This is the third and last part of an excerpt from Douglas Rushkoff’s new book Life Inc. You can read the first part here and the second part here.

The comparative advantage argument no longer holds when you’re talking about a car manufactured in ten countries, each with its own exchange rates. Comparative advantage applies to balanced national economies trading with one another. Trade agreements like the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT) are more about creating “integrated economies,” whose national boundaries no longer pose any obstacles to the corporations who transcend them. The United States is not trading with China at all. Wal-Mart is leveraging what used to be comparative advantage by sourcing products in China and selling them in the U.S.—where nothing but credit is produced in return. And what is a Mercedes manufactured by Beijing Benz- Daimler-Chrysler Automotive Corporation, Ltd., anyway? Who exactly is trading to whom?

By Douglas Rushkoff

The tasks sent overseas are simply the ones whose greater costs— environmental damage and health risks—can be externalized to the natives of the country where they are being performed. Labor is treated as a commodity. Is the terrain of China or the Philippines more suited to environmental damage? Are the people there better at getting cancer? Of course not. Unlike comparative advantage, externalizing costs is not about giving people the jobs that they do best, or using land in a manner consistent with natural climate and topology. It’s more a matter of giving the lowest- paying and most dangerous jobs to people who don’t have the means to complain—or who are so far away that we couldn’t hear them if they did. International trade offers a means for businesses to circumvent democratic oversight, regulation, and labor laws. In the process, corporations externalize the longer-term costs of their operations to nations who have no choice but to absorb them. The credit column of the corporate balance sheet remains intact.

Those on the other side of the trade have little choice in the matter. They are debtor nations, whose loans have been restructured by an IMF with only corporate interests or misapplied international trade theories in mind. A free- trade landscape sloped to the interests of corporate colonialism leads to what progressive economists call a “race to the bottom.” Nations compete to offer the best prices and the fewest obstacles for corporations to come set up shop. If this means preventing unions from forming, lowering environmental standards, or even subsidizing the construction of factories, so be it. With no minimum standards established between them or through international regulation, whoever stoops the lowest wins the contract.

This downward leveling supports the West’s consumption via credit while inhibiting local production of goods by developing nations for their own use. The cost of basic staples like food and clothing go up, as local consumers are now forced to compete against those in much wealthier nations for the same products. The net result is that the disparity of wealth and standards of living between the rich and poor nations gets worse, not better.

People living in the developing world might take heart in the fact that corporate colonialism no longer distinguishes between the localities it undermines. The phrase “race to the bottom” was first used, in fact, by Supreme Court Justice Louis Brandeis in 1933 to describe the way American states were falling over themselves to attract corporate business. Just like developing nations undercutting each other’s labor and environmental interests to win factory contracts, U.S. states were busy rewriting their charters and laws to the benefit of companies who incorporated there. Delaware eliminated most corporate tax, while New Jersey limited its citizens’ ability to challenge corporate behavior.

Corporations in the United States, England, and most other market-driven Western nations now operate at home with the very same colonial aggression they applied overseas—if we can even refer to today’s corporations as having “home” nations anymore. And domestic localities still fall over each other to win their business, either too confused or too corrupt to act in their own best interests.

In the 1970s, for example, Moore County, North Carolina, began working hard to attract businesses from the Northeast, with promises of corporate tax breaks, lax environmental standards, and a compliant, union- free workforce. The county finally won the privilege of hosting a Proctor Silex plant by floating a $5.5 million bond to finance water and sewer services for the facility—even though many residents in the region were themselves living without running water or basic services. Predictably, in 1990 the company moved to Mexico, which was offering more competitive terms. Moore County was left with toxic waste, eight hundred unemployed workers, and tremendous public debt for having subsidized the company’s plant.

In 1993, South Carolina bent over backward to secure a plant from BMW. BusinessWeek and other publications praised the state for its progressive policy toward competing with Mexico for automobile-manufacturing jobs. South Carolina promised to help BMW externalize its costs by subsidizing inexpensive mansions for executives, good golf courses, cheap labor, low taxes, and limited union activity. The state raised $2.8 million to send engineers to Germany for training. When BMW indicated its preference for a particular thousand- acre parcel on which over one hundred homes were already located, the state spent another $36.6 million to purchase all of them for subsequent destruction. South Carolina then leased the site back to BMW for one dollar per year. Winning the BMW factory is estimated to cost taxpayers $130 million over thirty years.

It’s not only our production that we subsidize on behalf of corporations, but our consumption as well. Remember, in addition to extracting resources from the colonies they controlled, chartered corporations also held monopolies over what the colonies could buy and from whom. The more corporations could control the laws and tax policies of the regions where they were operating, the more they could externalize the costs of selling just as they did the costs of manufacture. Today’s corporate- favoring legal framework permits domestic companies to behave in an analogous fashion.

Wal- Mart may be the easiest and most obvious target for us in this regard, but that’s for a very real reason: its practice of colonizing new regions for stores amounts to a scorched- earth policy that leaves financial and social ruin in its wake. Wal- Mart monopolizes new territory by pricing items below cost and rendering local merchants incapable of competing. Once the competition goes out of business and the community is dependent on Wal- Mart, the corporation raises prices to more profitable levels. Free and fair competition, as defined by the market, favors the company with more money to burn.

Although Wal- Mart enters new regions promising gainful employment and an expanded local tax base, the opposite usually occurs. A Congressional Research Service report found that for every two jobs created by a Wal- Mart store, the local community ended up losing three. Furthermore, the jobs created were at lower wages (an average of under $250 a week), fewer hours, and reduced benefits. A majority of Wal- Mart employees with children live below the poverty line, qualifying for public welfare benefits such as free lunch at school. Seventy percent of Wal- Mart employees leave within the first year of employment, and do so—according to a survey that Wal- Mart itself conducted—because of inadequate pay and lack of recognition for their work. Other studies have shown that, as a result of the increase in social services spent on the families of Wal- Mart employees, the net effect of a new store is to place a greater financial burden on the taxpaying community.

In spite of a huge “buy American” campaign, Wal- Mart purchases 85 percent of its merchandise from overseas, and is consistently associated with sweatshop scandals, from Kathie Lee Gifford’s clothing line and Disney’s Haitian- made pajamas to child- produced clothing from Bangladesh and Wal- Mart– brand apparel manufactured by underage Chinese workers in New York City sweatshops. So maybe it’s not even in Americans’ best interests to be manufacturing for Wal- Mart, anyway.

There’s nothing new in attacking Wal- Mart for poor corporate citizenship. There are plenty of organized protests and lawsuits under way, as well as at least some action on the part of the company to correct this impression and perhaps even its own behavior. What’s more important to recognize here is that Wal- Mart’s activities do not appear to be the result of conscious choices by a mean- spirited board of human directors who have any real relationship to the communities in which they operate. Rather, Wal- Mart’s relationship to the world seems to be directed by the sort of charter written four hundred years ago for trade monopolies. The company’s practices—abroad and at home—erode regional stability and self- sufficiency in order to conduct the long- distance trade at which Wal- Mart excels. Wal- Mart turns its home territories into colonies, robbing them of their ability to generate value for themselves and creating greater dependence on the colonial empire.

Wal- Mart’s relationship to place has become so abstracted that the company views even its own stores through the conquistador’s eyeglass. Like temporary forts built solely for purposes of territorial conquest, any one of them can be abandoned at any time. For example, it is deemed efficient by Wal- Mart to open two stores very close to each other if this quickly and most completely puts local merchants out of business. Once a monopoly over the region has been established, Wal-Mart can close the less profitable of the two stores. Residents will then pick up the externalized costs of fuel to travel to the farther one. As of 2000, by utilizing this strategy, Wal- Mart had already left behind twenty- five million square feet of space. In one Kentucky town, the abandoned Wal- Mart was eventually torn down at taxpayers’ expense, according to the corporation’s own website. After peaking at more than two new stores per day in 2005, Wal- Mart still planned to open 212 stores in the U.S. in 2009, despite the credit crisis.

Wal- Mart’s behavior is not terribly mysterious. What’s more puzzling is the widespread acceptance and patronage of this company and its peers by people who actually live in the wake of their damaging effects. While regions with very strong advocates for the environment, labor, local commerce, or health may have been successful in limiting the spread of the “big box” chains to their neighborhoods, the vast majority of American and, now, European counties have succumbed to or even welcomed their own colonization by international branded retail stores.

Our readiness to surrender the territory on which we live shouldn’t surprise us all too much, for we were already treating our neighborhoods as anything but real places.

Interested? Go to Douglas’ page and read more about his book and other projects.

This post is tagged corporatocracy, US hegemony