Issue of Business Tax from a Social Conflict Theory Perspective - Essay Example

Introduction The issue of whether taxing businesses or removing taxes on them is only the tip of the iceberg of a gargantuan economic issue that is about to shake the world again. The article by James Rainey on Los Angeles Times last February 27 despite solid evidences on both sides of the debate about the negative impact on whether you tax or not tax business only reflects the utter desperation of our times[Jam13]. The main point is that both of these measures have already been tried in various circumstances but eventually ended up in the dead end and with an even greater economic crisis looming in the horizon. Already, Congress is having problems about where to get the budget for the government which is set to be depleted in the coming months. Even now, government institutions are being affected by massive multibillion dollar budget cuts just recently signed by President Obama. This is a situation wherein the world’s greatest economists are in a quagmire on how to solve inflation and where more of the old solutions only add up to the problem. As the old saying goes, “the cupboard of ideas is bare.” There is no end in sight for the crisis. The classical pillars of sociology such as symbolic interactionism, phenomenology, and functionalism have lost potency in explaining this phenomenon and it seems that only the much avoided social conflict theory could provide an idea of what is really happening. Everybody now accepts that we are in the period of the Great Recession and who knows when the next Depression will begin. When will the next giant economic burst? Where will the government get the money for another bail out? The Great Debate: Keynesian Economics or Neoliberal Economics Taxing businesses is a result of President Roosevelt’s New Deal which is an expression of the economic principles laid out by John Maynard Keynes. Initially considered as communistic at first by the major economic players, it proved to be successful in preventing national bankruptcies that could spark world wars as was seen in World Wars I and II. The basic tenets of Keynesian economics are government pump priming the economy to prevent recession; government engaging in critical businesses such as transportation, communications, health and education; imposition of tariffs, and government regulation of prices[Key98]. After 1988, when corporations have already grown economically bigger than nations, Milton Friedman began questioning the role of the government and started the neoliberal counter revolution. It began with Brettonwoods’ institutions influencing major global influential institutions such as schools, banks, think tanks to eventually removing the role of the government in the economy and reviving the old principle of Adam Smith to “let the market decide”. Thus the main components of the so-called neo-liberal economics is for government to cut down budget on social services, privatization of government assets, removal of tariffs, and deregulation of the prices of critical resources such as oil, sugar, and water[Tay]. The World Trade Organization was put up to implement these structural adjustment programs the world over. The issue of taxing businesses spring from this general background and philosophy that when we let the market decide, there will be greater prosperity and equality for all. The Breaking of the Myth When Adam Smith wrote the “Wealth of the Nations” he assumed that there were no monopolies in the market competition. Thus he argued that individual players pursuing their own self interests would actually move the “invisible hand of the market” to eventually bring prosperity for everybody. This was the time of liberal economics coming into play. While it is true that capitalist enterprises did indeed create progress and prosperity, it is also equally true that it gave rise to monopolies and increased social inequalities. The economic pressures eventually bore down on emerging economies during those times such as Germany, Italy, Russia, and Japan leading to war. This time the revival of the principle of “letting the market decide” comes at a very inappropriate time where monopolies rule the market. Removing taxes on businesses will perhaps result in short term advantages but long term ruin. The tragedy of the bursting of the real estate bubble only goes to show that in the end, who will the businesses turn to but the government. The 700 billion dollar bail out money given by President George Bush all but came from the taxes of the people. The staggering 786 billion dollar bail out money given by President Obama not only came from the taxes of the people but from government loans. Today the United States is the biggest nation debtor with external debt amounting to one trillion dollars. Just a one percent increase in interest would tantamount to the total spending on World Wars 1 and 2 and the landing on the moon[Ove13]. Business will always push for policies that would increase their profits and lessen their costs. Lobbying for the removal of taxes is one of them. And yet when all is lost, who will the businesses turn to but the government. And who will the government turn to but the taxes from the people? Exposing the Scheme The argument of two liberal Democrats: City Controller Wendy Greuel and Councilman Eric Garcetti to cut taxes is just like being spokespersons of corporations. These corporations want to have their cake and eat it too. This is the problem because doing this is impossible. There would be costs involved. It might mean higher taxes from the people, higher debt by the government, more cuts in welfare and government budget, and there would be nothing left for another bail out. The arguments of these two people might get more campaign fund contributions from the corporations which might eventually help them win the elections but who will suffer in the end. When the government goes bankrupt who will save the government? The Conflict of Classes This whole issue brings to light the old social contradictions that plague industrial society. While monopolies are trying to cut each other’s throats in market competition, they have to increase their technology, eventually reducing their workforce, underpay their workers, and with neoliberal policies on the go, social services for the poor will be lessened every year. This means that by increasing production, corporations are also reproducing poverty by the thousands. In the end, who will buy the products that were made? Thus recession sets in. Inflation rises. And the possibility of Depression increases. We have to keep in mind that the Great Depression of the 1929 was a crisis of affluence and not of lack. It was not because there were no goods. On the contrary there were so many goods produced but cannot be bought in the market that they have to throw them into the sea just to keep the prices right. The fact remains that even with high technology, it is the workers who ultimately produce the commodities while the corporations reap a large chunk of the profit. It is the workers who eventually buy the commodities that give profits to corporations. As long as corporations do not take into consideration their most precious resources who are the workers/the people, then they will be digging their own graves. As long as corporations continue to pursue neoliberalism that removes all kinds of welfare and support to the workers then the Great Recession may well lead to another Great Depression. The Irony of Neoliberalism The greatest irony of our times is while corporations are aggressive in the their agenda to “let the market decide”, they are also the ones lobbying for the government to bail them out. Thus government money is now being used to run the corporations. The problem with this is that this time, we cannot afford another bankruptcy because that would tantamount to the collapse of the state itself. Another major problem with this is that most of the money being used for bail out comes from loans from other governments and corporations. Thus we are in a quagmire. What if the government now declares bankruptcy? Can it do that? What if we lose the confidence of our investors? Would we need another war just to keep the market up and going? After all, war is a very lucrative business and one which we have heavily invested upon. Would we rather choose war rather than bankruptcy? These are the hard questions that we need to pose. These are questions that we cannot answer if we simply think inside the box. These are questions that need hard answers if we are to solve the multidimensional crisis of our age. Works Cited Jam13: , (Rainey), Key98: , (Keynes), Tay: , (Gans-Morse), Ove13: , (Overdose: the Next Financial Crisis), Read More