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Robert Reich begins: "Some giant American corporations depend on a buoyant American economy and a world-class industrial base in the United States. Others are far less dependent. What comes out of Washington in the next few years will reflect which group has most political clout - especially if Republicans take over the House and capture more of the Senate this November."

Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)
Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)


The Two Categories of American Corporations

By Robert Reich, Robert Reich's Blog

12 September 10

 

The Two Categories of American Corporation - And Their Politics

ome giant American corporations depend on a buoyant American economy and a world-class industrial base in the United States. Others are far less dependent. What comes out of Washington in the next few years will reflect which group has most political clout - especially if Republicans take over the House and capture more of the Senate this November.

The first group includes national telecoms like Verizon and AT&T that need a prosperous America because most of their sales are here. Same with finance companies like Bank of America and Travelers Insurance whose business strategy has been built around U.S. consumers. Ditto certain giant chains like Home Depot. Naturally, all these companies were especially hard hit by the Great Depression and its devastating impact on American consumers.

The second group includes companies like Coca Cola, Exxon-Mobil, Hewlett-Packard, Intel, and McDonalds, that get substantial revenues from their overseas operations. Increasingly this means China, India, and Brazil. Ford and GM are still largely dependent on US sales but becoming less so. GM sold more cars in China last year than in the US. Not surprisingly, American companies that are less dependent on American consumers have been showing the biggest profits.

Wall Street gets this. Viewing the 30 giants that make up the Dow Jones Industrial Average, analysts are predicting that the 10 with the largest portion of sales inside the U.S. will show average revenue gains of just 1.6 percent over the next year, while the 10 with the largest portion of their sales abroad will grow by an average of 8.3 percent.

So what does this mean for politics? Big companies hedge their bets and support both Republicans and Democrats. But in my experience, companies in the first group are more responsive to tax, spending, and monetary policies that cause unemployment to drop and wages to grow, and less obsessed by inflation and deficits, than are companies in the second group. The former are also more supportive of new investments in infrastructure and education, which improve U.S. productivity over the longer term.

The problem is, more and more big companies are moving into the second category because that's where the markets and the money are. Years ago groups like the Business Roundtable consisted mostly of large American corporations that were indubitably American, and took largely progressive positions on U.S. jobs and wages. I remember working with the National Association of Manufacturers on measures to improve U.S. education and job training. The American Electronics Association pushed the Reagan Administration for an industrial policy to preserve the nascent industrial base of U.S. computing.

No longer. Large American corporations are going global as fast as they can. That's good for their shareholders. But in a Washington ever more susceptible to their money and influence, it's not necessarily good for American workers.

 

Robert Reich is Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written twelve books, including "The Work of Nations," "Locked in the Cabinet" and "Supercapitalism." His upcoming book, "AFTERSHOCK: The Next Economy and America's Future," is due out in mid-September. His "Marketplace" commentaries can be found on publicradio.com and iTunes.

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+7 # Guest 2010-09-12 19:01
Why aren't the words "imperialism" and transnationals used any more?
 
 
+8 # Guest 2010-09-13 06:35
Because use "imperialism" has to have a stupid flag to run up and unfurl for all the locals to hiss at.
The transnationals (run mostly by jet set, post-national types) can operate relatively fingerprint-les s, as long as they're not idiotic enough to wrap themselves in a foreign flag while conducting business abroad.
Seriously though, you're right... that there is currently a gaping hole in the English language... a gap where the word "imperialism" used to be, but now mostly ignorance and befuddlement in its stead.
 
 
+2 # Guest 2010-09-13 08:45
Quoting OneParty$...:
Seriously though, you're right... that there is currently a gaping hole in the English language... a gap where the word "imperialism" used to be, but now mostly ignorance and befuddlement in its stead.


I'm convinced that, like a lot of our linguistic blind spots, this one goes back to (and hangs on from) the Cold War, when empires was something only the Other Side had (the Soviet bloc was "the Evil Empire" to US, the West bloc was "imperialist capitalism").
 
 
+6 # Guest 2010-09-13 06:38
How about "Neo-feudalism"?

Nations and empires weren't on the tips of peoples tongues during the middle ages, either.
 
 
+6 # Guest 2010-09-13 03:47
Finally!
It is called by what it is: a Great Depression!

It needed to be stated starkly and explicitly so the solutions can be explored.

One needs to know the problem to solve it.

"Hidden within every problem lie the seeds of its own solution." Unknown
 
 
+13 # Guest 2010-09-13 04:16
Not necessarily good for? How about disastrous? I'm a contingent ("adjunct") teacher in a public college. I do not have health insurance. This is telling me I will never have health insurance, maybe not medicare, and my salary will never rise. Gee, that's not necessarily good for me.
 
 
+1 # Guest 2010-09-13 16:33
The wording was chosen intentionally to DIRECTLY counter Corporate cheerleaders who say things like "What's Good For GM is Good For America"--or now "What's Good For BP Is Good For America". Pick your favorite outsourcing, economy-destroy ing Corporation if you think BP has been scapegoated too much!
I'm pleasantly surprised that he called this a DEPRESSION, instead of the watered-down PC term, "Recession"!
 
 
+11 # Guest 2010-09-13 04:18
I noticed that Reich uses the word depression and not recession. Isn't that an interesting change. Reminds me of the difference between a recession and a depression. In the former, you neighbor lost his job. In a depression, you lost your job.
 
 
+1 # Guest 2010-09-14 16:16
This great divide may be largely true, but is flawed in two ways. First, some large US corporations are more imbued with ideology and investment capital than with dedication to the consumers that make them possible. ATT is the poster child for this distorted business mentality.

The second group, major corporations with international interests, are abandoning a 300 million strong highly elastic market in favor of belief that they can do so much better with the billions strong international market. Anybody greedy enough to gut their own market of spending capital to grow their wealth and international market will not have the savvy needy to succeed in the long run. The international market will be competitive, growing economies will be self-interested . They run the risk that befell Japan's economy.

These players need to realize that corporate strength begins and ends with nurturing healthy consumer marketplaces. Short-term gains with long-term greed won't help them win
 

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