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The New Feudalism: Big Corporations and the United States of Ever-growing Inequality

By   Follow Me on Twitter     Message Richard Clark     Permalink
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In Silicon Valley, where one fourth of the population now earn an average of about $19,000 dollars a year, median rent for a decent 1-BR apartment is about $20,000 a year, and that difference adds up to homelessness for many.   So, in the shadow of Google, in the shadow of Oracle, in the shadow of Apple Computer, you have people who are homeless and hungry.

The Valley is still generating successful people on the high end of course--engineers and scientists and the programmers who write code.   But the support positions, like in manufacturing, have largely disappeared.   Most of that work is now done in very low-wage countries where environmental laws and corporate taxes are virtually non-existent.

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For every 5 jobs corporations were adding in the Valley, they were building 2 units of housing.   So that jacked up the housing prices to what has become, right beside that of NY City, the most expensive in the country.   People who had blue-collar jobs were getting paid 10, 15, 20 bucks an hour, and when their jobs went away, usually to Asia or Mexico, and they lacked the skills to participate at a higher level, so they had to take jobs that paid $8 an hour, which has been the minimum wage in San Jose for the past 15 years.   But on those wages, you can't rent an apartment, you can't buy food, and you can't handle the expense of driving to work and back.   So, increasingly, you find people living three or four families to an apartment, or you find people moving into homeless shelters, or into tents along the creeks or in parks -- mostly where other people, and the police, aren't going to see them.   The problem remains largely hidden.

In spite of a booming economy and record profits by stock holders and big corporations, inequality in America is now at the greatest level in modern history and shows no signs of abating.   But how to explain this disconnect?   When the market goes up, it often means that corporations are benefiting from the new efficiency and productivity that comes with new computer applications and ever more sophisticated automation.   And this means they can fire workers in order to increase investor profits, and so they do exactly that.   Not surprisingly then, the latest figures show that the number of employed has barely risen, while ever more rank-and-file Americans have simply gone missing from the job market altogether and are no longer even being counted as unemployed.   Most significantly, the Commerce Department reports that personal income fell 3.6% in January -- the biggest one-month drop in twenty years -- which gives rise to one burning question:   As technology, off-shoring and production efficiency continue their unstoppable advance, just how many of us will eventually be on the road to serfdom and poverty in this new "feudalist,' corporate-dominated society?

Which brings us to our nation's capital -- rich in alabaster symbols of representative government yet shamelessly cynical in writing laws and bending rules (especially in the tax code) that massively favor corporations and the top 1%.  

Corporate profits are at record highs.   But have those companies invested any of those profits in new jobs?   No, of course not.   Why not?   Two reasons:  

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1.     With wages shrinking and decently paid jobs increasingly scarce, most consumers have ever less spending money in their wallets and so they are buying ever less stuff.

2.     But even if consumers were still buying at the level they did when credit and high-capacity credit cards were easier for most folks to come by, corporations really don't need nearly as many workers as they once did.   Why not?   As already explained, but well worth repeating:   With the benefit of the incredible new efficiency and productivity that comes with ever newer and more advanced computer applications and ever more sophisticated automation, companies simply don't need as many workers as they once did in order to produce a given amount of product or service.

Did corporations at least give their workers a bump-up in pay?   Hardly.   Well then surely the corps shelled out a little more in taxes to help refurbish the nation's infrastructure, which they and their workers use daily.   (I refer of course to the highways, bridges, schools, libraries, and parks.)   Guess again.   The fact is that US corporations are sitting on nearly $2 trillion of cash, not sure what to do with it except hide more of it offshore.   They can't expand production because, after years of rising prices, and falling wages for the bottom 80%, the necessary consumer demand is just not there.   Surprise, surprise.

Now look at this report  just published by the Public Interest Research Group, on how average citizens and small businesses have to pay for the $90 billion that giant companies "save" by hiding profits in offshore tax havens.   Among the 83 publicly traded corporations named, is Pfizer, which for the past five years reported no taxable income in the US, even as it made 40% of its sales here!

Also Microsoft, which avoided $4.5 billion in taxes over three years by miraculously shifting its income to Puerto Rico.   Yet another:   Citigroup, which maintains 20 "subsidiaries' in tax havens and has over $42 billion sitting off-shore.   Taxes collected here at home on that $42 billion?   Zero -- thanks to Joe Sixpack and other working-stiff taxpayers . . who got stiffed with this bill and many others like it!

But it's not only corporations that are stashing their swag offshore.   The Center for Public Integrity in Washington and its International Consortium of Investigative Journalists recently got their hands on two and a half million files from offshore bank accounts and shell companies set up around the world by the wealthy.   Among those documents are the names of 4,000 Americans who hid their money in secret tax havens so that the rest of us could pay the taxes on it.  

Here's how they do it:

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Set up a secret company using one of hundreds of off-shore locations.   The British Virgin Islands, for example, is home to half a million offshore companies.   There you can buy a ready-made shell company or create your own secret company from scratch in about three days, for just over $1,000.   You may be asked to produce documents to establish your identity and they might check your name in a database, to see if you're a terrorist.   But that's it.

So it shouldn't surprise us to learn  that the United States actually collects less in taxes as a share of its economy than all but two other industrialized countries!   Only Chile and Mexico collect less.   Chile and Mexico!  

So appreciate this:   Right now a powerful group of CEO's, multi-millionaires and billionaires, are calling on Congress to "fix the debt."   And their puppet politicians (paid stooges) in both parties are glad to oblige.   But fix the debt by raising more taxes from those who can most afford to pay?   Of course not.   Close the loopholes?   No way!   Shut down the tax havens?   Not a chance!   Cancel the Mitt Romney Clause that Congress enacted, allowing big winners to pay a tax rate far less than that of their chauffeurs, nannies, and gardeners?   Are you nuts?!   --big corps and billionaires are their primary campaign donors!   Why bite the hand that feeds you?

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Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've (more...)

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