A Philosopher's Blog

Business and Overseas Jobs

Posted in Business, Ethics, Law, Philosophy by Michael LaBossiere on September 1, 2011
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Among certain folks it is received wisdom that businesses have been going overseas because the United States (and other Western countries) imposes onerous taxes and environmental regulations. Some folks even note that American workers are paid more than workers in certain other countries, such as China.

To remedy this problem a standard proposal (endorsed, for example, by Michelle Bachmann) is to lower taxes and reduce (or eliminate) regulations. Politicians, including Bachmann, generally do not talk about lowering American wages. After all, “if I am elected I will see to it that you make less money” is hardly winning rhetoric. In contrast, claiming that Americans are losing jobs to other countries because “the government” is driving away companies with regulations and taxes is a smart approach from a rhetorical standpoint. After all, Americans tend to think poorly of their government (which is made up, ironically, of people we picked) and Americans often look at taxes and regulations in a negative light, seeing them as impositions on freedom.

This proposal does, obviously enough, have some merit. If corporations could get the same conditions here that they enjoy elsewhere, they would probably be more inclined to stay here. It is, however, important to dig a bit deeper here.

In general, it would seem that corporation are not sending jobs overseas because they would go out of business if these jobs remained here. After all, there are business that do quite well despite operating entirely or largely in the United States. This is hardly shocking since corporations are generally adept at reducing their taxes (see, for example, GE) and circumventing even the rather limited regulations that exist (see, for example, how “constrained” coal mining companies are in West Virginia). While they do have to pay a minimum wage, this wage is fairly, well, minimum.

The main reason that corporations go overseas would not seem to be survival or even because they cannot make a profit in the United States. Rather, they go overseas because they think they can make even more of a profit than they can here. Given that some other countries have lower taxes, laxer regulations and far lower wages, it is easy to see why other countries can be more appealing. However, it is important to note that these corporations re not having their jobs forcible driven from the United States. Rather, the decision makers are electing to send jobs overseas so as to increase profits. While this might seem to be a minor point, it is actually rather significant.

To use an analogy, imagine that Bill is telling a sob story about how he was “driven out” by his wife, Sally,  cruelly limiting his freedom and now he is “forced” to hang out with a girlfriend because she allows him to do what he wants. You ask Bill about her cruelty and he lists her crimes: she made him pay some of the household bills, she would not let him dump the oil from his truck in the flower garden, she made him pay for some of the expenses relating to the children and so on. Inquiring about his new girlfriend, you learn that she lets him dump his truck oil in her yard and while she does expect some gifts, he doesn’t have to do anything for her kids and so on. In this case, one should be inclined to think that Bill was not driven out. Rather, he chose to leave because he wanted to get away with more and do less. Now imagine that Bill’s buddy Sam goes to Sally and says that Bill will come back if she stops “taxing and regulating” him. Otherwise, Sam says, Bill will have no choice but to stay with his current girlfriend (at least until she wises up and “drives him away”). Sally, it would seem, would be foolish to take Bill back under those conditions. After all, he just wants to get away with things at her expense while pretending that it is her fault. The same would seem to apply to corporations.

In essence, corporations and their allies who argue that taxes must be lowered and regulations reduced so that jobs will remain here (or return) are arguing that the rest of us need to bear the cost of ensuring that corporations get the profits that they want. After all, if corporations pay less taxes then the rest of us need to pay more to make up for that shortfall. Alternatively, there would have to be spending cuts-and it is rather obvious who would bear the burden of those cuts. Also, if the regulations are reduced (Bachmann wants to eliminate the EPA, for example), then the rest of us would be harmed by what those regulations were intended to prevent. For example, allowing more pollution means that we would probably suffer more health problems and would thus be paying more in medical expenses. To preempt a possible attack, I am not saying that all taxes are fair or that all regulations are good. Rather, my view is that corporations (like Sally’s husband) should contribute to the society in which they exist (and benefit from) and that at least some regulations do protect us from harms.

In sum, the proposals to lower taxes and reduce regulations so as to keep jobs here seems to be largely an attempt to shift costs to the rest of us so that corporations can make more profits. I have no objections against corporations making money. I do, however, object against being forced to bear the costs of their profits. They need to carry their own weight and act in responsible ways. That is, pay taxes and live within the laws as the rest of us do.

But maybe there is some merit to this approach and I should give it a try: “Buy my latest book or I’ll be forced to go to some other country.”

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10 Responses

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  1. T. J. Babson said, on September 1, 2011 at 8:10 am

    Put yourself in the position of the CEO of Gibson Guitar. The government raids his business and won’t even tell him what law he is supposed to have violated. Right out of Kafka.

    Last week federal marshals raided the Gibson Guitar Corporation in Tennessee. It wasn’t the first time. The government appears to be preparing to charge the famous builder of instruments with trafficking in illegally obtained wood. It’s a rare collision of music and environmental regulation.

    In the hottest part of an August Tennessee day last Thursday, Gibson Guitar CEO Henry Juszkiewicz stood out in the full sun for 30 minutes and vented to the press about the events of the day before.

    “We had a raid,” he said, “with federal marshals that were armed, that came in, evacuated our factory, shut down production, sent our employees home and confiscated wood.”

    The raids at two Nashville facilities and one in Memphis recalled a similar raid in Nashville in November 2009, when agents seized a shipment of ebony from Madagascar. They were enforcing the Lacey Act, a century-old endangered species law that was amended in 2008 to include plants as well as animals. But Juszkiewicz says the government won’t tell him exactly how — or if — his company has violated that law.

    “We’re in this really incredible situation. We have been implicated in wrongdoing and we haven’t been charged with anything,” he says. “Our business has been injured to millions of dollars. And we don’t even have a court we can go to and say, ‘Look, here’s our position.'”

    http://www.npr.org/blogs/therecord/2011/08/31/140090116/why-gibson-guitar-was-raided-by-the-justice-department

  2. T. J. Babson said, on September 1, 2011 at 8:31 am

    And one for dhammett:

    • dhammett said, on September 1, 2011 at 10:07 am

      ” new red tape”—Not all that “new”.
      from your article:

      the Lacey Act [“a century-old endangered species law that was amended in 2008 to include plants as well as animals”]Lacey Act requires end users of endangered wood to certify the legality of their supply chain ^all the way to the trees^. EIA’s independent investigations have concluded that Gibson knowingly imported tainted wood.
      . . . quotes emails that seem to show Gibson taking steps to maintain a supply chain that’s been connected to illegal timber harvests.

      Again, I think he knows what the investigation is about

  3. dhammett said, on September 1, 2011 at 8:38 am

    TJB: You write “The government raids his business and won’t even tell him what law he is supposed to have violated. Right out of Kafka. ”
    And some of ‘the rest of the story’ from your source:

    The U.S. Justice Department won’t comment about the case it’s preparing, but a court motion filed in ^June^ asserts Gibson’s Madagascar ebony was contraband. It quotes emails that seem to show Gibson taking steps to maintain a supply chain that’s been connected to illegal timber harvests.
    Andrea Johnson, director of forest programs for the Environmental Investigation Agency in Washington, says the Lacey Act requires end users of endangered wood to certify the legality of their supply chain all the way to the trees. EIA’s independent investigations have concluded that Gibson knowingly imported tainted wood.
    “Gibson clearly understood the risks involved,” says Johnson. “Was on the ground in Madagascar getting a tour to understand whether they could possibly source illegally from that country. And made a decision in the end that they were going to source despite knowing that there was a ban on exports of ebony and rosewood.”

    The CEO seems to know quite well what law he is supposed to have broken. . .

    http://www.npr.org/blogs/therecord/2011/08/31/140090116/why-gibson-guitar-was-raided-by-the-justice-department

    • T. J. Babson said, on September 1, 2011 at 9:22 am

      Really? I see a company trying to comply with laws so Byzantine nobody can give him a straight answer.

      Remember when a farmer asked Obama how he could find out about the law, and Obama told him to call the USDA? And then a reporter tried to do just that:

      Call Uncle Sam. Sensible advice, but perhaps the president has forgotten just how difficult it can be for ordinary citizens to get answers from the government.

      When this POLITICO reporter decided to take the president’s advice and call the USDA for an answer to the Atkinson town hall attendee’s question, I found myself in a bureaucratic equivalent of hot potato — getting bounced from the feds to Illinois state agriculture officials to the state farm bureau.

      http://www.politico.com/politico44/perm/0811/call_uncle_sam_5c130fdd-0e34-4b04-99e1-3d923ea3919e.html

  4. dhammett said, on September 1, 2011 at 10:34 am

    ‘how he could find out about the law, and Obama told him to call the USDA’

    Qs: Does the law actually exist? Is it still a gleam in some bureaucrat’s eye?

    And what did Obama actually say?
    “If you hear something is happening, but it hasn’t happened, ^don’t always believe what you hear^.”
    “folks in Washington” like to get “all ginned up” about things that aren’t necessarily happening (“Look what’s comin’ down the pipe!”), Obama’s advice was simple: “Contact USDA.”
    “Talk to them directly. Find out what it is that you’re concerned about,” Obama told the man. “My suspicion is, ^a lot of times, they’re going to be able to answer your questions^ and it will turn out that some of your fears are unfounded.”

    My point. Ifthe law is only in the pipeline, no one knows at this point, BO, the USDA, the farmer, you or me what it will look like in the end.. If it does exist, fantastic Politico reporter MJ Lee hasn’t finished the job until he/she finds the law on the books and pursues the question from there.

  5. T. J. Babson said, on September 1, 2011 at 10:46 am

    dhammett, chances are you are committing 3 felonies a day and don’t even know it.

    In his new book, the Boston-based civil liberties advocate and occasional Reason contributor Harvey Silverglate estimates that in 2009, the average American commits about three federal felonies per day. And yet, we aren’t a nation of degenerates. On the contrary, most social indicators have been moving in a positive direction for a generation. Silverglate argues we’re committing these crimes unwittingly. The federal criminal code has become so vast and open to interpretation, Silverglate argues, that a U.S. Attorney can find a way to charge just about anyone with violating federal law. In fact, it’s nearly impossible for some business owners to comply with one federal regulation without violating another one. We’re no longer governed by laws, we’re governed by the whims of lawyers.

    http://reason.com/archives/2009/10/19/were-all-felons-now

    And here is a video of the author arguing his case:

    • dhammett said, on September 1, 2011 at 12:40 pm

      TJB. I honestly wish I had 6 minutes to spend hunting for the gold in your vid. I don’t. I’d rather spend that 6 mins. writing a reply and asking some useful Just tell me what three felonies/per day he’s referring to, and I’ll try my best to stop committing them. If my math is correct, by now I’ve committed over 65000 felonies (not all different, I’m certain). Yet over these many years, the black hand of the bureaucracy hasn’t enfolded me in its suffocating grip. With 300million+ other souls in this country, I”m certain there are many more in my position. I’m just as certain of the following ( I don’t have the numbers, but if you have data to refute my conclusions, provide it and I’ll admit I’m wrong: 1) The number of people accused of federal felonies is a very small percentage of those 300 million. 2) Some of that small percentage are guilty of the offenses of which they are accused. Perhaps even Martha Stewart.

      But since these discussions ultimately come around to conservative v. liberal anyway–after all, the guy’s speaking at CATO–where did these egregious incursions on your and my personal freedoms begin? When did the country become so large that ^we^ lost track of ^our^ government? Because remember, ultimately, ^we^ are responsible in the end for whatever mess ^we^ have created.
      If government inevitably grows to the point where it creeps up behind its citizens, grabs them by the scruffs of their necks, and tosses them in the hoosegow, how , practically, do ^we^ stop government from doing that, short of turning to anarchy? If the answer is “improve the existing system”, the process should have been started a long time ago, and it should not be a political football when the improvement is undertaken.

  6. T. J. Babson said, on September 4, 2011 at 10:48 am

    “They need to carry their own weight and act in responsible ways. That is, pay taxes and live within the laws as the rest of us do.”

    On the other hand, just being friendly with Obama seems to work better than paying taxes. Even the HuffPo is catching on:

    Obama’s Close Ties To CEOs Whose Firms Dodge Taxes

    WASHINGTON — As the nation struggles with a stagnant economy, President Barack Obama has preached overhauling the U.S. tax code to spur economic growth. But as he gears up for what looks to be a tough reelection campaign, the president has surrounded himself with the current loophole-riddled system’s prime offenders: corporate executives whose companies have profited off of those loopholes while reaping millions for themselves.

    Institute for Policy Studies, a liberal think tank, named in a new report 25 major American corporations whose CEOs were paid more last year than their firm’s total U.S. income tax bill. Of those business elites, 10 have substantive ties to Obama — including some who have official economic policy advisory positions in his administration — according to a HuffPost analysis of the report.

    All told, these 10 CEOs with Obama connections brought in over $158 million for themselves last year. Their companies’ federal tax bill, however, was a combined net benefit of $5.4 billion — meaning the federal government actually owed these companies billions of dollars. Eight of the 10 firms not only did not pay taxes; they received large refunds. The 10 companies scored combined U.S. profits of $26.8 billion.

    HuffPost’s calculations are based on data compiled in the report by the IPS. The IPS figures, in turn, are drawn from documents the companies filed with the Securities and Exchange Commission.

    http://www.huffingtonpost.com/2011/09/01/obama-tax-loopholes_n_943786.html#s340315&title=John_Faraci_CEO


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