Reprinted from robertreich.substack.com
Putting our chips on the table
As Congress prepares for summer recess, average working Americans are facing increasingly hard economic times "- including a likely recession (see here). Yet Congress has so far failed to provide most Americans with what they need to weather the storm "- subsidies for childcare and eldercare, paid sick leave, an increase in the federal minimum wage, lower pharmaceutical costs, additional help with the next strain of COVID, and so on.
At the very same time, American corporations are lining up with their hands outstretched, seeking all sorts of special benefits. And there's bipartisan support for giving them what they want.
Today I want to explain why corporations so often get what they want while average Americans don't. It's not simply that corporations bribe legislators with campaign donations, although that's a big part of it. There's another phenomenon at work that you need to know about.
Consider semiconductor chips. They're the brains of modern electronics "- embedded in everything from smartphones, radios, TVs, computers, video games, and advanced medical diagnostic equipment, to automobiles. As the world supply of almost everything tries to catch up with roaring post-lockdown demand, chips inevitably are in short supply.
This week, Congress is putting final touches on the CHIPS Act, which will provide more than $52 billion to companies that design and make semiconductor chips. The subsidy is demanded by the biggest chip makers as a condition for making more chips here.
It's pure extortion.
You see, the world's biggest chip maker (in terms of sales) is already an American corporation "- Intel, based in Santa Clara, California. Intel hardly needs the money. Its revenue rose to $79 billion last year. Its CEO, Pat Gelsinger, got a total compensation package of $179 million (which was 1,711-times larger than the average Intel employee).
From the perspective of the United States, the problem is that Intel is not dealing with the current American shortage of chips by giving preference to producers in the United States, and it's not keeping America on the cutting edge of new chip technologies. In addition to its facilities in the United States, Intel designs, assembles, and tests its chips in China, Israel, Ireland, Malaysia, Costa Rica, and Vietnam. And it sells them just about everywhere. (To add another layer of complication, many of Intel's "American" customers don't actually make their products in the United States. They're headquartered in the United States but, like Intel, they design and make stuff all over the world.)
Obviously, Intel would like some of the $52 billion Congress is about to throw at the semiconductor chip industry "- but why exactly should Intel get the money?
Among the other likely beneficiaries of the CHIPS Act will be GlobalFoundries. GlobalFoundries currently makes chips in New York and Vermont, but in many other places around the world as well. GlobalFoundries isn't even an American corporation. It's a wholly owned subsidiary of Mubadala Investment Co. "- the sovereign wealth fund of the United Arab Emirates.
The point is, the nation where a chipmaker (or any other global corporation) is headquartered has less and less to do with where it designs and makes things or where its customers are located.
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