THE TYPICAL AMERICAN, as I have shown, has little wealth and has “near-zero, statistically non-significant” political power. Almost all wealth and power now reside in the oligarchy. Yet the oligarchy is not committed to the public good. It does not want to raise the wages of working Americans, reduce inequalities, guarantee all Americans access to good health care and a world-class education, or stop climate change. The oligarchy’s allegiance is to corporate shareholders, and its major interest is enlarging their and its own wealth. The easiest ways to lift share values and enlarge the oligarchy’s wealth are to hold down wages, roll back regulations, find ever-cheaper places around the world to produce products and services, fight unions, and secure giant tax cuts that result in less money for education, health care, and everything else most Americans need.
Don’t blame CEOs or other members of the oligarchy. They’re in business to make a profit and maximize their share prices, not to serve America. But they also dominate American politics and essentially run the American system, and therein lies the problem. They cannot fulfill both roles—they cannot be advocates for their corporations and simultaneously national leaders. Jamie Dimon may sincerely believe that he’s a patriot before he’s the CEO of JPMorgan, but we would be foolhardy to rely on that self-assessment. The difficulty is not that corporate power is beyond the control of the American government. It is that corporate power controls the American government.
As a result, Americans don’t get nearly as good a deal as do the citizens of other advanced nations. Governments elsewhere impose higher taxes on the wealthy and redistribute more of it to middle- and lower-income households. Most of the citizens of other advanced nations receive free or nearly free health care, and most get free or nearly free college tuition. Americans receive neither. The United States is the only advanced nation that does not guarantee paid family leave. In Europe, the norm is three months’ paid leave. At most, Americans get twelve weeks’ unpaid leave. America is also the only advanced nation that does not guarantee paid sick days. It is the only one that does not guarantee workers any vacation at all. The European Union’s twenty-eight nations guarantee at least four weeks of paid vacation.
In other advanced nations, most people who lose their jobs get more generous unemployment benefits than do Americans. Employers cannot fire workers at will, as they can here. Among the three dozen advanced countries in the Organization for Economic Cooperation and Development, the United States has the lowest minimum wage when measured as a percentage of the median wage—just 34 percent, compared with 62 percent in France and 54 percent in Britain. The typical American worker puts in more hours on the job than Canadian, European, or Japanese workers.
American corporations distribute a smaller share of their earnings to their workers than do European or Canadian-based corporations. Top corporate executives in America make far more money than their counterparts in other wealthy countries. Consequently, inequality is far wider in the United States than it is in any other advanced country, and the American middle class is no longer the world’s richest. Considering taxes and transfer payments, middle-class workers in Canada and much of Western Europe are better off than in the United States. The working poor in Western Europe earn more than do the working poor in America. Globalization or technology cannot account for these differences because all these nations face much the same international competition and deal with the same technological changes. The answer is to be found in the different organization of these countries’ political-economic systems.
American corporations have no special allegiance to the United States and no responsibility for the well-being of Americans, yet they have overriding power over American politics. Power is distributed differently elsewhere. Labor unions are stronger in Europe and Canada than they are in America, able to exert pressure both at the company level and nationally. Only 6.4 percent of American private-sector workers are unionized. But 26.5 percent of Canadian workers belong to a union, as do 37 percent of Italian workers, 67 percent of workers in Sweden, and 25 percent in the United Kingdom. Most other advanced nations have parliamentary systems in which average workers are represented by at least one party that specifically advocates for them. The United States has a two-party system in which the winning party gets all of a state’s electoral votes, thereby discouraging third parties. Elections in other developed nations are less affected by big money than are elections in the United States, because other nations have stricter restraints on money in politics. Governments in these nations often devise laws through tripartite bargains involving big corporations and organized labor, which further binds their corporations to their nations’ workforces.
A frequent argument made by the American oligarchy is that “American competitiveness” must not be hobbled by regulations and taxes. Jamie Dimon often warns that tight banking regulations will cause Wall Street to lose financial business to banks in nations with weaker regulations—allowing “Deutsche Bank to make the better deal,” in his words. He says that “if there isn’t a JPMorgan straddling the globe serving clients then a Chinese bank will happily fill that role.” Under Dimon’s convenient logic, JPMorgan is America. But at the same time Dimon issues these warnings, other Wall Street bankers are warning other nations that if their bank regulations are too strict, banks located there will move more of their operations to the United States. Lloyd Blankfein, CEO of Goldman Sachs, cautioned Europeans that “operations can be moved globally and capital can be accessed globally.”
One advantage of being a huge Wall Street bank is you get bailed out by the federal government when you make dumb bets. Another is you can choose where around the world to make the dumb bets. It’s a win-win. Wall Street wants to keep it that way. In reality, the concept of American competitiveness is meaningless when it comes to a giant financial enterprise like JPMorgan that moves money all over the world at a keystroke. For years, the bank has been underwriting global acquisitions—a Japanese beer brewer by an Australian beer company, a steel company in the United States by a Brazilian steel company. JPMorgan doesn’t care where it makes money. Its profits don’t directly depend on the well-being of Americans.
Dimon used the same specious argument about American competitiveness to support the Trump tax cut. “We don’t have a competitive tax system here,” he warned. “Our tax system has become less competitive over the last twenty years. Everyone has improved theirs. We simply haven’t.” But in evaluating statements like this it’s always important to look behind the pronouns. Who’s “we”? What’s “ours”? What’s “theirs”? When Dimon talks about “competitiveness,” he’s really talking about the competitiveness of JPMorgan, its shareholders, and executives like himself.
“American competitiveness” is just as meaningless when it comes to big American-based corporations that make and buy things all over the world. The five hundred largest corporations headquartered in the United States are steadily becoming less American. Forty percent of their employees live and work outside the United States. A third of their shareholders are non-American. They sell and buy components and services all over the world. When GM went public again in 2010 after being bailed out by the federal government, it boasted of making 43 percent of its cars in places where labor is less than $15 an hour, while in North America it could now pay “lower-tiered” wages and benefits for new employees. The boast was directed toward Wall Street traders in an effort to boost their confidence. It was not directed toward Americans whose wages have been going nowhere.
Consider another mainstay of corporate America, GE. Two decades ago most GE workers were American. Today the majority are non-American. Over half of GE’s revenue in 2018 came from abroad. According to the Commerce Department, American-based global corporations added 2.4 million workers outside the United States in the first decade of this century while cutting their American workforce by 2.9 million. Nearly 60 percent of their revenue growth has come from outside America. Apple employs 43,000 people in the United States but contracts with more than 700,000 workers abroad. It assembles iPhones in China both because wages are low there and because Apple’s Chinese contractor can quickly mobilize workers from company dormitories at almost any hour of the day or night.
It is dangerous to believe that the top executives of corporations headquartered in the United States have a special allegiance to America. In July 2019, the U.S. Senate held hearings on Facebook’s planned cryptocurrency, Libra. Facebook executives cautioned that the firm must be allowed to create this currency or “some other country [that is, China] will.” But Facebook’s motive had nothing whatever to do with stopping China or any other country from creating its own cryptocurrency. Like JPMorgan, Facebook wants to be free to make as much money as it can, wherever it can. After all, Facebook has spent much of the last decade trying to curry favor with the Chinese in hopes of getting permission to operate Facebook apps there. Evidence of Facebook’s lack of allegiance to America is evident from the fact that the worldwide association it established for Libra is located in Switzerland, home of famously lax banking laws.
The real competitiveness of the United States depends on only one thing: the productivity of Americans. That in turn depends on our education, our health, and the infrastructure that connects us. The American workforce, unfortunately, is hobbled by deteriorating schools, unaffordable college tuition, decaying infrastructure, soaring health-care costs, and diminishing basic research. All of this is putting Americans on a glide path toward lousier jobs and lower wages. Big global corporations don’t see it as their responsibility to fix this, and they’d rather not have to pay for any of it. Truth be told, neither would the American oligarchy. As long as they’re in control of our politics, therefore, nothing gets done.
Global corporations will create jobs wherever around the world they can get the best return—where wages are lowest, regulations and taxes are minimal, or productivity is highest. But if Americans compete on the basis of lower taxes, fewer regulations, and lower wages, it’s a recipe for a continuously declining standard of living. Global companies will create good, high-wage jobs in the United States only if Americans are productive enough and clever enough to summon them. Yet global companies won’t make the necessary investments in American productivity, nor will they pay taxes to do so, because their allegiance is to their shareholders and not to Americans.
American companies are not just creating routine manufacturing jobs overseas. They are also creating good high-tech jobs abroad and doing an increasing amount of their research and development there: 9 percent in 1989, 20 percent today.
China’s share of global research and development now tops America’s. One big reason, according to the National Science Foundation, is that American firms nearly doubled their research and development investments in Asia over the last decade. China aims to create the technologies and the jobs of the future, and has been pouring money into world-class research centers designed to lure American corporations, along with their engineers and scientists. American corporations are allowed into China on the condition that they share their R&D. The Chinese are intent on learning as much as they can from American corporations and then going beyond them.
American corporations are fine with all this as long as the deals help their bottom lines. They’ll do and make things in China and give the Chinese their know-how when that’s the best way to boost their profits, and they’ll invest in research and development around the world wherever it will deliver the largest returns. In 2017, GE announced it was increasing its investments in advanced manufacturing and robotics in China, which it termed “an important and critical market for GE.” Meanwhile, Google opened an Artificial Intelligence lab in Beijing, headed by Fei-Fei Li, Google’s chief scientist for AI and machine learning, who came to Google after serving as the director of Stanford University’s Artificial Intelligence Lab. These moves occurred not because GE or Google is concerned about America but because these firms want to maximize the value of their shares. (Until Google employees forced the company to stop, Google was even building China a prototype search engine, Dragonfly, designed to be compatible with China’s state censors.) An Apple executive told The New York Times, “We don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible”—and showing profits big enough to continually increase their share price.
Donald Trump wants China to buy more goods from American corporations and stop stealing their intellectual property, as if American competitiveness were synonymous with the profits of American-headquartered corporations. He has also said he wants American companies to move their businesses out of China. Meanwhile, China is pouring money into the education of its people. In the last dozen years China has built twenty universities, each intended to become the equivalent of MIT. China is also investing in infrastructure at three times the rate of the United States.
China has a national economic strategy that’s designed to maximize China. It is focused on creating more and better jobs for China and taking the lead in industries of the future, and it is achieving these goals. Forty years ago China was still backward and agrarian. Today it’s the world’s second-largest economy, home to the world’s biggest auto industry and some of the world’s most powerful technology companies. Over the last four decades, hundreds of millions of Chinese people have been lifted out of poverty.
At the core of China’s economy are state-owned companies that borrow from state banks at artificially low rates. These state firms balance the ups and downs of the economy, spending more when private companies are reluctant to do so. They’re also engines of China’s economic growth—making the capital-intensive investments China needs to prosper, including investments in leading-edge technologies. China’s planners and state-owned companies are not interested in boosting share prices. They are interested in boosting China. Since 1978, the Chinese economy has grown by an average of more than 9 percent per year. Growth has slowed recently and American tariffs could bring it down further, but it is still growing faster than almost any other economy in the world.
The United States doesn’t have a national economic strategy to make necessary investments in the United States. Instead, it has a hodgepodge of tax breaks and corporate welfare crafted by American-based global corporations to maximize their profits. Big Oil gets a nice return on its political investments, as do America’s biggest banks, giant military contractors, the largest food processors, the biggest private equity and hedge funds, and other beneficiaries of the American system of corruption. Meanwhile, Congress is cutting publicly supported research and development, and cash-starved states are cutting K–12 education and slashing the budgets of their great public research universities.
The Trump tax cut did little for jobs and wages but did nicely for corporate executives and big investors. As I have noted, instead of reinvesting the savings in their businesses, companies used most of it to buy back their shares of stock. In June 2019, Walmart, America’s largest employer, announced it would lay off 570 employees despite taking home more than $2 billion courtesy of the Trump tax cut. In 2018 the company closed dozens of its Sam’s Club stores, leaving thousands of Americans out of work. At the same time, Walmart plowed more than $20 billion into buying back shares of its own stock, which boosted the pay of Walmart executives and enriched wealthy investors but did nothing for the economy. (It should also be noted that Walmart is a global company, not adverse to bribing foreign officials to get its way. In June 2019 it agreed to pay $282 million to settle federal allegations of overseas corruption, including channeling more than $500,000 to an intermediary in Brazil known as a sorceress for her ability to make construction permit problems disappear.)
I’m not suggesting we emulate the Chinese system. What I am suggesting is that it is folly to count on American corporations and their CEOs to voluntarily create good American jobs, raise the productivity and wages of American workers, and make America the leader of the industries of the future. Rather than try to get China to change, we’d do better to try to lessen the dominance of big American corporations over American policy. China isn’t the reason half of America hasn’t had a raise in four decades. The reason has more to do with where power is located in our system. The core contradiction is that Americans cannot thrive within a system run largely by big American corporations, which are not organized to promote the well-being of Americans. Oligarchy is good only for oligarchs.