Wednesday, 21 October 2015

How Corporations Are Contributing To Wealth Inequality In The USA : American Inequality Series #1



The power of the Corporate Lobby, according to George Monbiot, is a ‘Great Unmentionable’- rarely discussed in the media or among politicians, it has maintained a firm grip on every level of American policymaking. Not only has it subverted the very system of representative democracy that the West prides itself upon, but it has potentially created conditions conducive to a strong socio-economic imbalance in the States.

Corporate lobbyists have one primary goal- to represent their employers in the political arena, not by competing directly within it but by gaining favour with those already within. 

Outgoing Congressional Speaker John Boehner was seen
handing out cheques on the House floor seeking votes
against the cutting of tobacco subsidies.
Of course, this cannot be done by a friendship alone- since 1998 the nation’s largest lobby, the US Chamber of Commerce, has spent over $1.1bn on lobbying activities. The massive payments involved reflect lobbying’s effectiveness; PepsiCo spent $10m in 2009 lobbying to (successfully) prevent 24 states attempting to pass a soda tax. Even more spectacularly, current House of Representatives Speaker John Boehner was caught handing out cheques to fellow politicians written by a lobbying tobacco company- on the very house floor a debate on cutting tobacco subsidies was to be discussed. The tobacco company saw these payments as an investment to prevent their own subsidies being cut- and, unsurprisingly, the House voted against cutting them. 

But a more appropriate action of the lobby to the topic of economic inequality is the influence of corporations over minimum wage legislation. A minimum wage naturally affects businesses, leading them to either spend more or reduce staffing. However, in a period of constantly inflating costs of living, arguments are being made that minimum wages set by every state are all insufficient to maintain a decent standard of living. Governments around the world have sought to address this issue- the British government, for example, recently implemented a 'living wage' designed to provide enough for workers to maintain a decent standard of living.

Housing is a key indicator of living standards- yet in Florida, the minimum wage ($7.93) is less than half of what is needed to rent a two-bedroom home at official ‘Fair Market Rent’ calculations. Similar results arise in every state- the National Low Income Housing Coalition calculates that it would take two minimum wages to afford a Fair Market Rent nationwide, even with many one-bedroom properties.

Corporate taxes have sunk in recent decades as profits
have boomed.
Corporations have repeatedly successfully lobbied for tax cuts- a significant reason why corporate taxes have sunk in recent decades while profits have boomed (see graph). For example, Whirlpool Corporation spent just under $2m in the year 2011-13 in lobby fees chasing the renewal of lucrative tax credits (equivalent to tax breaks) for creating environmentally friendly appliances. The passing of this motion, thanks to the lobbying, was worth an estimated $120m in 2012-13- a healthy return on the initial investment, and government revenue lost

Both movements of corporate lobbies to maintain low minimum wages (such as the success of the National Restaurant Association over employees in 2014) and win tax breaks, subsidies and such from the government have drastically exacerbated the issue of wealth inequality- they have made it easier for those higher up in business to profit more, often at the cost of employees lower down.
Mohammad Lone Editor