Hacker News Reader

Comment by ashark | Hacker News Reader

Our preference for (relatively) high levels of local control (and the resulting tiered cake of tax jurisdictions and regulatory domains) makes our system incredibly vulnerable to race-to-the-bottom behavior when confronted with powerful non-state actors (corporations). Our fear of a hypothetical (though, to be clear, in other times and places realized) evil state leaves us with a host of real, everyday stresses, annoyances, and inefficiencies. It's a drag on GDP and, especially, on quality of life.

View on HN

Yup.

Amazon receiving 238 bids of localities falling over themselves to handover tax credits and other goodies is the example I've been thinking about recently.

https://www.reuters.com/article/us-amazon-com-headquarters/a...

How to fix it though?

unfortunetly you would have to radically reform the entire political system and take a lot of powers away from states eg single sales tax, a single set of employment law.

Unfortunately the states are not turkeys voting for Christmas

> How to fix it though?

Don't think we can. We're more likely to fix one of our other big, fundamental problems—the two party system + gerrymandering, for which proportional representation or any of several other schemes would be a good fix—than we are that, and I'd say the odds of our fixing that this century are maybe 50/50. We have no stomach (or mind...) for questioning such foundational premises of our system in the face of something as abstract and high-falutin' as a kind of political root-cause analysis, and aside from that we have too many states-can't-possibly-do-anything-right-ever-evidence-be-damned-no-really-I-proved-it-from-first-principles-it's-just-like-math folks running around.

The abundance of persons of the latter mentioned mindset are an intentional product of the power structure, though. Ignorance and indoctrination combined create an army you can oppress and use to keep the oppressed fighting amongst themselves. You just blame your oppressions on the "other".

I don't think you can save that many people when there are so many of them. It becomes cultural. Their identities are defined by their conviction. In earlier times, that would be the point where you leave the society and go somewhere else, but there is really no where left to go on Earth - every country has their own flavor of brooding fundamentalists supporting some faction of the government through propagandized anti-intellectualism.

The EU has a set of laws called State Aid, which disallows member states from subsidizing business to the detriment of their competitors (either other businesses or other states). Government can improve infrastructure, but cannot literally hand out cash to build a factory, or anything like that.

This exists even though EU nation states have far more individual power than US states.

https://en.wikipedia.org/wiki/State_aid_(European_Union)

In reality, these days member states will introduce laws for certain players that then anyone can use. It's not state aid then, but the result is the same.

For example, Belgium recently updated certain tax laws to reduce the amount of withholding tax payable by certain major foreign investors, to keep the AB Inbev holding company in Belgium instead of letting the shareholders move their holding entity to the UK.

> Government can improve infrastructure, but cannot literally hand out cash to build a factory, or anything like that.

Yes, because such "subsidies" would create competition for companies from more developed EU countries, the same countries that drive the acceptance of new EU members. Removing these obstacles crushed local industry, which is why less developed countries ended up with close to zero industrial production after joining the EU (thus starting the social, employment and competitiveness problems most smaller EU nations are facing).

Nevertheless, EU nations keep subsidizing "selected" businesses, especially for big foreign companies outsourcing their operations, using tax benefits.

> Removing these obstacles crushed local industry, which is why less developed countries ended up with close to zero industrial production after joining the EU (thus starting the social, employment and competitiveness problems most smaller EU nations are facing).

These sorts of talking points exist everywhere, in the West and in the East, state aid is one of the most attacked elements of the EU. Actually the talking point is near identical in the UK, that manufacturing has died because the government hasn't been able to step in (in effect, to prop up uncompetitive industries). Manufacturing has in fact plummeted in most developed countries, and it's easy for governments to pass the blame onto the EU.

> Removing these obstacles crushed local industry

Not really. The problem with most of the small-ish EU countries is that with the exception of Cyprus, Austria, Finland and Sweden, all the 13 countries that joined after GDR/BRD unification were former USSR or Yugoslavian countries + the GDR itself which was USSR allied. This means that their entire industry companys were either uncompetitive since decades (but kept artificially alive by the realo-socialist states) or got fleeced by local or foreign mafia (or, in the case of former GDR aka East Germany, by the Treuhand which has had its fair share of scandals) after the fall of the USSR.

In addition, there's a _massive_ wealth gap between the EU/EEA core (Germany, France, the Nordic states, Switzerland and UK), which bled all other EU nations dry of young people (they went off to study and stayed) and loads of working-age people (they went off to earn money to support their families at home, and stayed). The people "left behind" tend to be old-ish and politically conservative, which doesn't exactly help when everything around is changing at an unknown (for Soviet/Yugoslavia) pace... and what's left of young people today flees from the corruption and religious-conservative politicians.

What saddens me is that I have no idea if the situation can be fixed at all. Manufacturing or heavy industry isn't going to come back, no matter how hard Trump or his ideological "friends" try. It will stay in China or maybe migrate to Africa as soon as Chinese labor gets too expensive/the Chinese politics too restrictive. All that remains is agriculture (which is going to be more and more automated), tiny chunks of natural resources exploitation, and tourism. Maybe a bit of IT stuff, but people are highly skeptical of nearshoring/offshoring since the "big companies" (Accidenture, IBM, whatever) spoiled the well, and the local markets by far don't have as much demand...

Source: am half Croatian, half German (born and raised in Germany though).

> How to fix it though?

If tax agencies would just stop accepting any "transfer pricing" BS from multinational corporations, and simply divide their total net profit (wherever) by the share of the national market and base corporate tax on that, I think that would be a start.

Localities competing for business is i.m.o. much less problematic: it's a one-time write-off, there is legislation, and it has to be "sold" to tax-payers.

Just a minor clarification to your point. In "industry" towns like the Bay Area, Detroit, and Chicago - corporations are definitely the powerful non-state actors.

Outside of those though, their are many cities of considerable size where local developers hold the most sway. These local developers behave and are motivated by different things then the mega corps.

Reply on news.ycombinator.com