Just Sociology

Free Trade vs Neoliberalism: Implications on Apple’s Taxes and Subsidies

In contemporary economics, two ideologies are at the center of most economic and trade debates, often resulting in polarized opinions: free trade and neoliberalism. The former is a theory emphasizing the benefits of trade without restrictions such as tariffs, quotas or other barriers.

On the other hand, neoliberalism is a broader economic theory that focuses on the role of market forces, individual freedom, and the well-being of corporations. In this article, we aim to provide a comprehensive understanding of these two theories while examining their implications in real-world situations, such as the controversial tax issues facing Apple and the impact of subsidies on competition law.

Free Trade

Free trade is a central tenet of classical economics, promoting the idea that trade with other countries brings economic benefits by allowing goods and services to be allocated to their most efficient and suitable location. Advocates of free trade argue that facilitating the exchange of goods and services, without the imposition of tariffs or quotas, enhances global efficiency and economic growth since the specialization of countries increases.

Between countries, free trade agreements (FTAs) are commonly put in place to encourage free movement of goods across national borders. However, critics question the perceived benefits of free trade, particularly in the context of income inequality and labor standards.

Advocates of international trade under free trade agreements argue that increased competition and a more effective allocation of resources resulting from free trade ultimately benefits all consumers. Critics argue that the opening of the market to free trade may lead to lower wages or job loss for workers in developed economies.

This has sparked international political debate, particularly in developed economies, where anti-globalization sentiment is strong.

Neoliberalism

Neoliberalism, a term coined by French economist Michel Foucault in the 1970s, is a broader economic theory emphasizing the importance of competitive markets, individual freedom, and the well-being of corporations. Under this economic philosophy, governments attempt to minimize state intervention in the economy, including regulation and capitalist taxation.

The main idea behind neoliberalism is that the markets should dictate economic activity, rather than the state.

Neoliberalism was widely adopted during the 1980s and 1990s, particularly in countries like the US, the United Kingdom, Australia, and New Zealand. Its key proponents, such as Friedrich Hayek and Milton Friedman, believed that the state should intervene in the economy only in exceptional circumstances, such as in critical emergencies or where the market fails to provide essential goods and services.

Critics argue that neoliberalism prioritizes the interests of wealthy individuals and corporations over the well-being of society as a whole. It has brought rising economic inequality, made public goods more exclusive, and increased the economic power of the elite.

Opponents suggest that such policies often come at the cost of social welfare, environmental protection, and civil rights. Apple’s Tax Bill

In 2014, the European Commission ruled that Ireland granted illegal state aid amounting to 13 billion in tax breaks to Apple between 2003 and 2014.

Ireland had allowed Apple to pay less tax on profits than other corporations by allegedly setting up an illegal state aid scheme. The European Union filed a lawsuit against Ireland and Apple, arguing that the tax deal constituted a breach of state-aid laws.

The case is believed to have far-reaching implications for other multinational corporations that have similar structures in Europe. While Apple argues that it paid the necessary tax required, the EU claims that the company’s Irish subsidiaries should have paid tax in their home countries, rather than allowing Apple to use Ireland as a tax base.

Subsidies and Competition Law

Governments often provide subsidies to companies, particularly to support struggling industries and to maintain jobs. However, subsidies can effectively distort competition because it gives some firms an unfair advantage over others.

The World Trade Organization has argued that subsidies encourage companies to produce beyond the market demand, leading to inefficient allocation of resources and output that may be more expensive and environmentally harmful. Competition law has been used to prevent companies from abusing their dominant position in the marketsomething that subsidies can facilitate.

In 2012, the European Union hit the Korean electronics firm, Samsung, with a 37m fine for abusing its market position by offering unfair subsidies to retail chains. The European Commission claimed the subsidies were designed to increase the sale of Samsung products at the expense of its rivals, and hence resulted in a fundamental distortion of competition.

Conclusion:

In conclusion, free trade and neoliberalism are two concepts that are intertwined and often used synonymously in economic debates. Free trade aims to increase global welfare by enabling markets to allocate resources more efficiently, while neoliberalism focuses on the importance of a market economy and individual freedoms.

The real-life applications of these theories have far-reaching implications, including the taxation issues facing Apple and the effects of subsidies on competition law. Ultimately, policymakers must weigh the potential benefits and drawbacks of these theories to decide what economic policies best serve their constituents.

Revolving Door

The term “revolving door” refers to the movement of individuals between the government and the private sector, specifically from high-level political positions to lucrative jobs in the private sector, and vice versa. Concerns regarding the revolving door center around the potential for a conflict of interest, as individuals in high-ranking government positions have the power to award contracts, regulate industries and pass laws that could benefit businesses.

The revolving door raises questions about whether the private sector is unduly influencing government policies and decisions. Moreover, it may lead to regulatory agencies failing to fulfill their mandate effectively, undermining public trust in government institutions.

Critics of the revolving door argue that it creates a culture of corruption and lobbying, where those with connections and influence can gain access to the levers of power and influence to shape policies to their benefit.

Links between Government and Big Business

Critics suggest that the revolving door is just one example of the links between government and big business. The nexus of government and big business can be traced back at least to the development of the modern corporation a century ago.

Governments have been instrumental in extending the power and reach of corporations, providing them with the means to expand their influence globally through favorable policies and grants. The influence of large corporations on government policies and institutions extends far beyond the revolving door.

Many large corporations use their financial resources and lobbying power to shape laws that benefit their interests, often at the expense of the general public. They also have the power to influence the content of news and other media by using their advertising revenue to control the narrative.

However, there are arguments in favor of such links between government and big business, and collaboration between businesses and governments at a national and international level can be beneficial for both parties. For example, governments may seek to incentivize foreign direct investment through tax breaks or other initiatives, while businesses can benefit from political stability and supportive business regulations.

Supporters of these relationships argue that it can contribute positively to economic growth, job creation, and innovation. Nevertheless, the links between government and big business often lead to concerns about potential conflicts of interest, especially when official policies are formulated behind closed doors by large interests for their benefit.

This raises questions about the integrity of the democratic process, as citizens may feel that their voices are not adequately represented or heard. Conclusion:

In conclusion, the revolving door and links between government and big business are two controversial topics that influence the effectiveness of government institutions and the perception of the democratic process.

While some argue that collusion between government and big business is inevitable and even necessary for economic growth, others highlight the potential risks of corruption, conflict of interest, and distorting public policies alongside risking alienation from the wider public. Given that large corporations wield an enormous amount of influence and wealth, citizens are becoming increasingly vigilant about the activities of those institutions and how they may interact with the government.

Ultimately, the public needs to be educated about these issues and more aware of the extent and nature of the links between government and big business, which has significant implications for international trade, economic growth, and the efficient functioning of democratic institutions. Machinery must be put in place for effective governance of industries, with transparency, and a process for accountability, which ensures the risk of corruption is minimal while protecting corporate interests as a whole.

In conclusion, this article examined complex economic theories, government and big business connections, revolving door, revolving door, subsidies, EU’s claim against Apple, free trade, and neoliberalism, stressing that while these theories and practices have their strengths, their implementation requires careful consideration of repercussions and the means by which to minimize the risk of corruption and maintain accountability. It emphasizes that the public must be well-informed about the linkages between government and big business, and how they impact our daily lives.

The article hopes to encourage conversations around the ethical implications of current and proposed economic policies globally.

FAQs:

1) What is the revolving door?

The revolving door refers to the movement of individuals between the government and the private sector, often leading to a conflict of interest. 2) What are the links between government and big business?

The links between government and big business refer to the influence that large corporations have on government policies and institutions, which can lead to concerns about potential conflicts of interest. 3) What is the EU’s claim against Apple?

The EU’s claim against Apple is related to the alleged illegal state aid scheme provided by Ireland that resulted in discriminatory taxation by Apple in the EU. 4) How do subsidies impact competition law?

Subsidies can distort competition by giving some firms an unfair advantage over others, which can lead to a fundamental distortion of competition. 5) What is free trade?

Free trade is a theory that emphasizes the benefits of trade without restrictions such as tariffs, quotas or other barriers. 6) What is neoliberalism?

Neoliberalism is a broader economic theory that emphasizes competitive markets, individual freedom, and the well-being of corporations, with minimal government intervention.

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