Guest Commentary / Apr. 1, 2020

The Myth of Globalism

A tension, if not full-blown war, exists between progressive politicians and "corporations" as though the latter were somehow separate from the people who finance them, work for them, and lead them.

By Mark Fowler

A tension, if not full-blown war, exists between progressive politicians and “corporations” as though the latter were somehow separate from the people who finance them, work for them, and lead them.

This antipathy is manifested by a desire to tax corporations the same way we tax wage earners. That notion will not stand scrutiny when corporations are understood properly. One would think that a law professor from Harvard, now a former presidential candidate, would understand that development of the limited-liability corporation was instrumental in the growth of capitalism with its concomitant increase in societal wealth. The notion of limited liability means that the stockholders are limited in liability to the value of their shares. If the company — deemed a separate entity — fails, the investor walks away, whereas in a sole proprietorship or partnership, a partner or owner remains liable for the debt of the business. This concept allowed investors to avoid part of the risk of business failure. Perhaps she missed that day in law school.

A corporation allows several people to pool their capital by owning stock. Some corporations are small, wholly owned privately, as in a family business, and some are large like General Motors in which millions of shares are owned by thousands of individuals. In return for the use of capital, corporations pay dividends. If the company does well, shares will grow in value. These shares are owned by retirement funds, individual investors, banks, and insurance companies. This accumulated capital represents money that has been earned and taxed at least once by the individuals who buy shares or who contribute to a retirement fund.

The trouble now is that progressive politicians see “corporations” as though they are all the same and, more importantly, that they exist solely to provide money for the government to use. Consequently, we hear politicians say that corporations should pay their fair share. When corporations pay more in taxes, one or more things happen. Corporations will seek to pass on the cost of taxes to their consumers, or they will reduce expenses. In any event, taxes on corporations reduce the return on investment.

The coronavirus has brought to the forefront the result of reducing labor costs by shipping manufacturing to China and India. Notwithstanding former President Barack Obama’s declaration that he was a citizen of the world, the fact remains that all nations live in a state of nature, meaning that they must take care of their own interests without relying on the good will of other nations to help them in times of crisis.

We have depended too long on China to buy our debt and manufacture our essential items. Now we are not only engaged in a propaganda war as to the origin of the COVID-19 virus, we are also facing the threat that China could withhold from us medicines essential to our wellbeing.

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