Saturday morning, Nov 12 I read an article stating 14 CEOs of some of the largest US corporations meet with The Chinese President in Honolulu. The topics of these discussions were issues of US policy pertaining to trade, legal matters and of currency values. These discussions and any policy that may result are functions of a government role, not corporate.
The companies of these CEOs are heavily invested in China and are still increasing those investments substantially. I expect these investments are financed with profits made from importing cheap goods made in China to the US and other Western economies. Profits that never crossed US soil, profits that never contributed to the support of the US government in the form of taxes.The same scenario of making profits off shore and keeping them off shore is happening in many countries, not just in China. China is just the largest of them.
I haven’t taken the time, nor have the resources to calculate what US taxes on those distant corporate profits might have added to US Treasuries but I am sure they would put a large dent in current Treasury deficit. If one were to also transfer the amount of economic activity created by their current and planned investment activity in China to the US I am also certain that investment on US soil would also create more significant levels of tax payments and perhaps even enough good paying jobs to bring unemployment under 6 percent and further increase tax revenues.
Corporations in this country were created as a vehicle to efficiently provide goods and services to the needs of US society and it’s citizens. To a considerable degree, they have provided such benefits. There are flaws though in the current corporate model. The environment corporations operate in, and the needs they fill, have changed over the years. Their design, like most objects created in the past, needs to be updated so that corporations remain a benefit to society and not a parasite on it.
In their creation, they were provided status and rights of a legal person. That did not pose a problem when corporations were relatively small. As human population increased so did demand for goods and services. New technologies evolved to meet these higher demands. Technology also created demands for more complex products. The ‘economies of scale’ to create the new and greater numbers of products grew larger at exponential rates. (Economy of scale refers to a theoretical size an organization needs to be to produce a product most efficiently in terms of economic cost per unit.)
As a result many corporations needed tremendous amounts of capital to operate efficiently. Control of that amount of capital, with few very restrictions, combined with status of a legal person which also provides corporate access to politics controlling our government is where the a major flaw in corporate design currently resides. The combination provides power to the large corporations that challenges the power of government itself.
The problem that manifests, from a combination so much power and citizenship, is that corporations and citizens have goals that are very much different and often conflicting with one another. The first goal of a corporation is to maximize profit. I don’t believe that even the distribution of those profits is stated by law. Ironically, to my knowledge, there are not any laws stating a corporation even needs to be of any benefit to society, in America or anywhere. That in practice makes corporations very poor citizens.
Evidences of corporate self serving behaviors, as one might expect, are everywhere. Unfortunately, one can’t blame the corporations or CEOs for their behaviors. The corporate machine is running exactly in the parameters our laws have provided and it is destroying us in ways that were never intended to be.
We urgently need to modernize the corporate model to correct the flaws that have been made evident by the increasing levels of economies of scale and the status of a legal person.