Globalization or Freedom? Corpocracy or Democracy?

Which Do You Prefer?

What is the role of government & what should it be? Has government perhaps become too
enmeshed with corporatism and less focused on the individual citizen when making laws or
conducting policy?

First and foremost, before I begin, I want to declare that I firmly believe in capitalism and free
markets. I also believe in as limited government as may be practical & possible. However, free
markets must also be fair markets. And with that said, while at the same time being wary of
allowing a “Corpocracy” to replace a “Democracy”. This is where it can get divisive, as more
Libertarian oriented people clash with those more to the political (and economic) left in terms of
what the role of government should be regarding regulation & it’s relationship with business (think
“bail-outs”, which I oppose completely by the way, no matter what company or industry is
involved). As President Trump’s administration currently engages in various activities to “drain the
political swamp” we must remember that corruption, unlawfulness & malfeasance has unfortunately
permeated everywhere. Not just in Washington, D.C. but across the business spectrum, including
(and maybe especially) the corporate world. But you already knew that, as revelations keep coming
out almost daily about unethical and criminal behavior in the banking & financial sector especially.

With the above said, I consider myself a Libertarian on many topics, but my own feelings about
complete unabridged “Laissez-Fair” capitalism has also been tempered with experience watching
private business run amok, disregard regulations & rules, and then get away with it. So what then is
the answer? What is the proper & correct balance? What really is the role of government, or at
least what should it be?

In my own opinion, I do agree government needs to get out of anything that competes with the
private free market, highlighting health insurance as one example (Obama Care). Social welfare
programs to help the poor & indigent aside, for those that cannot afford private health insurance,
government has no business competing with the private sector in such matters and the truth is they
usually screw it up anyway. However, with that said, what then should government do?
Government can provide “public” services that in reality only government can do (and such things
may not be economically attractive to the private sector and or difficult to integrate, manage,
control, coordinate when many private “players” are involved, especially with profit as the bottom
line and not competent delivery). In addition, government should play the role of fair arbitrator via
the legal system & governmental regulatory bodies, guaranteeing a fair system for ALL.

In terms of government services, activities such as the building & maintenance of public roadways,
streets, bridges, tunnels, schools and public spaces (such as parks) are what we are referring to. In
addition of course police, fire protection, public education, courts & legal system, border security
and just about anything that affects the “commons” (which means services provided to ALL citizens
equally & fairly without prejudice, that are necessary for the proper functioning of society). These
things, these services are difficult to be run or operated on profit motive alone, and profit is not the
goal regardless. Rather, as I already stated, it is the competent delivery of such services to the
public. And to be honest about it, government services are somewhat of a “loss leader” providing
benefits, security & framework to allow both private individuals & private business to flourish
inside a fair atmosphere wholly across the entire country.

As an example of government services being somewhat of a “loss leader” and or something than
cannot be operated on profit motive, if it costs more to have a stronger police presence in a high
crime area, should the honest & non-criminal elements living in that area pay higher taxes? And
when crime perhaps hopefully goes down and less of police presence required, should they then pay
less taxes or be given tax rebates? When it comes to government services, such as police
protection, it can be difficult to look at the benefits & delivery of such things only from a profit &
loss point of view. Government does not exist to make a profit (although it would be nice if it was
operated so efficiently that taxes could be decreased). It exists to protect & serve the public, which
cannot always be viewed as one would a company manufacturing a product or providing a service
(such as telephone service) for profit. The courts & legal system are another example. Do you
want judges to make legal decisions based on some other criteria rather than the law? Should they
weigh the merits of a case based on the “profitability” of rendering a decision one way or another?
Once again, fairness and the price of maintaining a civil & just society has no price because it is in
fact priceless.

The current clash or issue we have as a society today, in terms of how we choose our way forward,
is “globalization”? But what does that mean really? The narrative or rhetoric is so-called free
global trade and a political structure that supports such a “Corporatocracy”. It sounds good in
theory, or at least the proposed benefits do. Free trade, no trade barriers, the free flow of goods,
services & people across borders for the betterment of all. Plus some kind of “supra-national”
political entity to regulate it all, resolve disputes & maintain order. However, the reality is a bit
more sinister as this is about both political control in the hands of the unaccountable (technocrats
not elected by the populace but rather appointed) and corporations with a form of global citizenship,
also not always accountable to any one particular nation as it pertains to both taxation & legal
disputes under this “supra national global political entity paradigm” (think European Union
governance structure based in Brussels and so-called free trade agreements that demote sovereign
nations in favor of some kind of supra national arbitration entity). We have this already in the from
of multinational companies that have subsidiaries and holding companies spread across the planet.
Which is to explain large corporations simultaneously incorporated & domiciled in a few different
jurisdictions at the same time, sometimes for the purpose of escaping trade barriers but mainly for
the purpose of tax arbitrage. And unlike individual citizens that must go through a rigorous &
sometimes lengthy naturalization process to gain another citizenship, the corporation structure can
gain “juridical” citizenship quite easily by simply paying the respective fees & filing some forms.

I am not complaining nor criticizing about this as one cannot blame the corporations nor their own
financial or accounting advisers that counsel and assist with this multinational process. After all, it
is quite legal and companies are merely utilizing the various tax laws, rules and regulations that the
politicians in their original home country (and other respective countries) of incorporation have
established. One example would be the tax consequence involving US corporations that might have
“dual” citizenship abroad (a subsidiary or holding company domiciled in another country) and
foreign earnings. The current US tax code permits such foreign earnings of the US parent
corporation to not be taxed IF the earnings are earned abroad and kept abroad (meaning not brought
back home or repatriated). As such, if you were such a company you would try to book as much
earnings and profits abroad as you could to gain this tax advantage. And indeed, through creative
accounting & cross border invoicing, it might be possible to “book” the earnings from one country
to the more favorable tax jurisdiction elsewhere. The theory of course behind some existing tax
legislation is to prevent double taxation as it is presumed the foreign profits earned abroad would be
taxed in that jurisdiction. However, that is not the reality as some jurisdictions have passed
legislation and or set up attractive tax rules to entice or encourage the company domicile in their
country. Luxembourg would be one example, Ireland, Hong Kong, the Channel Islands, Gibraltar,
Cyprus and a list of others.

Here is the main problem with all this. In many countries corporate income taxes compose a large
percentage of government tax revenues, by volume if not percentage of the overall number of
taxpayers. If companies can “escape” corporate income taxes, if not entirely then at least at a
greatly reduced rate, then government revenues suffer accordingly. Personally I am all for lower
taxes if and whenever possible, for everyone. However, using the US as an example once again,
individual living & breathing citizens cannot do the same. Meaning, individual citizens are required
to report & pay taxes on worldwide income, interest, dividends & capital gains no matter where in
the world it was earned and no matter where the US citizen might be living (there is an tax
exemption for salaried income only if the person is living & working abroad, currently capped at
about US$100,000). So, the point to be made is that corporations are favored in this way, regarding
taxation, that individual citizens are not. All of this creates government revenue issues as
governments continue to operate on deficit financing (spending more money than they take in from
tax revenues & borrow to fund the difference, which ultimately falls on the backs of taxpayers) and
also find themselves increasingly burdened with social welfare program costs. So, as corporations
take advantage of ways to legally reduce their tax burden, the captive individual citizen then is “on
the hook” for the remaining shortfall.

But what about the political side of things? Well, just as the corporations are permitted to be
“supra” with tax allegiance to no particular sovereign nation, so the ruling political structures
operate in similar fashion. And the perfect example of this is the European Union, whereby
political technocrats are appointed by the individual member nation states & never elected directly
by the public via democratic election. However, such a governing body based in Brussels has
“supra” national authority over member nations, superseding any local laws, rules, regulations
passed by democratically elected members of the legislature in a particular country. In terms of the
general population, in essence they have “overlords” they never voted for who pass dictates that
cannot be overturned by local sovereign member nations.

The theory behind this, or at least the rhetoric, is an argument for “professional” technocrats who
can make supposedly unbiased decisions, freed from the restraint of local politics. However, the
reality of such a structure is the complete loss of individual national sovereignty on just about any
and all topics. However, interestingly enough, the costs & financial burden still falls upon the
individual member nations and NOT the supra national governing structure. In other words, and
stated more plainly using the EU as an example, Brussels gets to pass dictates without having to
incur the responsibility to pay for whatever is being decreed. That falls upon the individual member
nations. Governing without the fiscal responsibility, so to speak. Another way to look at it is the
citizenry in indivdual member nations get to foot the bill via taxation, but they get no direct say in
how those funds are spent or why such costs are incurred in the first place, at least as it pertains to
edicts coming out of Brussels.

So, with all that said, what should individual citizens be wary of? The short and consolidated
answer is the loss of their own nations sovereignty and the direct accountability of political decision
making. On an individual state level, China is the example of “one party” governance structure that
has been using an economic system of “state capitalism”. On a regional level, the creation of the
European Union would be another example, taking a step further of divorcing fiscal responsibility
from the “decision makers” and pushing that back down to the bottom, or at the local member
nation level (as already stated above). Regardless, this “state capitalism” or the interweaving of
state and business power is the common factor and is really more akin to “Fascism” or a kind of
“Corpocracy”. As such, the rights & power of the individual citizen is diluted in place of the
corporate & “supra” national political symbiotic relationship.

As we go forward into the so-called 4th Industrial Revolution involving AI, Robotics and the
“Internet” of things it becomes even murkier and dicier for citizens that value freedom & liberty.
As if corporate lobbying & political influence wasn’t bad enough, now we also have to contend
with social media corrupted by political influence as well. So, be aware, be awake and make sure
your own local politicians don’t allow your country to fall into the trap of Globalism, assuming of
course that is not what you want.

About The Author: This article was written by John Schroder of Ascot Advisory Services.
John's firm has been helping clients in the Dominican Republic for the last 18 years to date with
residency application services, naturalized citizenship filing, banking assistance, incorporation
services and legal services pertaining to real estate (title transfers, legal representation at closing,
sales contract review). In addition he writes articles like this one and produces a newsletter for his
clients & subscribers. You can contact him by telephone at 809-756-1917 or click the about the
author link above to reach a contact page to send an email directly.

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