The Two Categories of American Corporation — And Their Politics

Some giant American corporations depend on a buoyant American economy and a world-class industrial base in the United States. Others are far less dependent. What comes out of Washington in the next few years will reflect which group has most political clout — especially if Republicans take over the House and capture more of the Senate this November.

The first group includes national telecoms like Verizon and AT&T that need a prosperous America because most of their sales are here. Same with finance companies like Bank of America and Travelers Insurance whose business strategy has been built around U.S. consumers. Ditto certain giant chains like Home Depot. Naturally, all these companies were especially hard hit by the Great Depression and its devastating impact on American consumers.

The second group includes companies like Coca Cola, Exxon-Mobil, Hewlett-Packard, Intel, and McDonalds, that get substantial revenues from their overseas operations. Increasingly this means China, India, and Brazil. Ford and GM are still largely dependent on US sales but becoming less so. GM sold more cars in China last year than in the US. Not surprisingly, American companies that are less dependent on American consumers have been showing the biggest profits. 

Wall Street gets this. Viewing the 30 giants that make up the Dow Jones Industrial Average, analysts are predicting that the 10 with the largest portion of sales inside the U.S. will show average revenue gains of just 1.6 percent over the next year, while the 10 with the largest portion of their sales abroad will grow by an average of 8.3 percent. 

So what does this mean for politics? Big companies hedge their bets and support both Republicans and Democrats. But in my experience, companies in the first group are more responsive to tax, spending, and monetary policies that cause unemployment to drop and wages to grow, and less obsessed by inflation and deficits, than are companies in the second group. The former are also more supportive of new investments in infrastructure and education, which improve U.S. productivity over the longer term. 

The problem is, more and more big companies are moving into the second category because that’s where the markets and the money are. Years ago groups like the Business Roundtable consisted mostly of large American corporations that were indubitably American, and took largely progressive positions on U.S. jobs and wages. I remember working with the National Association of Manufacturers on measures to improve U.S. education and job training. The American Electronics Association pushed the Reagan Administration for an industrial policy to preserve the nascent industrial base of U.S. computing. 

No longer. Large American corporations are going global as fast as they can. That’s good for their shareholders. But in a Washington ever more susceptible to their money and influence, it’s not necessarily good for American workers.  

About Robert Reich 545 Articles

Robert Reich is the nation's 22nd Secretary of Labor and a professor at the University of California at Berkeley.

He has served as labor secretary in the Clinton administration, as an assistant to the solicitor general in the Ford administration and as head of the Federal Trade Commission's policy planning staff during the Carter administration.

He has written eleven books, including The Work of Nations, which has been translated into 22 languages; the best-sellers The Future of Success and Locked in the Cabinet, and his most recent book, Supercapitalism. His articles have appeared in the New Yorker, Atlantic Monthly, New York Times, Washington Post, and Wall Street Journal. Mr. Reich is co-founding editor of The American Prospect magazine. His weekly commentaries on public radio’s "Marketplace" are heard by nearly five million people.

In 2003, Mr. Reich was awarded the prestigious Vaclev Havel Foundation Prize, by the former Czech president, for his pioneering work in economic and social thought. In 2005, his play, Public Exposure, broke box office records at its world premiere on Cape Cod.

Mr. Reich has been a member of the faculties of Harvard’s John F. Kennedy School of Government and of Brandeis University. He received his B.A. from Dartmouth College, his M.A. from Oxford University, where he was a Rhodes Scholar, and his J.D. from Yale Law School.

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