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Reverse Privatization: Let Us Share Wal-Mart’s Profits, We Created Them!

By Shlomo Maital

                                    Wal-Mart

Two seemingly unrelated pieces appear in today’s Global New York Times. But they are intimately connected.

  • Timothy Egan’s Op-Ed piece reports that Wal-Mart made an obscene $17 b. in profits last year, paid its top executive over $20 m. and has made the six Walton family heirs worth at least $150 b.   Meanwhile, a study by House Democrats shows the average Wal-Mart superstore cost taxpayers $904,000 a year in subsidies, or over $5,000 per employee. Egan writes, “Walmart’s humiliating wages force thousands of employees to look to food stamps, Medicaid and other forms of welfare. Working at Walmart may not make you poor, but it certainly keeps you poor – at the expense of the rest of us.” And a recent piece in Forbes magazine notes, “Walmart’s low-wage workers cost U.S. taxpayers an estimated $6.2 billion in public assistance including food stamps, Medicaid and subsidized housing, according to a report published to coincide with Tax Day, April 15.”
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  • David Jolly reports that the board of the French industrial conglomerate Alsthom unanimously backed General Electric’s bid to acquire Alstom for $13.5 b.   Initially the Socialist French government led by Francois Hollande opposed the takeover. It then changed its mind, after Siemens and Mitsubishi made a bid.       France’s economy minister Arnaud Montebourg said that a condition of allowing GE to buy Alstom, was that the Agence des Participations de l’Etat, the French government’s national shareholdings agency, should acquire 20 per cent of Alstom stock.      

 

What is the connection?

  Suppose, just suppose, we tried ‘reverse privatization’.  Privatization means, the government sells its interest in companies it once owned to private investors.  This has happened all over the world.  In Russia, oligarchs snatched control of state-owned assets and become instant billionaires.

       Reverse privatization means, the government buys (not SELLS) an interest in companies, for the benefit of ordinary people.  

     If the GE Alstom merger succeeds, the French people will own 20 per cent of the profits. Moreover, with 2 out of every 10 seats on the Board of Directors, the French government will have access to inside information and will be able to influence hiring and wage policies of Alstom.   Alstom/GE will be run by top managers, not by government.  But government will oversee and share in the profits. 

     What if, just suppose, what if, the U.S. government had a 20 per cent stake in Walmart?    First, that means $3.4 b. share in the total $17 b. in profits.  That would go a long way to paying for the $6 b. of public assistance that Walmart workers get.  

     More and more capital is concentrating in fewer and fewer hands. What is the solution?   Put some of that capital, as shares, into the hands of a government holding company, so that some of the profits get funneled not into the well-padded pockets of the super-rich, but into the empty pockets of ordinary citizens.

     Reverse privatization.  The French get it.   Why don’t we?

Obama – Bring the Money Home!

By Shlomo  Maital    

       money abroad

Two reports in today’s Bloomberg Business Week and  Global New York Times are closely connected.

 Floyd Norris reports that after six years of economic crisis and stagnation, the level of employment in the U.S.  has at least returned to its level in 2008. 

  And Bloomberg reports that American businesses, which recovered far far faster than us ordinary working people, have piled up nearly 2 trillion dollars (!) in retained profits abroad, which they choose not to repatriate and bring home to America, in order to avoid the 35 per cent corporate income tax. 

   General Electric alone has $110 b. locked up abroad; Microsoft, 76.4 b.; Pfizer, $69 billion; Merck $57 billion;    and Appel $54 billion.   Overall,  only 22 big companies hold half of the ‘locked earnings’ abroad, or $984 billion. 

   In the past, economic recoveries occur when businesses start investing again, in capital formation, using their retained earnings.  But this cannot happen in America when businesses are sitting on their money abroad. 

   It’s not as if America doesn’t need investment. It needs infrastructure, new airports, fast trains (Amtrak’s ‘fast’ Boston to Washington train is a disgrace, compared to Japan’s and France’s bullet trains), new roads, new bridges, new schools, new factories…in short, everything. 

   So President Obama —  why not declare an amnesty?  Tell the giant businesses, if you  bring your money home and use it – or even just bring it home, and make it available in capital markets for OTHERS to use it —  we’ll offer you an Irish rate of tax, about 12 per cent, rather than the American one, 35 per cent.   Do it because it makes good business sense, and besides, your country needs it – and it is your country that gave you the innovation and creativity that made you the profits in the first place. 

      It’s pretty likely the Republicans, who are pro-business, will support such an amnesty.  And President Obama —  after your dismal performance for six years, this may be your last chance to actually do something creative and productive.    Do something for America’s workers.  Renewed investment will create jobs more than anything.  Until America’s businesses stop sitting on their piles of money abroad and start using it at home, employment cannot recover strongly.

Blog entries written by Prof. Shlomo Maital

Shlomo Maital

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