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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.

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