expanding market share at the expense of their competitors, and have been advised that in a market economy, competition, that great leveler known since before Adam Smith, will by its “invisible hand” separate the wheat from the chaff. Corporations which are most efficient in providing goods and services at the lowest price will prosper; those which are less efficient by reason of high costs or managerial mistakes (contra – see bank bailouts) or are in Chapter 11 bankruptcy or subject to merger or acquisition will either not prosper, be acquired via merger or other acquisition or perhaps whose assets will be cannibalized by vulture corporations (see Romney), or simply fail and fade into history and serve as a study for what not to do in participating in market economies in economics texts and business schools.

My thesis in this essay is that this view of the roles of competition and expanding market share held by both classical economists and those of today is outdated by reason of government policies, policies in effect made by those of the rich and corporate class and not those in government, who merely serve as a conduit not for the good of those who elected them but for the good of the rich and corporate class who finance their elections.

Of course this is not a first in history as the royal charter giving East India Tea the exclusive rights to “The Indian Trade” suggests. The Crown took a cut of the profits from East India Tea and East India with such a government-granted monopoly had no reason to be efficient given the absence of competitors. With no incentive to reduce costs due to lack of competition, this means that consumers of goods imported from India whether to England or elsewhere by trade paid higher prices for such inefficiencies, but who cares about the social good of lower prices or costs given such royally-granted immunity to any necessity for efficiency? (Parenthetically, the East India anomaly is a good example of why we needed and still need robust enforcement of the Sherman Anti-Trust Act outlawing monopolies, collusion, price fixing etc. – all of which are currently unenforced due to political pressure from the rich and corporate class on their legislative captives anxious to please their donors in return for the quid pro quo of “campaign contributions,” known in my day as “bribes.”

I think that there is a sort of collusion today between big corporations on market share whether by design or happenstance. For instance, consider Boeing. Boeing, a giant defense contractor and the recipient of billions every year in congressional appropriations under the heading of “defense,” is a company that has farmed out some of its production to China and has paid zero income taxes the last five years running on huge profits. They have no serious competition in building planes for this country and for export and only the European Air Bus seriously competes internationally. Boeing has company on taxes. General Electric, another big “defense” contractor, and Verizon, among others, have paid no income taxes on huge profits for five years running as well. You and I should be so lucky.

Tell me how a startup competitor to Boeing would fare these days, what with Boeing’s entrenched political support, and tell me why Boeing should be concerned with costs which you and I ultimately pay given its monopoly status, and as for political support, I almost fainted in hearing Trump shortly after he assumed the throne when he ended a speech before Boeing executives saying, “God bless Boeing!” I recall thinking at the time of how disgusting it was ask God to bless a huge monopolistic corporation which pays no taxes, outsources jobs etc. How about blessing those millions of Americans such as you and I and those who work multiple jobs and at minimum wages who paid more taxes than Boeing and, for that matter, General Electric (another big “defense” contractor) and  Verizon five years running?

The foregoing examples, and there are many more I could cite, tell me that there is little incentive to contain costs or compete for market share by huge corporations these days given their monopoly positions in their industries and their political influence to maintain the status quo on matters of taxation and bankruptcy protection afforded by Chapter 11 of the Bankruptcy Act, which encourage bad corporate decision-making since there are little to no consequences to such corporations but big time consequences for the rest of us (see our bailout of insolvent Wall Street banks, The Great Recession, massive mortgage fraud, millions of foreclosures etc.).

The (in my view) solution? Elect legislators who are honestly and courageously dedicated to the public good. Enact tax and bankruptcy reforms which even the now lopsided playing field that allows hugely profitable corporations to pay no taxes (GE even had a refund one year!) while you and I either pay the taxes to keep the government running or add to the deficit you and I are ultimately responsible to pay, and it is you and me because, as seen, some major corporations pay no taxes along with others that pay reduced taxes due to a complicit tax code their lobbyists wrote. They argue that they provide jobs but only demand provides jobs; they are mere intermediaries, and besides, jobs for where, China?

We are being had, and in broad daylight. It is long past time to require corporate America to pay its fair share of the freight and recognize that the rest of us are part of their venture as taxpayers, consumers, employees, vendors, and in other capacities. The rest of us are paying dearly for their misdeeds and undue influence on government, and it is time to end it, so let’s get on with it.     GERALD       E

 

 

 

 

 

 

 

Advertisements

From → Uncategorized

Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: