A book called America: Who Pays the Taxes?, written by a couple of Philadelphia Inquirer reporters, apparently shows that the amount of taxes paid by corporations has dramatically declined in the US.

That's for sure. It's been very striking over the last fifteen years.

Some years ago, a leading specialist, Joseph Pechman, pointed out that despite the apparently progressive structure that's built into the income tax system (that is, the higher your income, the higher your tax rate), all sorts of other regressive factors end up making everyone's tax rate very near a fixed percentage.

An interesting thing happened in Alabama involving Daimler-Benz, the big German auto manufacturer.

Under Reagan, the US managed to drive labor costs way below the level of our competitors (except for Britain). That's produced consequences not only in Mexico and the US but all across the industrial world.

For example, one of the effects of the so-called free trade agreement with Canada was to stimulate a big flow of jobs from Canada to the southeast US, because that's an essentially nonunion area. Wages are lower; you don't have to worry about benefits; workers can barely organize. So that's an attack against Canadian workers.

Daimler-Benz, which is Germany's biggest conglomerate, was seeking essentially Third World conditions. They managed to get our southeastern states to compete against one another to see who could force the public to pay the largest bribe to bring them there. Alabama won. It offered hundreds of millions of dollars in tax benefits, practically gave Daimler-Benz the land on which to construct their plant, and agreed to build all sorts of infrastructure for them.

Some people will benefit -- the small number who are employed at the plant, with some spillover to hamburger stands and so on, but primarily bankers, corporate lawyers, people involved in investment and financial services. They'll do very well, but the cost to most of the citizens of Alabama will be substantial.

Even the Wall Street Journal, which is rarely critical of business, pointed out that this is very much like what happens when rich corporations go to Third World countries, and it questioned whether there were going to be overall benefits for the state of Alabama. Meanwhile Daimler-Benz can use this to drive down the lifestyle of German workers.

German corporations have also set up factories in the Czech Republic, where they can get workers for about 10% the cost of German workers. The Czech Republic is right across the border; it's a Westernized society with high educational levels and nice white people with blue eyes. Since they don't believe in the free market any more than any other rich people do, they'll leave the Czech Republic to pay the social costs, pollution, debts and so on, while they pick up the profits.

It's exactly the same with the plants GM is building in Poland, where it's insisting on 30% tariff protection. The free market is for the poor. We have a dual system -- protection for the rich and market discipline for everyone else.

I was struck by an article in the New York Times whose headline was, "Nation considers means to dispose of its plutonium." So the nation has to figure out how to dispose of what was essentially created by private capital.

That's the familiar idea that profits are privatized but costs are socialized. The costs are the nation's, the people's, but the profits weren't for the people, nor did they make the decision to produce plutonium in the first place, nor are they making the decisions about how to dispose of it, nor do they get to decide what ought to be a reasonable energy policy.

One of the things I've learned from working with you is the importance of reading Business Week, Fortune and the Wall Street Journal. In the business section of the New York Times, I read a fascinating discussion by a bureaucrat from MITI [Japan's Ministry of International Trade and Industry] who trained at the Harvard Business School.

One of his classes was studying a failed airline that went out of business. They were shown a taped interview with the company's president, who noted with pride that through the whole financial crisis and eventual bankruptcy of the airline, he'd never asked for government help. To the Japanese man's astonishment, the class erupted into applause.

He commented, "There's a strong resistance to government intervention in America. I understand that. But I was shocked. There are many shareholders in companies. What happened to his employees, for example?" Then he reflects on what he views as America's blind devotion to a free-market ideology. He says, "It is something quite close to a religion. You cannot argue about it with most people. You believe it or you don't." It's interesting.

It's interesting, in part, because of the Japanese man's failure to understand what actually happens in the US, which apparently was shared by the students in his business class. If it was Eastern Airlines they were talking about, Frank Lorenzo, the director, was trying to put it out of business. He made a personal profit out of that.

He wanted to break the unions in order to support his other enterprises (which he ripped off profits from Eastern Airlines for). He wanted to leave the airline industry less unionized and more under corporate control, and to leave himself wealthier. All of that happened. So naturally he didn't call on government intervention to save him -- things were working the way he wanted.

On the other hand, the idea that corporations don't ask for government help is a joke. They demand an extraordinary amount of government intervention. That's largely what the whole Pentagon system is about.

Take the airline industry, which was created by government intervention. A large part of the reason for the huge growth in the Pentagon in the late 1940s was to salvage the collapsing aeronautical industry, which obviously couldn't survive in a civilian market. That's worked -- it's now the United States' leading export industry, and Boeing is the leading exporter.

An interesting and important book on this by Frank Kofsky just came out. It describes the war scares that were manipulated in 1947 and 1948 to try to ram spending bills through Congress to save the aeronautical industry. (That wasn't the only purpose of these war scares, but it was a big factor.)

Huge industries were spawned, and are maintained, by massive government intervention. Many corporations couldn't survive without it. (For some, it's not a huge part of their profits at the moment, but it's a cushion.) The public also provides the basic technology -- metallurgy, avionics or whatever -- via the public subsidy system.

The same is true just across the board. You can hardly find a functioning sector of the US manufacturing or service economy which hasn't gotten that way and isn't sustained by government intervention.

The Clinton administration has been pouring new funds into the National Bureau of Standards and Technology. It used to try to work on how long a foot is but it will now be more actively involved in serving the needs of private capital. Hundreds of corporations are beating on their doors asking for grants.

The idea is to try to replace the somewhat declining Pentagon system. With the end of the Cold War, it's gotten harder to maintain the Pentagon system, but you've got to keep the subsidy going to big corporations. The public has to pay the research and development costs.

The idea that a Japanese investigator could fail to see this is fairly remarkable. It's pretty well known in Japan.