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Corporations aren’t ‘obligated’ to build in US

corporate America flagMy background noise this morning was Candy Crowley’s State of the Union. Her guest was James P. Hoffa, president of the Teamsters Union. I wasn’t paying much attention until I heard Hoffa say:

“Look at Honda. They’re building a new plant in Mexico. Don’t they have an obligation to build here?…

“… Apple. Don’t they have an obligation … ?”

“We are an American company. Don’t we have an obligation … ?”

Uh, no. American companies don’t have an obligation to build their plants in the U.S. Where’d he get that idea?

Many corporations indulge in bad policies, excess profit-taking, CEO graft and corruption, and an apparent disdain for their customers. Not the least of these is their increasing tendency to farm out services and manufacturing to overseas bases. I don’t like it, but I would never argue that those corporations have an obligation to build their plants in America.

Ours is a capitalist society. Companies are born and grow because there’s a demand or need for a particular product or service, and there’s a profit to be made by filling that need. If a company cannot buy the materials it needs at a fair price, or afford to pay its workers, or sell enough of its goods and services, it will lose money and go out of business. That’s not even Econ 101; we all learned this basic model of capitalism in high school.

Why then does a presumably educated man believe corporations are obligated to build their new plants in America if there are more favorable conditions, cheaper labor, or cheaper materials in another country? The unions can wish all they want, but it won’t change reality.

Corporations are not obligated to build here. It would be nice if they built their plants in the U.S. It would be nice if they stayed here and hired American workers. But nice won’t pay the bills. They aren’t in business to be nice, to prop up American workers or the American economy. Corporations exist to make money for their investors. Period. And before you say that’s selfish, greedy, and wrong, just think of all the products you use that they make, the services you use that they provide, and even the little piece of them you might own through a mutual fund, insurance policy, or some other investment.

Clearly a company will not build a plant here unless it is profitable to do so. It’s called the profit motive. It sounds somehow unsavory to be focused on profit, but the fact is that without a profit, there would be no company. That’s the way a free-market, capitalist society works. And for all its many shortcomings, it’s still the best model out there.

Of course I’d like American corporations keep their plants in America and hire Americans and sell wonderful, high quality, American-made products. (Now simmering: a rant about American companies selling cheap foreign-made products.) But if all the regulations and tax laws we have (not to mention U.S. labor demands), combined with the global economic environment, convince them they must go elsewhere, such is business. It’s up to America to create an environment conducive to their staying here.

I don’t believe for a second that corporations have any obligation — legal, moral, fiscal or otherwise — to stay in America. But I also don’t like seeing our companies moving overseas or farming out all their jobs to foreign workers. The corporations aren’t blameless in their quest for more profit, but the fact remains, they can’t stay in business without it.

4 Comments »

  1. Profit rules, no question about it, Pied, but such decisions are complex because there are numerous other factors that affect that profit than just the prevailing wage. These would include political factors (corruption, trade laws, tariffs, etc.), social factors (work ethic, religious stability, crime), educational level and trainability of the potential work force, healthcare resources for the workforce, transportation facilities for the products, and not least, taxes.

    I believe the biggest defect in the global marketplace is the lack of a level playing field for corporate taxation. Many large companies use legal tricks to evade taxes, including something called the “double Irish Dutch sandwich”. I wrote about such in one of my posts:

    http://jwheeler59.wordpress.com/2011/08/05/hidden-on-a-rock/

    It is because of such manipulation, I submit, that the world now has the largest disparity of income between the haves and the have-nots since the age of the Robber Barons. They had best be careful and should learn from Henry Ford. He knew that a prosperous underclass was necessary as a market for his production.

    • Oh yes, I’m aware of the complexities and was trying to simplify for the sake of example (and in case Sarah Palin stopped by for a read). Personally I doubt there’s anything one president, one party, one term in office, or perhaps even one nation can do at any one point in time. We can push here and nudge there, but it’s difficult to know for sure what the eventual result will be after all the forces have had their shot at it. It’s like the butterfly effect, and we are the butterfly.

      A lot of people talk about creating a “level playing field” as though we had direct control over what other nations do. But we can only directly change the U.S. end of the field. That would probably mean rolling back labor safety standards, reducing taxes and regulations on our corporations, etc., to convince corporations to locate or stay here. I don’t see that happening while Americans are up in arms about corporations not paying enough in taxes, not hiring, not “sharing the wealth” as Hoffa seemed to think they should. People can’t have their cake and eat it too. You can’t treat corporations like the Sith and then complain if they move their base to another planet.

      Or maybe just to Grand Cayman.

  2. I think any American corporation that outsources to China, India, etc. ought to be taxed within an inch of its life. Enough of them have put enough people out of work with the sole goal of lining the pockets of a handful at the top that their actions have been partner to destroying this country. Is it their right to go wherever they want? Sure. But it is an ethically bankrupt practice, and in the end, it’s going to bite them in their own backsides, anyway. http://www.nytimes.com/2011/09/04/opinion/sunday/jobs-will-follow-a-strengthening-of-the-middle-class.html

    Happy Labor Day. 😉

    • I like Robert Reich. He always has something intelligent to say.

      I don’t know what the answer is with the corporations. If we start taxing them to death for outsourcing, they can just pull up stakes completely and move to Timbuktu. If we don’t do anything, it will be business as usual, complete with outsourcing. And if their behavior eventually ruins them, they’ll just be replaced by another corporation (probably with many of the same board members). ‘Tis a puzzlement.

"Nothing is more dangerous than ignorance and intolerance armed with power." ~ Voltaire

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