William Greider has an interesting piece about retired IBM exec Ralph Gomory’s ideas about multinational corporations and the public interest. Gomory is a free-trade heretic, and he supports the common-sense idea that free trade is not a simple win-win as free-trade enthusiasts insist. He has written a book entitled Global Trade and Conflicting National Interests–in collaboration with William Baumol, former president of the American Economic Association, that makes sophisticated arguments that might undermine the current Bob Rubin free-trade orthodoxy to which most Democrats currently genuflect.
Read the whole article here, but I’ve exerpted some paragaphs to identify key elements to which Gomory points for finding a policy solution, namely insisting on balanced trade and enforcing it with caps:
Neither of Gomory’s fundamental policy reforms–balancing trade or imposing discipline on US multinationals–can work without the other. Both have to be done more or less at once. If the government taxed US multinational behavior without also capping imports, the firms would just head out the door. "That won’t work," Gomory explains, "because you will say to the companies, ‘This is how we’re going to measure you.’ And the corporations will say, ‘Oh, no, you’re not. I’m going overseas. I’m going to make my product over there and I’ll send it back into the United States.’ But if you insist on balanced trade, then the amount that’s shipped in has to equal the amount that’s shipped out by companies. If no companies do that, then nothing can be shipped in either. If you balance trade, you are going to develop internal companies that work the way you want." Public investment in new technologies and industries, I would add, may not achieve much either, if there is no guarantee that the companies will locate their new production in the United States.
Essentially, Gomory proposes to alter the profit incentives of US multinationals. If the government adds rules of behavior and enforces them through the tax code, companies will be compelled to seek profit in a different way–by adhering to the national interest and terms set by the US government. Other nations do this in various ways. Only the United States imagines the national interest doesn’t require it.
This principle that government can use regulation and the tax code to rein in corporations to promote the public interest was established in the U.S. during the New Deal, and renouncing this principle has been at the heart of the Libertarian/GOP program since at least 1980. But if government isn’t going to stand up to corporations who have no interest in the public interest, who will?
If some Libertarian happens to read this post and thinks that politicians should leave business alone, please make your case, and I’ll be happy to argue it in the comments. I realize that the issues are complex when it comes down to particulars, but to me it’s utterly baffling that anybody could argue as a matter of Libertarian principle that allowing corporations the freedom to do as they please without reference to the public interest serves the public interest. Halliburton’s recent announcement of plans to move its headquarters from Houston to Dubai is textbook, and it’s nauseating.
But that’s the way things work in corporate think these days. Was it always that way? It was in the late 19th century, but changed during the New Deal era from the thirties through the seventies, for which Gomory is nostalgic:
Gomory’s vision of reformation actually goes beyond the trading system and America’s economic deterioration. He wants to re-create an understanding of the corporation’s obligations to society, the social perspective that flourished for a time in the last century but is now nearly extinct. The old idea was that the corporation is a trust, not only for shareholders but for the benefit of the country, the employees and the people who use the product. "That attitude was the attitude I grew up on in IBM," Gomory explains. "That’s the way we thought–good for the country, good for the people, good for the shareholders–and I hope we will get back to it…. We should measure corporations by their impact on all their constituencies.
"So in my utopian dream, we decide what we want from the corporations and that’s how they make a profit–by doing those things. Failing that, I would settle for the general realization of this divergence and let people argue it out."
Some older CEOs and board members at least listen to him sympathetically. "They have grandchildren," he says. "They wonder too what’s going to happen to our grandchildren. You can’t get a vote around the corporate board table about, Is this good for the grandchildren? But you can talk to them and they’ll worry about it and say, Well, maybe we need to do something.
And if they don’t, the American public should by insisting on these basic changes through the political process. Am I optimistic that this will happen? A lot depends on who Americans elect to congress and the presidency in ’08. If we let the GOP back in, there’s no hope. If we elect Hillary, possibly educable, but I’m not optimistic. Guys like Edwards and Obama–guardedly optimistic. It will depend on what kind of congress they’ll have to work with, and that will depend on Americans and people in the MSM overcoming their thrall to the conventional wisdom that laissez-faire Libertarian policies regarding corporate behavior somehow benefit us all.
Or even if polls showed that they were convinced, would they have the will to do anything about it? Will congress? The next four of five years will indeed be critical for determining the kind of lives our grandchildren will have.
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