Tag Archives: Corporation

Who has more power over you: rich business owners or government officials?

Police arrest pro-life student
Police arrest pro-life student

Economist Walter Williams answers the question in the Daily Signal.

He writes:

Let’s look at the power of the rich. With all the money that Gates, Bezos, and other super-rich people have, what can they force you or me to do?

Can they condemn our houses to create space so that another individual can build an auto dealership or a casino parking lot? Can they force us to pay money into the government-run—and doomed—Obamacare program? Can they force us to bus our children to schools out of our neighborhood in the name of diversity? Can they force us to buy our sugar from a high-cost domestic producer rather than from a low-cost Caribbean producer?

The answer to all of these questions is a big fat no.

You say, “Williams, I don’t understand.” Let me be more explicit.

Bill Gates cannot order you to enroll your child in another school in order to promote racial diversity. He has no power to condemn your house to make way for a casino parking lot.

Unless our elected public officials grant them the power to rip us off, rich people have little power to force us to do anything. A lowly municipal clerk earning $50,000 a year has far more life-and-death power over us. It is that type of person to whom we must turn for permission to build a house, ply a trade, open a restaurant, and do myriad other activities.

It’s government people, not rich people, who have the power to coerce us and rip us off. They have the power to make our lives miserable if we disobey. This coercive power goes a long way toward explaining legalized political corruption.

We have much more to fear from big government than we do from big corporations, and this is granting that big corporations are bad. There’s no question that big corporations are generally very liberal, and opposed to social conservatives, and even fiscal conservatives. But what can they really do to you? Not much.

There is a lot of anger among young people in particular against “big corporations” these days, and many of these young people vote for bigger government because of it. But big corporations can only ever try to sell you things, and if you don’t like it, turn off the TV and block their ads on Twitter. But you can’t as easily stop the IRS from attacking your conservative group, or get rid of a SWAT team conducting a pre-dawn raid to punish you for being a conservative.

Venezuela orders soldiers armed with assault rifles to impose price controls

Venezuela: price controls don't work
Assault weapons vs Amazon and Ebay: socialism in practice

From the left-leaning USA Today.

Excerpt:

 Thousands of Venezuelans lined up outside the country’s equivalent of Best Buy, a chain of electronics stores known as Daka, hoping for a bargain after the socialist government forced the company to charge customers “fair” prices.

President Nicolás Maduro ordered a military “occupation” of the company’s five stores as he continues the government’s crackdown on an “economic war” it says is being waged against the country, with the help of Washington.

Members of Venezuela’s National Guard, some of whom carried assault rifles, kept order at the stores as bargain hunters rushed to get inside.

[…]Images circulating online as well as reports by local media appeared to show one Daka store in the country’s central city of Valencia being looted.

“I have no love for this government,” said Gabriela Campo, 33, a businesswoman, hoping to take home a cut-price television and fridge. “They’re doing this for nothing but political reasons, in time for December’s elections.”

Maduro faces municipal elections on Dec. 8. His popularity has dropped significantly in recent months, with shortages of basic items such as chicken, milk and toilet paper as well as soaring inflation, at 54.3% over the past 12 months.

Economists are expecting a devaluation soon after the election, likely leading to even higher inflation.

This will surely encourage more businesses to come to Venezuela to create jobs, and compete with other businesses in order to lower prices and increase quality for consumers. Oh wait, no it won’t. It’s just going to causes businesses to scale back, expand in other countries, and go out of business entirely – taking jobs with them.

The real face of communism
The real face of communism

Earlier, Venezuela nationalized some oil drilling plants, as well:

Petroleos de Venezuela SA, the state oil company, seized about $1 million worth of equipment from Superior Energy Services Inc. (SPN:US), the Houston-based company said.

PDVSA expropriated two hydraulic units that were idled after the Caracas-based company missed payments, Greg Rosenstein, head of corporate development, said by phone from New Orleans. The units operated in eastern Venezuela’s Anzoategui state, Associated Press reported Nov. 1.

[…]Under President Hugo Chavez, who died of cancer in March, Venezuela initiated a nationalization process, seizing assets from companies including Exxon Mobil Corp. (XOM:US) and ConocoPhillips. (COP:US)

Schlumberger Ltd. (SLB:US), the world’s largest oil-services company, said in March it would reduce work in Venezuela because of mounting overdue payments from PDVSA. Schlumberger subsequently reached an agreement and announced on May 24 that it would provide a $1 billion rolling credit for a joint venture in Venezuela.

That will encourage oil companies to come to Venezuela and pay royalties to the government, and give jobs to more Venezuelans. Oh wait, no it won’t. It’s just going to cause companies to scale back their investments, expand in other countries, stop hiring, lay off more people, and pull out of Venezuela. I’m sorry but this is standard leftist economic policy.

Are Barack Obama and Hugo Chavez very different?
Are Barack Obama and Hugo Chavez very different?

Remember the last time that Venezuela seized privately-owned oil companies? They eventually had a nice explosion at the oil drilling facility, because the government doesn’t know how to run a business better than the people who created that business. You can see it today here, as Obama nationalizes the health care industry and tries to substitute his own web site. He thinks he knows how to create web sites. The man who has never run so much as a lemonade stand in his entire life, and is an authority on how to read a teleprompter and play golf. You do NOT put people like this is in charge of the economy.

Comparing Chile to Argentina and Venezuela
Comparing Chile to Argentina and Venezuela

The strange thing is that the economies of Chile embraced free market capitalism, free trade, private property, and the rule of law. Unlike Venezuela and Argentina, they are doing vastly better economically. Look at that chart, which I got from libertarian economist Dan Mitchell. You can’t refute that, because economics is real. No one can hide from the facts.

Related posts

Socialist government of Venezuela announces devaluation of their currency

Are Barack Obama and Hugo Chavez very different?
Are Barack Obama and Hugo Chavez very different?

From the Boston Globe.

Excerpt:

Venezuela’s government announced Friday that it is devaluing the country’s currency, a long-anticipated change expected to push up prices in the heavily import-reliant economy.

Officials said the fixed exchange rate is changing from 4.30 bolivars to the dollar to 6.30 bolivars to the dollar.

So, if you are earning and saving Bolivars, you just got a massive cut to your earnings and savings.

More:

By boosting the bolivar value of Venezuela’s dollar-denominated oil sales, the change is expected to help ease a difficult budget outlook for the government, which has turned increasingly to borrowing to meet its spending obligations.

[…]Economist Jose Guerra told The Associated Press that given the devaluation, he predicts inflation of more than 25 percent this year.

The announcement of the devaluation came after the country’s Central Bank said annual inflation rose to 22.2 percent in January, up from 20.1 percent at the end of 2012.

The oil-exporting country, a member of OPEC, has consistently had Latin America’s highest officially acknowledged inflation rates in recent years. Spiraling prices have come amid worsening shortages of some foods.

[…]It was the fifth time that Chavez’s government has devalued the currency since establishing the currency exchange controls a decade ago in an attempt to combat capital flight.

[…]The government’s announcement drew strong criticism from opposition leader Henrique Capriles, who said that the government’s heavy spending was to blame for the situation and that officials were trying to slip the change past the public at the start of a long holiday weekend.

The opposition party explains why this is happening:

‘They spent the money on campaigning, corruption, gifts abroad!’’ Capriles said in one of several messages on his Twitter account. Capriles was defeated by Chavez in an October presidential vote that was preceded by a burst of heavy government spending.

Who else do we know who likes to spend money and borrow from future generations? Someone whose economic policies are similar to Chavez? Who could it be? Increasing inflation is a very attractive policy to socialists who want to spend more money without raising taxes. It’s a hidden tax on those who try earn more and save their money. It punishes independence and makes dependence on the government inevitable.

Related posts

New paper on income inequality: Does taxing the rich hurt the middle class?

Aparna Mathur (right)
Aparna Mathur (right)

Here’s an article by Indian economist Aparna Mathur.

She writes (in part):

In a recent paper that I co-authored with Kevin Hassett, we explored the effect of high corporate taxes on worker wages. The motivation for the paper came from the international tax literature (summarized by Roger Gordon and Jim Hines in a 2002 paper1) that suggested that mobile capital flows from high tax to low tax jurisdictions. In other words, in any set of competing countries, investment flows are determined by relative rates of taxation. The current U.S. headline rate of corporate tax is 35 percent. The combined federal and state statutory rate of 39 percent is second only to Japan in the OECD. With Japan set to lower its statutory rate later this year, the U.S. rate will soon be the highest in the OECD and one of the highest in the world. What effect do these high rates have on worker wages?

When capital flows out of a high tax country, such as the United States, it leads to lower domestic investment, as firms decide against adding a new machine or building a factory. The lower levels of investment affect the productivity of the American worker, because they may not have the best machines or enough machines to work with. This leads to lower wages, as there is a tight link between workers’ productivity and their pay. It could also lead to less demand for workers, since the firms have decided to carry out investment activities elsewhere.

Our paper was one of the first to explore the adverse effect of corporate taxes on worker wages. Using data on more than 100 countries, we found that higher corporate taxes lead to lower wages. In fact, workers shoulder a much larger share of the corporate tax burden (more than 100 percent) than had previously been assumed. The reason the incidence can be higher than 100 percent is neatly explained in a 2006 paper by the famous economist Arnold Harberger.2 Simply put, when taxes are imposed on a corporation, wages are lowered not only for the workers in that firm, but for all workers in the economy since otherwise competition would drive workers away from the low-wage firms. As a result, a $1 corporate income tax on a firm could lead to a $1 loss in wages for workers in that firm, but could also lead to more than a $1 loss overall when we look at the lower wages across all workers.

Following our paper, several academic economists substantiated our results, using different data sets and applying varied econometric modeling and techniques. Some examples of these studies include a 2007 paper by Mihir A. Desai and C. Fritz Foley of Harvard Business School and James Hines Jr. of Michigan University Law School, a 2007 paper by R. Alison Felix of the Federal Reserve Bank of Kansas City, a 2009 paper by Robert Carroll of The Tax Foundation, and a 2010 paper by Wiji Arulampalam of the University of Warwick and Michael Devereux and Giorgia Maffini of Oxford.3 A recent Tax Notes article that I co-authored summarizes these various studies and also the lessons from the theoretical literature on the topic. The general consensus from theory and empirical work is that while we may argue academically about the size of the effect, there is no disagreement among economists that a sizeable burden of the corporate income tax is disproportionately felt by working Americans. On average, a $1 increase in corporate tax revenues could lead to a dollar or more decline in the wage bill.

Conservatives and liberals have the same goal. We both want to help the poor. Liberals think that taking money from the rich and giving it to the poor helps, but all it does it cause the rich to move their capital and jobs elsewhere, leaving the poor poorer. Conservatives let the rich keep their money and encourage them to risk it trying to make more money by engaging in enterprises that create wealth – creating products and services from less valuable raw materials. In a socialist system, the rich get poorer, but so do the poor. In a capitalist system, the rich get very rich, but the poor also gain more wealth. That’s what happens when corporations like Apple make IPads out of junky raw materials. That’s how wealth is created – by letting people who want to make things keep more of what they earn. We all benefit from encouraging people to make new things and provide value for their neighbors.

Related articles

Caterpillar decides to not build its new manufacturing plant in Illinois

Central United States
Central United States

From the Peoria Journal Star.

Excerpt:

Caterpillar Inc. will not be building its new North American plant anywhere in the state of Illinois, officials with the company told local leaders Tuesday, with part of the reason being continued concerns about the business climate in the state.

The company will instead focus on a location closer to its division headquarters in Cary, N.C., Peoria County officials were told in an email sent to them shortly after the close of business and later obtained by the Journal Star. The plant stood to bring with it from Japan roughly 1,000 jobs manufacturing track-type tractors and mini hydraulic excavators.

Peoria County had submitted a regional proposal for the facility at the end of last year, and the Galesburg area also had a proposal on the table for the manufacturer. Peoria’s proposal reportedly included economic incentives as well as a promise of a legislative effort to establish a tax increment financing district to benefit the company.

At its core, Caterpillar’s decision reflects some concerns its officials had previously expressed about the economic condition of the Land of Lincoln.

“Please understand that even if your community had the right logistics for this project, Caterpillar’s previously documented concerns about the business climate and overall fiscal health of the state of Illinois still would have made it unpractical for us to select your community for this project,” the letter reads in part. “Caterpillar intends to continue calling for long-term changes in Illinois and to offer help to the state as it works toward real and fundamental reforms that will position communities like yours to compete for future projects.”

And:

Still, the rejection didn’t come as much of a surprise to state Rep. David Leitch, R-Peoria.

“I think Caterpillar has been very frustrated by the state’s inability to improve the business climate,” he said. “I still think that workers’ comp is a very serious issue for Caterpillar and others. I think there’s great concern about the financial situation within the state itself. The precarious nature of the state’s finances and having the worst bond rating in the country and huge liabilities … have not been addressed.”

The decision to locate elsewhere — and the reasons for it — should serve as a wake-up call to the region and the state as a whole, Rand said.

“I think the lessons learned here shouldn’t read like recriminations but instead resonate like a call to action,” he said. “Perhaps someone in Springfield will take notice. It’s our job to make certain they do.

“You can’t move a mountain while wearing a pair of roller skates. The disadvantages Cat identifies in Illinois are all man-made. We have to make ourselves competitive. It won’t happen because of a wish.”

Illinois is one of the bluest states in the union – totally dominated by Democrats. It’s very important for working Americans to understand that a Democrat can stand up and complain about outsourcing and greed and corporations and income inequality until they are blue in the face. It doesn’t mean a thing. Democrats are for higher taxes and more regulations on businesses, and that’s what causes outsourcing. Democrats cause unemployment. It doesn’t matter what they say. What matters is how job creators respond to the incentives created by Democrat policies.