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14 December 2014

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Walrus

With respect Col. Lang Australia is not a unitary system and our battles between individual Australian State and Federal Governments are just as bitter and lengthy as yours. Where we have been lucky, not necessarily intelligent, has been to standardise a lot of legal and civil law across the continent, that only took about Twenty years of State working parties.

The last thing I would want to see a a centralised bureaucracy in Canberra making decisions about events a Thousand miles away.

Surely you would agree that some standardisation across taxation and commercial law for example, driven by the states themselves rather than being a Federal grab for power, would be a good thing? State income and sales taxes has to be a minefield of inefficiencies at the best of times.

For example, we run with a single 10% value added tax, collected administered by the Federal Government under the watchful eyes of the states and every cent collected goes back to the States, the Feds don’t get a cent of it. Pretty much impossible to avoid and easily understood by all.

confusedponderer

Pat,
I don't argue against federalism.

I just think that as far as corporate charters go it is a bad idea to leave that to the states because of the demonstrated effect it had - that regulatory race to the bottom.

As far as corporate charters and according regulations go - not as an end in itself but as a means to benefit the citizenry, the US are at the bottom of the barrel.

With the omnipresent influx or corporate money into the political process, the US are - to formulate boldly - right now embracing a bottom up 'inverse corporatism', in which not the state utilises the corporations as a means of societal control but where the corporsations use the state as a means to gain cometitive advantage. Everybody else loses.

confusedponderer

"in a country with a consolidated government in which people like Holder, Yoo and Cheney would have even more power over our lives"

That is an sbsolutely valid point that you make. Of course, relatively speaking, a citizen has more of a chance to effect change on the state level.

Still, I am not so sure that the states are so much of a safeguard after all, with bodies like ALEC pushing standardised legislation written to push the envelop from the shelf.

The problem is interia and lack of informed public debate (and that is a problem not unique to America).

Put starkly, it's the choice between death from above and the death by a thousand cuts from below.

BabelFish

Babak, the word you used, eke, is close to the problem. The America that helped win WWII produced a middle class that didn't eke out anything. It took the machinery of pre-war industrial America, added the additions war industries and produced a long boom where that middle class had solid lives of hope, with even higher expectations for their children. That all now appears to have been destroyed. If the 2007 bust taught us anything, it is that we are more ever firmly in the hands of the oligarchs and financial elitists. We are simply their fodder.

BabelFish

Bobo, nice description of my Maine. There is this little thing about finding jobs that pay a living wage that drove me out. I miss living their fiercely but I watch my nephews and nieces struggle to find employment that pays enough to make more than a marginal life possible.

BabelFish

Pat, I just have to think that I was born in the hospital they built, studied in the library they constructed, played baseball in the park named after them. That park used to host Babe Ruth, on occasion.

LeaNder

confused, I am not sure what you have in mind with "chorporate charter" but if you have in mind generally where to go when starting a business in Germany, you may well have to check what state or region is best for you too. Depending on different factors.

There are the most diverse funding programs, public incentives and related matters with enormous differences across regions. Just as there are the most diverse programs on the level of the German government, the different states and the EU.

Ok this is concerning the average founder in search of programs and money supporting his or her business plan.

Add to that the highest competition of the different states down to the single different communities to support larger corporations in a special community or smaller or medium-sized business generally.

Of course we had public outcries when highly sponsored corporations or big players closed down the enterprise several years later when their expansions did not pay anymore and moved on.

Taxes are of course the same all over Germany. I would assume as in the States.

Where I think we may have a comparable problem, and no I am no expert in any of the above issues, is that the bigger players have the better experts or advisers that smaller firms don't have to the same extend. Add to that a highly complex tax law--I have no idea about its US variant-- that offers much better chances to the bigger players to cut their taxes, all strictly legal of course, as small or medium-sized enterprises. But these businesses may well create most jobs, at least over here. If I may adopt their perspective: they do use the ultimate economical wisdom to cut cost by cutting jobs to a far lesser extend.

The carpenter Tyler mentions is a good point, but that really stated decades ago over here. When they started to order a lot of the stuff they used by catalog, since it was simply much cheaper then producing it themselves. But can a plumber, a heating fitter or related crafts ever run out of business. I somewhat doubt. But maybe I am wrong.

Below a link to the German state's database for founders.
The word "Fördergebiet" means "funding region", translated literally. If you click on the interface you see you can sort it according to programs available at the diverse state levels.

www.foerderdatenbank.de

I haven't checked for ages in this field, but this database may well be up-date. Of course it can be used by anyone smaller, medium or bigger players.

What has a huge impact on all of this is of course the internet. I have seen my bookshop at the corner die a couple of years ago. And yes, I helped aggravating its crisis. After I realized another bigger shop had to close down, I started to buy local at one of the only two bigger once left in the field. We are all part this. A click and the delivery next day or the simple ebook download immediately is much more comfortable. And the bigger players like Amazon of course often can offer tools more cheap with their exquisite tax evasion scheme via Luxembourg. Apart from the really comfortable one click purchase. Which is nothing but the expansion of the competition in attracting business between communities, towns and states to the larger European level.

Bob R

Babak Makkinejad may have been overhasty in dismissing Tyler's insight that illegal immigration has been a major causative factor in the wage stagnation that has afflicted communities like Downey and America writ large over the past 35 years. It's a simple matter of supply and demand: substantially increasing the supply of labor in an economy will negatively impact the wages and compensation of those working legally in the economy (and illegally, also). Steve Sailer summarizes the point neatly in his blog and also points out that the Washington Post article overlooked the fact that the Hispanic population of Downey increased from 16.8% of in the population in 1980 to 70.7% of the population in 2010. http://www.unz.com/isteve/washington-post-the-middle-class-took-america-to-the-moon-then-something-went-horribly-wrong/

turcopolier

LeAnder

In the US, the federal, state and local governments all have the ability to levy taxes, but they know that they are in competition with other jurisdictions for the continuing presence of businesses in their area. In my experience this is an advantage for business. All states have economic development commissions. Depending on the state these commissions have a lengthy menu of incentives and inducements available for bringing and keeping business especially large scale business. such inducements include; tax breaks for periods of up to 15 years on income earned within the state, "recruitment" of capital for both initial capital needs and operating capital. this would be from regional and local financial institutions which in the US are often quite large, work force recruitment and training at state expense, assistance in finding a "good deal" on real estate for factory and offices, assistance in finding good local construction and other contractors, improvement of electrical and other utilities at work site at state expense, assistance in negotiation of concessionary rates for electricity from providers. As I say, these features vary from state to state. The "hungrier" the state is for development the better the deal for business. In my experience the best "deals" are to be had in places like Mississippi. Alabama, Louisiana, Texas. the least pro-active states are in the NE and the Midwest. I used to run this process of negotiation with state economic commissions for the group I was with. The thing about business licenses is trivial. If you are bringing employment and payroll with you the local authorities will take care of that for you. It does help to be sympatico. It is not a good idea to have someone from New Jersey try to deal with people in th deep South. pl

turcopolier

Babelfish

The Goodall family of Sanford, Maine were remarkable people. A large part of my secondary school education was dependent on the quality of the family endowed "Louis B. Goodall" Memorial library. and then, as you say, there was the family endowed "Henrietta Goodall" memorial hospital , etc. Unfortunately, we cannot hope to see such owner/managers again. The 'breakup" between the unions and the Goodall family in 1953 must have been tragic. pl

Ulenspiegel

Babak Makkinejad,

your freed trade destroys manufacturing is only correct if you understand the underlying issues:

In the US most of the export was done by large companies, the SMEs in the USA contributed only a small percentage. Lage companies can indeed use a global market to move their industrial production abroad, smaller usually can not.

The losses of the German economy were much lower, here my bet is that the SMEs had a larger market share and were traditionally, in contrast to their US counterparts, global players. Therefore they stayed at home and tried to adapt; the surviving ones became even better on the global market.

The next aspect IMHO is that the Silicon Valley on one hand contributed to an amzing number of new companies and technological developements, on the other hand their VC models promote rapid expansion of companies and high tendency to sell new companies, even in field where other appoaches would have been possible and IMHO would have been better. Money became too important and destroyed useful tradition.

Contrast this with typical German Mittelständler, these guys usually grow organic (no influence of banks, VC, no need to care about sharholder "value"), are often for generations in the same family and town. This works despite the fact that the German market is per se more open than the US or UK market.

And last but not least there could be a different value attached to producing real stuff vs financial "industry" in different countries.


turcopolier

walrus

"Surely you would agree that some standardisation across taxation and commercial law for example, driven by the states themselves rather than being a Federal grab for power, would be a good thing?" I do not. As I said to LeAnder business and local citizens often benefit from competition among he states. Varying taxes are not a challenge. we do not seem to have a problem attracting foreign capital and business in the business friendly states. Look at all the Japanese and German automotive factories all over the South. pl

confusedponderer

What I mean is the Rechtsform.

There is one form of 'AG (stock corporation)', 'GmbH' (minimum capital 25.000 €), 'KG (whre you know tha the Kommanditist is personally liable for the full sum of his documented investment)' etc and the few inbetweens.

Now we also have the british 'Ltd.' (minimum capital € 1,50, hum) and the the European company - Societas Europaea (minimum capital € 120.000) and so forth.

I.e. with such beats, you know what you're dealing with and approximately what they're worth and how much risk you're taking. Give credit to a Ltd. in Germany? Hum. Probably you want to look, first.

The idea for these corporate charters is Rechtssicherheit im Geschäft, or essentially predictability in business.

In the US there are 50 different rules for corporations with differing requirements as to necessary capital, transparency and so forth.

That makes it riskier to do business in the US, makes the marketplace less transparent and less of an even playing field.

To see what I am getting at:

http://www.bizfilings.com/states.aspx

### California

"Name endings are not required to be used in the corporate name unless the corporation is being filed as a professional corporation or close corporation, or if it is using a person's name. In such cases, the name must end with "Corporation," "Company," "Incorporated," "Limited" or an abbreviation thereof. The name must not be likely to mislead the public.

* Director information

Minimum number. Corporations are required to have not less than three directors unless (1) shares have not been issued, then the number can be one or two, (2) the corporation has one shareholder, then the number can be one or two, or (3) the corporation has two shareholders, then the number can be two.

Inclusion in the Articles of Incorporation. Director names and addresses are not required to be listed in the Articles of Incorporation.

* Requirements for the Articles of Incorporation

Officers. Officer names and addresses are not required to be listed in the Articles of Incorporation.

Stock. Authorized shares and par value must be listed in the Articles of Incorporation. An increase in the number of shares or par value does not affect initial filing fees."

### Maryland

"The corporation’s name must contain the word "Corporation," "Incorporated," "Limited" or an abbreviation thereof. For banking corporations, the words "Bank," "Banking" or "Bankers" may be used. The name may not contain language stating or implying that the corporation is organized for a purpose other than the one permitted by the Articles of Incorporation.

* Director information

Minimum number. Corporations must have one or more directors.

Inclusion in the Articles of Incorporation. Director names and addresses are required to be listed in the Articles of Incorporation.

* Requirements for the Articles of Incorporation

Officers. Officer names and addresses are not required to be listed in the Articles of Incorporation.

Stock. Authorized shares and par value must be listed in the Articles of Incorporation. An increase in the number of shares or par value can affect initial filing fees."

### Wyoming

"Wyoming corporations are not required to use corporate name endings, such as the word "Incorporated" or the abbreviation "Inc." The corporate name may not contain language implying a different purpose from the purpose or purposes in the Articles of Incorporation.

* Director information

Minimum number. Corporations must have one or more directors.

Inclusion in the Articles of Incorporation. Director names and addresses are not required to be listed in the Articles of Incorporation.

* Requirements for the Articles of Incorporation

Officers. Officer names and addresses are not required to be listed in the Articles of Incorporation.

Stock. Authorized shares and par value must be listed in the Articles of Incorporation. An increase in the number of shares or par value does not affect initial filing fees."

turcopolier

ulenspiegel

The US internal market is so large that SMEs do very well if not forced to compete with countries like China that essentially run their businesses with slave labor. pl

cville reader

I would like to see a study about the long-term effects on economic development of the incentives offered by different states and/or localities in order to attract new businesses. I personally have seen more than one case where the hype exceeds the actual results. It takes a lot of diligence and follow-up to figure this out.

Also, there can be some drawbacks to pitting states against each other. The cheaper, and union-free labor of the South destroyed many mill towns in New England. Is this a good idea? I haven't decided.

Another consequence of the more "business-friendly" policies of the South, is that the lower tax rates tend to attract natives from the North, who generally pay more taxes. But then what happens when they move? They decide that they like the amenities and social services that they are used to--- and often vote for higher taxes to get them.

Don't get me wrong-- I think giving more power back to the States (and some have argued to large metropolitan areas) is key to fixing a lot of this country's problems. The biggest advantage of this is that is makes the politicians closer to population to which they are purportedly accountable. I am just not sure the US has figured out the right mix yet.

Poul

All:
Don't forget that there is a price to be paid for having the US dollar as the global reserve currency.

It make the US the automatic target for currency manipulation/policies which aim at increasing exports by lowering the exchange rate with the US dollar. The US government's willingness to accept that price has a important role too in the fall of the middle class.

http://blog.mpettis.com/2014/12/my-reading-of-the-ft-on-chinas-turning-away-from-the-dollar/

Quote:
"The US financial market, it turns out, is the only one that is deep and flexible enough to absorb China’s huge trade surpluses, and, perhaps much more importantly, it is also the only one whose government would not oppose being forced to run the countervailing deficits.

Had the PBoC tried to switch out of dollars and into Japanese yen, or Swiss francs, or Korean won, or euros, or anything else, it would have met tremendous resistance. In fact it did try to purchase some of those currencies and it did meet tremendous resistance, which is why its only option was to buy US government bonds. I explain why in my book as well as in another one of my blog posts."

turcopolier

cville reader

In the Southern states where I have worked with economic development commissions none of those things was a problem. the state commissions were most diligent in fulfilling their promises. The commissions in my experience are aware of their local political issues and are keen to obtain minority employment. As for the timing, New England emptied itself of industry well before the Southern states began to aggressively recruit business. pl

BabelFish

Though I was young, I remember both my mom and dad being thrown out of work when that happened. My dad disappeared (in my young mind) but was actually working in CT, to support the family. He found long term work at the Portsmouth Naval Ship Yard, building and repairing subs. Between his WWII smoking and a life long exposure to asbestos (he was building liberty ships prior to entering the Navy), he succumbed to mesothelioma.

The follow on/coda is that the jobs that fled south from Sanford are now in Malaysia and other points in South East Asia.

turcopolier

Babelfish

Your mom and dad were, of course, my aunt and uncle. I was older than you, my parents having recently moved from California but the hardship created by the closure of Sanford-Goodall was immense. as I recall the union simply refused to "split the difference" with the company on rising costs and increasing foreign competition. As you say, the textile business has moved on chasing lower labor costs. pl

cville reader

Don't "state commissions" put politicians and/or their appointees in charge of picking winners and losers? Is this a good idea?

Some of the more interesting ideas I have encountered focus more on establishing the conditions that allow industry to flourish-- things like education, population density, and looking at the true costs of government provided infrastructure. A lot more can be found on this website: http://www.baconsrebellion.com -- and it is written by a Virginian, so no Southern sensibilities need be offended!

turcopolier

c'ville reader

"Don't "state commissions" put politicians and/or their appointees in charge of picking winners and losers? Is this a good idea?" And you think that is a bad thing? Hey! Politicians and their appointees know that their political future is dependent on such issues as business revenues and payrolls. Tell me where the money is supposed to come from for the general development you want. what is your academic specialty?. pl

cville reader

I am not an academic, am not in anyway associated with UVa, and am not going to establish my bona fides for you. Do you think only those with advanced degrees (who often have woefully little practical business experience) are capable of evaluating public policy proposals?

Who said anything about spending more money? I was addressing how to spend tax money more effectively to get desired results.

I am glad that you think that state commissions can do the job. Virginia's Tobacco Indemnification and Community Development Commission does not inspire confidence in me.

Babak Makkinejad

Thank you for your comments.

What I gleaned from reading magazine articles has been this:

That the growth of finance capital in the United States sucked money away from SMEs. Machine tools manufacturing - largely SMEs - in the state of Ohio declined over a 20-year period to almost nothing.

Silicon Valley was funded - to a large extend - by people whose income was from Finance Capital - a small amount of that money was used by Venture Capitalists to play - quite literally - it was a game for them.

That also shrank after 2008.

I think The United States, the European States, and Russia cannot be Great Military Powers, Great Economic Powers, and to provide, at the same time, good or great jobs.

They have to give up on one of the 3.

Babak Makkinejad

You are quite correct; Japan and Korea are quite prosperous behind their wall of protectionism.

Babak Makkinejad

3rd World has been flooding Iran since the war in Afghanistan started in 1980. Construction work in Iran would come to a stand-still if the lower wage Afghan immigrant pool of laborers disappear someday.

The highest unemployment in Iran among youth are among the "degreed" individuals with worthless degrees that had prepared to work as a minor office clerk in a minor business.

The diploma factories there in Iran, just like their counterparts in US or EU - are not producing skilled labor that could actually do something.

They are catering to the democratic public demand for "Higher Education" - their only redeeming feature being that they are free.

The immigrants did not destroy the machine tools industry in Ohio; for example.

What destroyed that industry was the unwillingness of US capital markets to invest in manufacturing enterprises with unacceptably low rate of return on capital in comparison to what the financial wizards were producing in Wall Street.

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