Economy & Budget

A democracy lost to corporate socialism

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The campaign of Sen. Bernie Sanders (I-Vt.) for the Democratic nomination has pushed the issue of wealth inequality to the forefront of mainstream politics. Once a tenet isolated to the fringes of the Occupy Wall Street movement, the expanding gap between the rich and poor in America is now being acknowledged by both Republicans and Democrats.

{mosads}Conservative radio talk show host Hugh Hewitt was recently asked in a New York Times interview about the Republican Party’s unwillingness to increase taxes on the wealthy. He responded, “I don’t think it’s very good for the society to have billionaires. It creates envy. And envy destroys republics.” Hewitt added, “You don’t need 10 billion dollars. Nobody does. The country does.”

This growing animosity toward the greed of the immensely wealthy is not merely symptomatic of a popular presidential candidates’ rhetoric, but indicative of the harrowing economic inequalities existing in American society and politics. The 62 richest people in the world have as much wealth as the bottom 50 percent of the world, roughly 3.6 billion people. The wealthiest 1 percent of the global population have as much wealth as the other 99 percent of the world’s population. For decades, wages of the middle and working classes have remained stagnant in the United States while the top earners have seen their wages grow exponentially. In the United States since the 2008 recession, nearly 99 percent of all new generated income has gone to the wealthiest 1 percent of Americans. Current trends suggest these enormous disparities in wealth are expanding.

Amid calls for reform to redistribute wealth in the United States to the middle and working classes, criticism has mounted, stereotyping such reforms as “handouts,” “free stuff” or “socialist.” What these criticisms of proposed reforms for wealth inequality fail to recognize is that socialism for the wealthy not only exists, but is prevalent throughout our current system of government in the form of corporate socialism.

“Corporate socialism is where we socialize losses and privatize gains. Companies that have failed in the marketplace stick the taxpayers with their losses, but when they make money they get to keep it, and secondly, huge amounts of capital are given to companies by taxpayers,” David Cay Johnston said in a phone interview. A former New York Times reporter, Johnston won a Pulitzer Prize in 2001 for revealing inequities and loopholes in the U.S. tax code. “Many of the retail stores you walk into, especially big box retailers and in some cases entire shopping centers, legally keep the sales taxes you pay at the cash register,” he said. “That’s because government bought the land, often after condemning it through eminent domain and had the buildings erected to the specifications of the company, but the land and building are actually owned by a government entity, and the cost of buying the land and putting up the building are paid for with your taxpayer dollars. That’s not capitalism. That’s not market economics. It’s a system in which governments pick winners and create losers.”

Johnston cited several examples of corporate socialism. In Lockport, N.Y., Yahoo is receiving $2 million for every job it creates in the area, which pay on average $45,000 annually. Alcoa is currently receiving $5.6 billion in electricity discounts from New York state, which would be better spent decreasing utility rates for residents across the state. Boeing has received billions in subsidies to build a plant in South Carolina, while transparency remains elusive regarding the exact worth of the subsidies and incentives the company received. In his 2007 book “Free Lunch,” Johnston discusses how a corporation like Cabela’s received $32 million in government subsidies to build, at the time, the largest outdoor recreational gear store in the country in Hamburg, Pa., while a local competitor who sold the same products at lower prices went out of business because of the deal.

One major example of corporate socialism in the past few decades has been the use of tax havens abroad by multinational companies to avoid corporate income tax; smaller, domestic companies are unable to use tax havens, giving multinational companies an additional edge over smaller competitors. A 2015 study conducted by the Citizens for Tax Justice and the U.S. Public Interest Research Group Education Fund found that the largest 500 companies in the U.S. keep more than $2.1 trillion in tax havens. And according to Johnston, large multinational corporations often pay licensing fees and royalties to their offshore subsidiaries for logos and patents under the guise of a business expense, in order to legally transfer the money from the United States while using the payments as tax deductions.

The proposals and empty promises for reforms to close loopholes that benefit corporations and the wealthy have come up empty because these special interests have infiltrated politics to the extent that government is no longer working with the public good in mind, but the interests of wealthy campaign contributors. Thousands of lobbyists flood Washington and state capitals on a regular basis to push for legislators to support rules and regulations that favor the corporations they represent, while those same corporations send large campaign donations to the politicians who vote in their interests. So far in the 2016 presidential primaries, Democratic candidate Hillary Clinton has received $47.9 million from super-PACs; Republican candidates former Florida Gov. Jeb Bush, Sen. Ted Cruz (Texas) and Sen. Marco Rubio (Fla.) have received $123.7 million, $42.8 million and $31.7 million through super-PACs, respectively, according to the New York Times. Nearly half of the money contributed to presidential bids for the White House in 2016 has come from 158 families. Those donations are attached with strings to the interests of the wealthy who donated to them.

“Many of the regulations are written by businesses that want to insulate themselves from the rigors of the competitive market,” said Johnston. “They have unequal access. If you are a member of Congress, you have to think about who is going to either fund you or your opponent. You don’t have much time to think about what’s in the public interest.”

Sainato is a freelance write based in Gainesville, Fla. His writing has appeared in The Guardian, the Miami Herald, The Baltimore Sun, The Denver Post, The (Cleveland) Plain Dealer, Tallahassee Democrat and the (Albany) Times-Union. He is a frequent contributor to the New York Observer.

Tags Bernie Sanders Corporate welfare David Cay Johnston Hillary Clinton Inequality Marco Rubio Socialism Ted Cruz wealth disparity

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