Monday, August 20, 2018

Corporations As Luggage

This piece was written for a different purpose, but was never used.  So it wants to have its fifteen minutes of fame here:

Fans of Terry Pratchett's Discworld fantasies  know all about the magical suitcase with many small legs, the Luggage:
 It is a large chest made of sapient pearwood (a magical, intelligent plant which is nearly extinct, impervious to magic..). It can produce hundreds of little legs protruding from its underside and can move very fast if the need arises. It has been described as "half suitcase, half homicidal maniac" (Sourcery paperback p22).
The Luggage will follow its owner, even through brick walls.

This doesn't differ from today's large and mobile corporations.  The more legs governments have legally given them, the faster they can leave any given locality (town, city and even country) and the less they care about the mayhem caused.

Consider the death of a commercial light fixture plant in Sparta, Tennessee.  Esther Kaplan's prize-winning 2014 article  "Losing Sparta" tells us what happened when an old and  profitable plant, essential for the economic and cultural well-being of a small town, was taken over by Phillips, the multinational behemoth:
Then, one morning in November 2010, a Philips executive no one recognized drove up and walked into the plant, accompanied by a security guard wearing sunglasses and a sidearm. He summoned all the employees back to the shipping department and abruptly announced that the plant would be shut down. Though the workers didn’t know it at the time, most of their jobs would be offshored to Monterrey, Mexico. The two of them then walked out the door and drove off. “It was a shock, I’ll tell you,” Ricky Lack said more than two years later. Still brawny in his late fifties, he’d hired on at the plant in 1977, when he was nineteen years old. “My dad worked there,” he said. “Half the plant’s mom or dad or brother worked there. We still don’t know why they left.”
The consequences for Sparta were dire:  Older workers faced  long-term unemployed or part-time or minimum wage jobs.  Marriages failed, ill health increased, and the various levels of government earned less tax revenue and paid out more in unemployment benefits.  But none of this touched Phillips, the suitcase with many little legs. Off it went to Mexico.  Sparta could hardly follow.

In the past, corporations were more bound to a locality.  If they behaved badly, local reputations suffered. If they laid off too many workers, their local sales declined. If their management lived in nearby areas, the public services their families enjoyed would diminish.  If nothing else, the goodwill the firm possessed would diminish. 

Today, these ties are fraying, as we can see in Sparta, Tennessee. In international trade agreements multinational corporations now demand veto rights over the decisions of future national governments.

The  losses to others from what may be gains to multinational corporations don't affect only the workers when plants close or only the towns that join the American Rust Belt.

The 2007-2010 burst of the US housing bubble had many causes, among them the strengthened ability of firms to ignore local knowledge.  If a firm sold many mortgages, ground them up like sausage meat with the good and the bad risks  all mixed, and then sold the  new product in giant new sausage skins to far-distant places, who would ever be able to find the original culprits to the mortgage crisis?  They would not be the ones who ultimately bore the costs of granting too many bad mortgages. 

Compare that to past practices where the mortgage remained with the awarding institutions.  Still in the mid-199s mortgage negotiations with a bank resembled the Spanish inquisition in their thoroughness.  Yet soon after that date I heard of large mortgages given to people I knew couldn't pay them back.  The almost nonexistent regulation of financial markets, the general exuberance of investors, and many other factors played a role in creating the housing bubble,  but the firms' mobility mattered:
On Wall Street, where many of these loans were packaged into securities and sold to investors around the globe, a new term was coined: IBGYBG, “I’ll be gone, you’ll be gone.”
It referred to deals that brought in big fees up front while risking much
larger losses in the future. And, for a long time, IBGYBG worked at every level.
Terry Pratchett's half-homicidal "Luggage" with many little feet is fantasy, but the scope for corporations to leave a place in ruins while following their owners is not.

What next?  Legal personhood for corporations?  Hmm.