Thursday, March 7, 2013

Do multinational corporations have a duty to maintain a strong presence in their home countries?

In a debate at the Economist's website they ask if companies should spend lots of their money in the country in which they were founded.

I am not going to cover the stupidity and arrogance of the debater that wants companies to stop outsourcing.  I'd like to just look at one of his arguments:
The argument for the first duty is eloquently made by Clyde Prestowitz:2 "Corporations are not created by the shareholders or the management. Rather they are created by the state. They are granted important privileges by the state (limited liability, eternal life, etc). They are granted these privileges because the state expects them to do something beneficial for the society that makes the grant. They may well provide benefits to other societies, but their main purpose is to provide benefits to the societies (not to the shareholders, not to management, but to the societies) that create them." Historically, the nature of American corporations has changed from having customised, societally focused charters in the early 1800s, to retaining an avowed societal obligation in the 1970s, to the condition today where we can seriously debate whether they have a duty to country. 
This part of his argument can described as saying: because the government allowed the creation of the company, that company is obligated to do things the way that that government wants them to.

Let's remind ourselves of what actually happens in the creation of a company.  This assumes that the prospective company is actually able to find all the laws and forms needed to start.

"I'd like to form a company that will provide goods and/ or services to people who will voluntarily exchange their money for my goods and services."

"Fill out forms 1307, 1214, 7376,....

If you want hire any employees, then you need to conform to the tens of thousands of pages of our labor laws.  If your product is X, then you need to conform to tens of thousands of labor laws about their manufacture, the tens of thousands of laws about their safety, the tens of thousands of laws about...

You must provide your financial statements according to the thousands of laws that govern accounting.

Then you must pay more than 1/3 of your profits to me (the government).  And you must pay whatever tariffs on anything that you export.

Btw, I will be handing out subsidies to many of your competitors because they spend millions lobbying us to do so.

I will also be creating new laws and regulations that your competitors asked for because they don't want your competition.  They'd prefer that we regulate you to the point that you are unable to exist profitably.  They did spend millions lobbying us to do so.

If we find some mouse on your intended building site, then you will be prevented from setting up shop.

If we find a puddle in your parking lot, then we will declare it a wetland and prevent you from setting up shop."
Others who oppose  outsourcing say, "but look at all the roads, etc. that the government provides."  This was part of the point of Obama's "You didn't build that" speech.

They ignore the fact that we all, including companies already pay for that with taxes.  And they ignore how awful the the roads, etc that we get are.

Public roads are responsible for tens of thousands of deaths each year.  The literacy rate of some cities, with public schools, is less than 50%, see: Detroit, Milwaukee.  There are hundreds of murders in cities with thousands of publicly funded public safety officers.

People who oppose outsourcing don't do so because they are more noble than those that don't, they want people, and companies to do what they think is best.

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