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Multinational (Global) Operations,   and
Government Of, By, and For the People


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Multinational (Global) Operations,   and
Government Of, By, and For the People

How individuals in responsible positions or authority, in local and national government, are managing our affairs on our behalf and for us, is of crucial importance to every citizen.

Government has to make ends meet, has to bring about a rising standard of secure living, social security and an increasing quality of life for its citizens. There can be ups and downs but, says Manfred Davidmann, "failure to make ends meet is just as directly and surely the result of bad leadership and management as it is in any commercial enterprise."

This is a severe criticism also of the kind of experts and consultants used, and of the way they are used. "The quality of one's experts and whether and how their expertise is used, and applied, are of decisive importance."

Multinational Operations

It was Manfred Davidmann who twenty years ago demolished the then-current economic myths about 'Price Inflation' and 'Wage Inflation', and about inflation and unemployment. He coined the phrase 'Exporting Employment and Importing Unemployment', and pointed to, and warned about, the social and economic consequences of what is now often euphemistically called 'outsourcing' or 'globalisation'.

In 1996, for example, Manfred Davidmann pointed out that imports were now being priced at what the market will bear, or just under. The enormous profit margins then cause production to move from high-wage to low-wage countries. The consequence is a lowering of standard of living in high-wage countries to that in low-wage countries, instead of a raising of standard of living in low-wage countries to that in high wage countries.
See   Exporting and Importing of Employment and Unemployment

In 1991, Manfred Davidmann showed that multinational companies were minimising their liability for corporation tax by transfer pricing, that is by making book entries which transfer profits to the country with the lowest corporation tax.

Say a multinational has increased its profits in such ways. As the government's expenses have not changed it must make up this shortfall elsewhere. From its other tax payers, say from its citizens. So its citizens pay more tax, the government can now spend the same amount as before, the multinational's profits have increased.

This tax avoidance is legal and governments have not legislated to prevent this practice.

The multinational, and this means the owners and directors of the multinational, are thus in effect taxing the country's citizens, its population, in this way increasing the multinational's profits and thus their own incomes and wealth.
See   Multinational Operations: Transfer Pricing and Taxation

Studies published in the USA, for example, tell us much about the extent to which multinationals can avoid paying tax on their profits. These present a disturbing picture.

It is an accepted principle of economics, that the social costs of an enterprise's operations have to be paid by the enterprise, expressed by the maxim 'The polluter pays'. In other words, the social costs of unemployment have to be paid by the enterprise which caused the unemployment.
See   Community Economics: Principles
However, multinationals tend to regard profit as the sole consideration, regardless of the consequences to the community, regardless of the cost to people. Instead of producing more effectively and competitively at home, owners and directors find it easier and more profitable to import from low-wage countries. Unemployment increases at home, and increasing unemployment and social need is used to force down wages and living standards.
See   Creating Unemployment for the Sake of Private Profit;
Multinational (Global) Operations and the Exporting of Employment

Owners and directors in this way profit from the unemployment and the lower standard of living their operations cause in the home-country. They will continue to profit from increasing unemployment and its consequences as long as they do not have to pay the social costs of their operations. In other words, as long as they are allowed to pass this part of their operating costs to the community.

Employers should pay wages which will provide a good life for employees and their families. But the lower the wage paid, the higher the profit. And there will be employers who are more interested in their own profits than in the welfare of their employees.

Some employers may then pay wages which are so low that employees are forced to work long hours merely to survive. A government may then make up such wages with income-support benefits to a poverty-existence level. Which is apparently what happened in the UK while minimum-wage requirements ceased to be applied. And which is also being done in Germany.

In such ways taxpayers' moneys are used to subsidise the profits of companies (corporations), of their owners.
See   Taxing the Population for Private Profit

MAI stands for 'Multilateral Agreement on Investment'. But its name does not reflect those aspects which are of deep concern. What is disturbing are not only the provisions of this proposed treaty but also that the provisions were debated in almost complete secrecy.
See   Democracy Under Attack: Top-level Leadership and Decision-taking

Also see   Multinational Summits and Agreements (Top-level Decision-taking and Democracy)

It appears that representatives of multinationals and governments representing the 29 richest industrialised countries, all OECD members, had been developing the MAI's provisions at the OECD (Organisation for Economic Co-operation and Development) since 1995. This seems to have been done in complete secrecy till a leaked copy became available on the Internet in 1997.

It seems that the agreement was to have been finalised in February 1998. Apparently it was adverse publicity relating to its restrictive provisions which delayed completion as concerned groups of citizens publicised their concerns. And some governments then withdrew their support.

So let us look at the kind of provisions this almost-agreed agreement on 'Multilateral Agreement on Investment' contained:

Democratically elected governments

  • Would have had to allow multinationals access to the country.

  • Would have been prevented from discriminating against foreign firms, would not be able to refuse any form of investment in any sector apart from defence.

  • Would have been prevented from reducing or controlling a multinationals profits, say by minimum-wage or anti-pollution legislation, or by legislation to ensure local employment.

Multinationals would have had the right to

  • Sue national governments for any profits lost through laws which discriminated against the multinational, and which harmed a multinational's interests.

  • Sue national governments in an international court which would have been closed to public scrutiny.

We saw that multinationals can legally avoid paying corporation tax by transfer pricing. Unitary taxation can overcome this tax avoidance by assessing the actual profits being generated by a multinational in a particular country. Multinationals could, under MAI, have refused to be taxed by a system of unitary taxation.
See   Taxing the Population for Private Profit

So it appears that under MAI the national governments would have handed over control, that is authority to act, over much of the economic and social welfare of their citizens to multinational corporations (that is to those who own and direct these corporations), if they had agreed to this treaty.

In other words, multinationals would have been given overriding authority over democratically elected governments.

Governments recently promised to provide vast money handouts to what appear to have been speculative financial institutions when commercial banks considered these institutions too great a risk and refused to continue lending money to them.

Following which multinational motor manufacturers were claiming that they would have to seriously curtail or close down their operations in major industrialised countries, thus increasing unemployment, apparently hoping or clamouring for similarly enormous money handouts.

With governments seriously considering the motor manufacturers' requests and apparently agreeing, at least in principle, to the handing over of vast sums to them.

Socially responsible and caring governmental legislation has to take precedence over the profit-motivated activities of corporations (including financial institutions)

No elected representative, government or government employee has the authority

  1. to hand over to corporations (that is to those who own and control them), or to anyone else, an overriding control over the present and future, economic and social, welfare of its people, or

  2. to sign away the democratic rights of their people for the self-determination of key fundamental aspects of their lives.

Descriptions of Sources

Title   Description
Exporting and Importing of Employment and Unemployment   Discusses exporting and importing of employment and unemployment, underlying principles, effect of trade, how to reduce unemployment, social costs of unemployment, community objectives, support for enterprises, socially irresponsible enterprise behaviour. See 'Press Notices'.
Multinational Operations: Transfer Pricing and Taxation   One of the most controversial operations of multinationals, transfer pricing, is clearly described and defined. An easily-followed illustration shows how transfer pricing can be used by multinationals to maximise their profits by tax avoidance and by obtaining tax rebates. Also discussed is the effect of transfer pricing on the tax burden carried by other tax payers.
Community Economics: Principles   This statement of the fundamental principles of the free-market economic system is unique and outstanding because it allows for the needs of the community.
Taxing the Population for Private Profit   Shows how taxpayers' moneys are used in different ways to enlarge the profits of companies (corporations). These are in effect allowed to tax the population and to pass large parts of their operating costs to taxpayers.
Democracy Under Attack: Top-level Leadership and Decision-taking   Discusses and illustrates the internal struggles taking place in political parties and all other organisations, for achieving greater democracy and against those wishing to overpower democratic processes of decision-taking.
Multinational Summits and Agreements (Top-level Decision-taking and Democracy)   Describes how secretive top-level multinational meetings and agreements (such as GATT and MAI) negate democratic government and decision-taking. Shows that publicity about what is being planned or taking place is an effective deterrent.

Manfred Davidmann

Manfred Davidmann is an internationally well-known and respected scientist and author of a number of books and reports which have had and are having considerable impact. His work usually breaks new ground and opens up new understanding and is written in meaningful and easily understood language. Outstanding is that his work is generally accepted as factual, objective and unbiased.

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