Robert Reich on Corporations
Former Secretary of Labor; Democratic Challenger MA Governor
The once famous American middle class, the bedrock of our democracy, is disappearing while the media distracts us with "reality" TV, shock jocks, and rants delivered by talking heads.
Are you ok with that? I'm not okay with that.
To enforce and ensure dominance, the company has employed a phalanx of lawyers. They've sued other companies for patent infringement and sued farmers who want to save seed for replanting. You might think Monsanto's overwhelming market power would make it a target for antitrust enforcement. Think again. In 2012, it succeeded in putting an end to a two-year investigation by the antitrust division of the Justice Department into Monsanto's dominance of the seed industry.
Monsanto has the distinction of spending more on lobbying--nearly $7 million in 2013 alone--than any other big agribusiness.
So why, exactly did CEO pay skyrocket? One theory is that CEOs play large roles in appointing their corporations' directors for whom a reliable tendency toward agreeing with the CEO has become a prerequisite.
Corporate law in the United States gives shareholders at most an advisory role on CEO pay. "Say on pay" votes are required under the 2010 Dodd-Frank financial legislation, but the votes are not binding on a corporation. Such cronyism in American boardrooms has been common for decades.
One possibility would be to make corporate tax rates depend on the ratio of CEO pay to the pay of the median worker in the firm. Corporations with low ratios would pay a lower tax rate and vice versa. For example, in a 2014 CA bill, if the CEO makes 25 times the pay of the typical worker, the tax rate drops to 7%. If the CEO earns 200 times that of the typical employee, the tax rate rises to 9.5%.
The Chamber of Commerce has dubbed the bill a "job killer." But CEOs do not create jobs. Their customers create jobs by buying more of what their companies sell, giving the companies cause to expand and hire. So pushing companies to put less money into the hands of their CEOs and more into the hands of their average employee creates more purchasing power among people who will buy, and therefore more jobs.
In America, people with lots of money can easily avoid the consequences of bad bets and big losses by cashing out at the first sign of trouble. The laws protect them through limited liability and bankruptcy. But workers who move to a place like Atlantic City for a job, invest in a home there, and build their skills have no such protection. Jobs vanish, home values plummet, and skills are suddenly irrelevant. They're stuck with the mess.
"Since the recovery, almost all of the gains have gone to the very, very top. People who are in the top 1% are doing even better than they did before the Great Recession, better than they have done since 1928," says former Labor Secretary Robert Reich. "Most Americans are on a downward escalator. Median wage in the United States, adjusted for inflation, keeps on dropping."
Reich is the focus of the new film, "Inequality for All." In this interview, he also talks about Syria, the second anniversary of Occupy Wall Street on September 17, Obama's healthcare plan and Milton Friedman's connection to the Pinochet dictatorship in Chile
According to former labor secretary Robert Reich, in 2009 "the 25 most successful hedge-fund managers earned a billion dollars each." The top earner clocked in at $4 billion. Closing this outrageous loophole would bring in close to $20 billion in revenue--money desperately needed at a time when teachers and nurses and firemen are being laid off all around the country.
Consumer power became aggregated and enlarged by mass retailers like Wal-Mart that used the collective bargaining clout of millions of consumers to get great deals from suppliers. Investor power became aggregated & enlarged by large mutual funds.
As a result, consumers & investors had access to more choices and better deals. But the institutions that had negotiated to spread the wealth and protect what citizens valued in common began to disappear. Labor unions shrank; regulatory agencies faded; CEOs could no longer be corporate statesmen. And as the intensifying competition among companies spilled over into politics, elected officials became less concerned about the Main Street
Three decades ago there were only 3 major TV networks, one phone company, and a handful of movie studios. Today, thousands of businesses compete intensely where telecommunications, high-tech, and entertainment overlap. Look almost anywhere in today's economy and you find the typical company has less market power than the typical company of three decades ago.
To be sure, some corporations are very large and many have global reach. But the world economy contains far fewer oligopolies than it did decades ago, and almost no monopolies apart from those created or maintained by government. The power and impetus that once came from the giant corporation--the planning and execution of large-scale production--are gone.
Personally, I'd be willing to sacrifice some of the benefits I get as a consumer and investor in order to achieve these social ends--as long as I knew everyone else was, too.
Nor was it mere coincidence that the CIA discovered communist plots where America's core corporations possessed, or wished to possess, substantial holdings of natural resources. When, in 1953, an anticolonial Iranian nationalist movement led by Mohammed Mossadegh challenged the power of the shah and seized the Anglo-Iranian Oil Company, the CIA secretly channeled millions of dollars to army officers dedicated to returning the shah to power; once their objective had been fulfilled, generous access to Iranian oil was granted to Gulf, Texaco, Mobil, and Standard Oil of NJ.
The protectionist strategy failed. Protectionist walls ceded the rest of the rest of the world's markets to foreign producers, who could gain vast scale efficiencies by selling their goods everywhere but the US.
Nor, finally, did protection enhance the standard of living of most Americans. To the contrary, it caused them to pay extra for what they purchased. The "voluntary" export restraints on Japanese cars that temporarily helped the Big Three automakers maintain their profits (but not their work forces) through the 1980s cost American consumers about $1 billion a year more than they would have paid for cars had the American market been open.
Rarely did such alleged "unfairness" prompt the US to erect unilateral quotas or tariffs, which, after all, would have violated the General Agreement on Tariffs and Trade. The more common tendency was for the foreign perpetrators to agree "voluntarily" to limit their exports to the US--voluntarily, that is, in the narrow sense that they acquiesced in the full knowledge that they would suffer a worse fate--a more severe quota, directed only at them--were they to refuse to do so.
|Other pundits on Corporations:||Robert Reich on other issues:|
Opinion Leaders on the Right:
Milton Friedman (Nobel Economist)
Rush Limbaugh (Radio Talk Show Host)
Ayn Rand (Author and Philosopher)
Heritage Foundation (Think Tank)
Joe Scarborough (Former Congressman; Radio Host)
Opinion Leaders on the Left:
American Civil Liberties Union
Noam Chomsky (Author and Philosopher)
Arianna Huffington (Internet Columnist)
Robert Reich (Professor and Columnist)
Howard Schultz (CEO of Starbucks)
John F. Kennedy(President,1961-1963)