A critical scene in the 1976 satire Network appears to have told the future of corporate America and the economy.
Howard Beale, the newsman-turned-“mad prophet of the airwaves,” railed on his TV show against the sale of his network from an American corporation to an Arab entity. Arthur Jensen, a network executive, sought to set Beale straight and make him “atone” for his patriotism.
“There are no nations. There are no peoples,” he tells Beale in a darkened board room. “We no longer live in a world of nations and ideologies … The world is a college of corporations, inexorably determined by the immutable by-laws of business. The world is a business, Mr. Beale.”
It certainly seems that companies in 2014 embracing Jensen’s vision of a world divided not by boundaries but by corporations, putting profits ahead of any sense of nationalism.
Take Pfizer, the drug conglomorate that once had a major foothold in Williamsburg. The company shut its Brooklyn factory six years ago, and now it seeks to buy out a rival-AstraZeneca- and relocate its operations to the United Kingdom.
“The deal, if consummated, would most likely deprive the United States government of billions of dollars in revenue over the next decade,” Andrew Ross Sorkin wrote in a New York Times piece Tuesday, May 12, on the Pfizer deal. “Pfizer isn’t hiding this fact. [Ian] Read,” Pfizer’s chairman and CEO, “repeatedly told his investors about the tax-saving scheme. ‘It will liberate the balance sheet and tax of the combined companies,’ he said over the weekend.”
American corporate taxes appear to be too much for Pfizer, and their cure is to relocate to a nation across the pond with lower corporate tax rates. Even the British are skeptical of the deal, fearing that the Pfizer-AstraZeneca merger would cost their nation jobs. Pfizer, however, reportedly vowed to preserve the jobs there.
What about the American jobs about to be lost through this deal? Neither Pfizer nor anyone else seems to care enough to provide any prescription to that ailment.
But this might be the first of many new blows to strike the American economy and government, Sorkin warned: “More ominously, the deal represents a potential tipping point in a trend among United States companies to acquire foreign competitors and reincorporate abroad in low-tax countries, a process known as an inversion.”
Pfizer is exploiting a loophole in corporate tax law that opens the door for corporate inversion. Sen. Carl Levin of Michigan has drafted legislation to close that loophole, but with Congress being a dynamo of dysfunction, it’s hard to imagine both Democrats and Republicans working together to stop the bleeding.
The world may indeed be a business, but corporate expatriation poses a clear and present danger to an American economy reeling from decades of bad decisions. Inversion threatens to end the monetary ebb and flow, with wealth leaving the U.S. and little coming back in. In mere generations, it could reduce our economy to third-world status.
It’s time for Washington to get “mad as hell” and stop this disaster from happening. Close the loopholes and remove any government privileges (such as patent protection and corporate welfare) from any business looking to divorce itself from our nation.
