Would there be iPhones in a fair economic system? Could such a system prevent huge scale tax evasion? A practical look at the ‘economy for the common good’: a different model for how we do business.
The latest leak from the International Consortium of Investigative Journalists (ICIJ), the Paradise Papers, once again brought to light evidence on the hidden treasures politicians and corporations have stashed away in tax havens. Tax evasion by the global elite has emerged as a problem of yet unimagined magnitude, all the more astounding as it coexists with huge and growing global inequality.
One of the corporations shown to have used the services of offshore companies to avoid paying taxes is Apple. In 2016, the European Commission established that Ireland had given Apple an illegal tax benefit, and ordered the company to pay this state 13 billion euro in taxes for the period 2003-2013. The latest leaks show that following the EU’s crackdown on its illegal tax practices, Apple had found a new destination for its not-destined-for-tax billions – Jersey. According to the ICIJ, under this scheme, Apple would have saved billions in taxes, meaning even thicker lining for the coffers of its shareholders.
Now can Apple afford to pay these taxes? Most certainly yes – it is the most profitable company in the world with current untaxed offshore cash reserves of 252 billion dollars. Would any of its operations suffer or be endangered through doing so? Most certainly not – there would still be enough money left to cover all its costs (profit, after all, is what is left of a company’s revenues after all operating costs have been met), make new investments and deliver fat checks to its shareholders. So why has Apple been engaged in a disreputable mission to find a “lawless” corner of the world from which to run its operations? The answer is profit maximization.
The relentless logic of capitalism condemns enterprises to constant growth or extinction. Ultimately, success is only measured through the profits earned for a company’s owners/shareholders. Although an enterprise has other goals as well, such as providing a service, delivering quality to consumers or creating jobs, profit trumps all of them, seemingly at any cost. That is why Apple’s behaviour is nothing unusual, but a logical progression of a core feature of our system.
The economy for the common good, as we’ve already discussed, is a social movement founded by Christian Felber that advocates a simple but groundbreaking change. What would happen if profit was no longer the primary goal of an enterprise, but only a means to meeting more important goals – those that promote “the common good”?
Apple’s shareholders would surely have a fit. But that is hardly relevant, for if we had a common good economy instead of a capitalistic one, Apple would likely be a very different company from the one it is today. It would, presumably, still be successful, provided it scored well on its Common Good Balance Sheet, which would replace financial balance sheets as the ultimate measure of a company’s success. It would still be selling its products on the market and making profits (the common good economy would remain, to a large extent, a market economy), but its size, ownership structure and scope of operations would differ considerably.
In an economy where the primary purpose of enterprises is to serve the common good (as defined by citizens through a democratic process), e.g. by meeting needs, providing jobs, conserving the environment, cooperating and so on, companies would no longer need to grow just for the sake of growing. So Apple might be a smaller company, but still thriving. For it would have found its “optimal” size, based on the demand for its products, but also on the wishes and needs of its employees, owners and managers.
The line between employees, owners and managers in our hypothetical Apple Inc would be blurred. In the economy for the common good, enterprises with more than, say, 250 employees would have to give shares and decision-making power to employees as well as the “democratic sovereign”. The latter would comprise all the people of a country, organized in regional economic parliaments that would be independent of governments.
This means that after so many years of operation, Apple would look a lot more like a self-managed cooperative, or a social enterprise of sorts, than a shareholding company of today. It could still have external shareholders, but they wouldn’t be entitled to dividends if they didn’t work for the company.
The pay gap between the lowest- and highest-paid employees would be lower and limited by law (the “democratic sovereign” would have decided the maximum acceptable pay difference). Managers with the most responsibility would still earn the most, but all employees would have a greater say in running the company and through co-ownership would have the chance to share in both the gains and risks. In addition, their work-life balance would be better because people in the common good economy would work only 20 to 30 hours a week. With Apple’s employees already so good at designing and marketing popular products, imagine what would happen if they had this extra motivation.
In a common good economy, Apple’s founder would still have earned the highest income while working at the company and would have been able to appropriate a (steadily decreasing) share of the profits. A founder of a company would also be guaranteed a generous pension, and would be able to accumulate significant assets that they can then pass on to their children, up to a certain limit. There would thus still be enough of a financial incentive to create enterprises, but everyone else who helps build up a company over the years would be fairly compensated as well.
It is uncertain whether Apple of the common good economy would have an equally global reach. It would surely still be able to export products to foreign markets, but only as long as it met their common good criteria. Today’s Apple has a complex value chain, sourcing the various parts of its products from all over the world, and raising problemtic labour issues and environmental concerns in the process. The purpose of this is to offer lower prices to consumers and still maximize profits.
Our hypothetical Apple would probably be a much more “local” company, for its success would depend on ethical behaviour rather than the other way around. It would be rewarded for paying fair salaries to its employees and fair prices to its suppliers and business partners, and for limiting its environmental impact. With the profit imperative gone and stricter ethical regulations in place, much of the advantage to be gained from relocating and outsourcing would not exist anymore.
There may well be several companies like Apple around the world offering comparable products and services on different markets, and even cooperating with each other to meet demand. Since the rules would apply to all companies equally, there would be no danger of a competitor undercutting Apple by violating ethical norms (they would be punished and be at a market disadvantage if they did so).
Finally, tax evasion would not be an option in our new system. Not only would the incentives for Apple to avoid taxes be removed, but the overhaul of the banking system would also make it difficult to conceal any data/transactions. Banks would be non-profit and democratic, so they would have no interest in helping companies cheat, and would report numbers directly to the tax authorities. International transfers would be monitored and regulated.
For all of this to work, governments would have to become much more democratic as well, and more transparent in how they spend tax money. Christian Felber has ideas about this too, and I’m sure many more details can be worked out and questions answered as more people start contributing to the economy for the common good’s blueprint.
The biggest challenge, as for any utopia, even a practical one, is how to get there. Many small companies might support and join the movement voluntarily, but will the likes of Apple ever be convinced that the current paradigm needs changing? Can we persuade the rich to give up their privilege and governments to really enforce the common good? The oldest struggle in the world, but well worth carrying on.
Oh, right, would there be iPhones? Your guess is as good as mine. Apple might never have gone in the iPhone direction, or its iPhones might look differently and have a different name in the common good economy. They would surely be fairer though, and thus – more awesome!