Social Policy in Ontario

Why Big Business is a punching bag in U.S. campaign

Posted on March 12, 2016 in Debates

—

TheStar.com – Business – In this U.S. presidential election year, all candidates agree that many Big Business practises are suspect.
Mar 11 2016.   By: David Olive Business Columnist

In this U.S. presidential election year, one thing candidates on the right and left agree on is that many Big Business practices are a curse on the nation.

The current U.S. campaign has seen attacks on Ford Motor Co., Apple Inc. and Kraft Heinz Co. for shipping jobs overseas. Republican Donald Trump says, “I’ll never eat another Oreo again. Ever. Ever.” (Oreos are no longer made by Kraft, but point taken.)

The financial markets are a moral cesspool, according to Democratic contender Bernie Sanders. The U.S. Senator from Vermont says: “The business model of Wall Street is fraud.” The once obscure Vermonter, an avowed Socialist, has accumulated an unexpectedly large number of delegates ahead of the Dems’ nominating convention.

Big Business is accused of habitually poking its snout in the trough of corporate welfare (G.O.P. hopeful Ted Cruz). And the 12-nation Trans-Pacific Partnership (TPP) trade deal, to which Canada and the U.S. are signatories, should be blocked due to substandard labour and environmental protections and other shortcomings. So argues Democratic candidate Hillary Clinton.

Why would contempt for Big Business become possibly the only bipartisan issue among all those remaining in the U.S. presidential race? Perhaps they all saw the tape of billionaire Mitt Romney, during his 2012 campaign for the U.S. presidency, ridiculed by his own supporters as he persisted in trying to convince them that “businesses are people.”

But that doesn’t explain why “corporate America has responded to the charges with murmurs,” says Bloomberg Businessweek in a recent cover story titled Open Season on Big Business: Why won’t it fight back?”

“In this gladiators’ match, one side simply hasn’t shown up,” BBW complains, as if joining the battle would somehow help Big Business.

It wouldn’t.

If Big Business were to attempt a defence of its practices, where would it begin in trying to counter the popular antipathy toward it?

The indictment is extensive, after all. The charges include firms like Apple Inc. parking billions of dollar is profit in offshore tax havens; and “inversions,” by which U.S. companies change their tax domicile with the expedient of a reverse takeover by a non-U.S. firm. That’s how the merged Burger King and Tim Hortons, an entity controlled by Brazilian billionaires, came to be headquartered, for tax purposes, in Canada. Barack Obama, the U.S. president, has labelled these practices “unpatriotic,” but the U.S. had done little to discourage them.

How would Big Business defend itself against the excessive executive pay, by which CEOs are paid about 400 times the average shop-floor pay, though there is no proof (as yet) that CEO wisdom has increased by a similar multiple in recent decades?

How do you justify the periodic epidemics of corporate malfeasance and delusional thinking – the S&L crisis in the 1980s, the dot-com and telecom bubbles in the 1990s, Enron Corp. and the C-suite crime wave of the early 2000s, and the 2008 Wall Street meltdown and resulting Great Recession that put nine million people out of work in the U.S. and 400,000 in Canada, and erased $6.2 trillion (U.S.) in homeowners’ equity.

And we move on, to the current era of insufficiently fettered capitalism.

Three years ago, a poorly maintained 74-car train carrying heavy oil controlled by a minor Chicago tycoon rolled into downtown Lac Mégantic, Que., derailed, and killed 47 people in the resulting explosion. Last year, a tax-inversion outfit, the Montreal-based but U.S.-run Valeant Pharmaceutical International Inc., ran afoul of regulators after acquiring cheap but life-saving drugs for small patient populations and immediately hiking their prices by as much as 500 per cent without doing a thing to improve them. And Japan’s Takata Corp., the world’s largest vehicle airbag maker, last year announced the recall of 40 million vehicles to replace airbags which, in the company’s words, “could explode and potentially send shrapnel into the face and body of both the driver and front seat passenger.”

By then, Big Business had already painted a bullseye on its back with the biggest oil spill in U.S. waters (BP PLC’s Deepwater Horizon tragedy); the biggest oil spill on U.S. land (the rupture of a Calgary-based Enbridge Inc. heavy-oil pipeline in southern Michigan); a faulty General Motors Co. ignition switch that without warning abruptly cut power to moving vehicles, linked to at least 124 deaths; and a “defeat device” by which Volkswagen AG caused users of 11 million of its VW and Audi models to pump about 40 times’ the contaminants in the air than U.S. law allows.

VW, in better times tied with Toyota Motor Corp. as the world’s biggest automaker, has lost 42 per cent of its stock-market value over the past year. Regulators in more than two dozen countries have launched investigations into VW’s business practices, a distraction for VW’s top management for the rest of this decade and beyond.

And because VW was so methodical in lying to its customers, regulators and investors, and did so for about a decade, the potential regulatory fines and class-action lawsuit damages are sufficiently open-ended that it’s estimated that supporting VW will end up costing Berlin more than Germany’s contribution to the three bailouts of Greece.

It’s likely the main reason Big Business avoids a fight to defend its honour is that investors would be aroused. That includes you, dear reader, with your indirect stock-market holdings through your mutual funds and pension plans.

Here’s a group of 10 scandal-free companies selected at random: Canadian Tire Corp. Ltd., Costco Wholesale Corp., Starbucks Corp., Metro Inc., Magna International Inc., Airbus Group SE, Canadian National Railway Co., Telus Corp., Bank of Montreal and Cisco Systems Inc.

The average annual gain on that group of Canadian and U.S. stocks over the past five years is 41.1 per cent.

And here’s a group of 10 scandal-tainted companies: General Motors; Volkswagen; Siemens AG and SNC-Lavalin Group Inc. (bribery scandals); BlackBerry Ltd. (stock-options scandal); BP; Royal Bank of Scotland PLC (RBS) and Citigroup Inc. (imprudent lending); Takata; and Toshiba Corp. (accounting scandal).

The average annual loss on those stocks in the same period is 7.7 per cent.

Notice that none of the second group of firms are fly-by-night outfits. They are among the oldest, largest and most sophisticated enterprises the business world has to offer. The three oldest among alone can boast a total of 660 years in operation. They can hardly claim ignorance about the consequences of departing from prudent and honest practices.

And they have only themselves to blame for the widespread populist ill regard for business that emboldens politicians to use Big Business as a punching bag to win an election.

< http://www.thestar.com/business/2016/03/11/why-big-business-is-a-punching-bag-in-us-campaign-olive.html >

Tags: crime prevention, economy, globalization, ideology, privatization, standard of living

This entry was posted on Saturday, March 12th, 2016 at 1:06 pm and is filed under Debates. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.