General Electric (GE) is the most recognized brand in the world, and some claim that its logo has a value of $48 billion, though it’s unclear to me how that value estimate is derived. In the past the company was well known as a manufacturing giant which produced jet engines and nuclear reactors though most Americans know GE through their manufacture of home appliances and light bulbs. GE has a very storied history to its formation, as its founder was Thomas Edison who first formed the company in 1890 as the Edison General Electric Corporation. It was one of the twelve original companies selected for the Dow Jones Industrial Average in 1896 and is the only remaining original company on the Dow. At one time GE also founded and owned the Radio Corporation of America (RCA) and owned NBC Universal, but now shares in that ownership with Comcast. The company is a global, multinational corporation, whose influence rivals that of many governments with 287,000 employees worldwide. GE spends more on lobbying in the United States than any other corporate entity. When GE speaks, others listen and it pays off as GE has one of the lowest corporate tax rates of any major company operating in the United States.
GE was recently in the news as Americans were outraged to learn that for the year 2010 GE paid no U.S. Federal income tax and and in fact, received a tax rebate of $ 3.2 billion. GE’s current CEO, Jeffrey R. Immelt serves as the chair of the President’s Council on Jobs and Competitiveness. The purpose of this committee is to make suggestions for changes in corporate tax laws by closing loopholes in the tax code. But can a company that spends more money on lobbying than any other organization, whose efforts we must assume include those aimed at further reducing their corporate tax burden (so the company can report a higher profit, which is the sole function of a CEO) really give objective advice on closing corporate tax loopholes? An earlier comment on the tax breaks for GE as well as a bit of their history has already appeared in these postings.
Less well known than the GE logo is the company’s history of grooming Ronald Reagan and converting him from an FDR Democrat (he voted for FDR four times) to a rabid conservative, who, as a figurehead Governor of California and then President of the United States, introduced runaway tax cuts and corporate gifts that initiated, among other transitions, the corporate merger mania and the beginnings of dismantling American manufacturing. Reagan was for many years the public face of General Electric through General Electric Theater and Death Valley Days: his indoctrination was so complete that he absorbed the core values of GE and the company was a major benefactor of Reagan’s new tax policy once he was elected to the Presidency. Citizens for Tax Justice estimated that the 1981 tax law pushed through by Reagan yielded in excess of $ 1 billion in additional tax savings to GE alone over the subsequent half decade. The tax savings were not put into plant equipment and improvements to make the company more efficient, but instead went into corporate mergers and the loss of American jobs as GE shifted many of its operations overseas. It’s that overseas shift in jobs the gets our attention here.
It is always worth looking at the social values of a multinational giant like GE when they invest their money overseas. As these companies take away jobs from Americans, gaining lower wages workers and bigger profits, do the communities in which they invest derive improvements in their community life and if not can the lack thereof be laid at the feet of GE or any other multinational corporation? When investing in emerging economies, do the multinationals help create cities like those in 20th century America or do they prefer those that can be exploited like American cities were in the 19th century, with low wages, poverty and slum conditions of living? Was America just a stopoff center for the evolution of the multinational corporation? We hear about the lost jobs in America, but how well off are the foreign communities when a firm like GE invests in their local and national economy? Does their presence raise all boats? Does a giant corporation like GE have social responsibility to a community in which they invest and if not, isn’t that a violation of their obligations when they apply for a corporate license? Wasn’t one of the original defining characteristics of a corporate entity based on the premise that granting a corporate license was done to facilitate public benefits? And just providing jobs isn’t enough. We need worker safety and benefits, including health care, retirement obligations and worker retraining if the corporation decides to leave. Many of these options are no longer considered to be those of a corporation if they choose to leave the United States and locate in other countries, while continuing to make profits in the United States. But the situation is very different in European countries, such as Germany.
Enter two players who can shed light on this weighty question. The first is Genpact (previously known at GE Capital International Services (GECIS)); it’s another global company whose operations in India are finance and accounting. Genpact went public in 2007 (symbol on NY stock exchange is “G”) and GE has been reduced to a major share holder rather than outright owner. The second stage entry is Gurgaon India, a city that barely existed a few decades ago, located about 15 miles south of India’s capital, New Dehli. Jim Yardley, writing in the NYT had an extensive article on this city which resonated with me about this question (linked above)–the question of American corporate responsibility to the foreign communities in which they invest. On the one hand Gurgaon has become a picture of wealth and prosperity, boasting modern shopping centers and many large corporations have expanded their space and development of the city and in the process outsourced many jobs that once resided in the United States.
But Gurgaon is a city with two faces. While displaying an image of rapid growth and prosperity on the one hand, it is also a city of extreme poverty, residing in basically the same space as its far wealthier counterpart. Yet, while two widely disparate social classes reside in the same city space, they co-exist with vastly different trajectories of their economic future. Perhaps no other city in the world has such a stark display of the mean raw edge of corporatism, the global economy and its indifference to poverty and public social needs. You can see some of the contrast in living conditions in a NYT slide show illustrating the extremes of life in Gurgaon and the contrasts so visibly evident in a seemingly prosperous city, based on privatized services that all but skip the poor. The NYT article blames the clumsy democracy of India and Gurgaon, heavily bureaucratized with a corrupt regional government as the reason for Gurgaon’s failure to establish better living standards for all of its citizens. But what are the responsibilities of the corporations that make huge profits in Gurgaon? Perhaps corporate failure must bear some of the responsibility for the diminished water supply as the water table that feeds bolewells is reduced each year. Perhaps corporate behavior should address the lack of schooling among the poor and, instead of paying off politicians to hide miserable conditions like poor education and filthy living conditions, the citizens of Gurgaon should rise up to demand greater attention for their needs and try to establish a more uniform standard for the basic living conditions of all members of Gurgaon? So, an alternative explanation to the cause of Gurgaon’s widespread poverty is that corporate giants like GE have failed to meet their fundamental ethical obligations as members of the communities in which they invest. To be sure there is a shameful side of government behavior, with deep corruption and inefficiency, but isn’t this among the issues that should be of concern to the corporations of Gurgaon that make money there?
Today Gurgaon is sometimes referred to as the “United States of Gurgaon,” a rapidly expanding city in which Genpact, Coca-Cola, PepsiCo, Motorola, Ericsson, Nestle of India and many other companies operate in a city in which outsourcing has provided about 500,000 jobs. Although it barely existed before 1979, the city now has a teeming population of 1.5 million and is one of the most rapidly expanding cities in India. Next time you talk with someone in customer service or technical support, and they have an Indian accent, ask them if they are from Gurgaon.The rapid expansion and poor services for the city has been blamed on a government that can be manipulated and is seemingly incapable of significant city planning. One of the characteristics of this city is that the corporations operate outside of government for almost all of their needs, including water, which they get by digging borewell holes, electrical power from privately owned generators and even security protection, with 12,000 private security personnel. In contrast, the village of Gurgaon is an urban slum, with open sewers, polluted water, and impoverished living conditions that are in stark contrast to the other wealthy life styles available to those who participate in corporate profit making.
You can imagine that Gurgaon is a model of how corporate America would like to see United States cities positioned, where corporate wealth leads to a vast and increasing distinction between the wealthy and the rest of us. The Republican budget recently proposed by Paul Ryan, written by the American Enterprise Institute, would force America to make a giant leap backwards towards the Gurgaon-American model for our cities, with restricted services, emasculated government and crumbling infrastructure. In case you haven’t looked around you, we already qualify for the area of crumbling infrastructure part. There isn’t a road in Minnesota that doesn’t have a string of potholes and bridge safety is a huge issue after the collapse of the I35 bridge in Minneapolis a few years ago. In the meantime, companies like GE would benefit by diminished corporate taxes and enhanced dominion over a limited government whose functions are primarily defense of the nation against external enemies, imaginary or real. It may seem far fetched to think of Gurgaon as a model for a future American city, but with increasing privatization of our government functions, how can we avoid this futuristic vision from establishing itself in America and consuming our country, just as it is consuming India, where rural peasants struggle to survive on $2 a day and find themselves in the majority but completely disconnected from any political power. Keep in mind that in America, the polls consistently show that Americans favor social structures such as labor unions, Social Security, Medicare and Medicaid. Yet, these are the very attributes of our culture that the Republican party, in its Tea Party iteration, are willing to take away for the sake of improved corporate profits and the enhanced prospects of one party rule. The election of 2012 will reveal to us how far down that road we have traveled. Will we step back from a corporatist future and the momentum for converting of our cities into Gurgaon-like entities or will we take another step forward and become more progressive and inclusive in our social policies? For me, and for many others, two giant tapestries will be used to paint the 21st century, including the one that we will use to bring corporate power into an alignment that better serves people, while the other is waiting for us to reveal our plans for the global climate change that is already upon us and already demands our attention. Denial at this point amounts to a social crime.
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