At the Lowy Interpreter Sam Roggeveen speculates about the possibility of a company (particularly Apple) buying a country.
There has been at least on fictional treatment of a corporation taking over a country in John Brunner’s wonderful 1968 novel Stand on Zanzibar. It is based in 2010 and the corporation is transparently based on General Electric, and the country based on what would become Benin. Like much science fiction, it tends to tell us a great deal from what change it didn’t anticipate. In particular it didn’t anticipate how corporations (at least in the US) would change, and why the idea of a corporation taking over a country is less plausible than it once was.
It made sense in the 1960s to think of Corporations as great sprawling organisations that could possibly marshall the array of skills involved in running a country. Companies did have wide ranges of businesses and were more relaxed. But attitudes changed in the 1980s – maximizing return on capital meant that companies would shrink down to core products with the greatest returns, and jettisoning or spinning off other projects. In many ways I suspect this had alot to do with the movement from internally fostered management to a floating class of specialists in exploiting the principal agent problem in corporate governance. Shuffling projects between companies and identities meant an apparent increase in return on capital became the basis for bonuses – even though in aggregate there was no improvement.
Nowadays only a few companies still dominated by the shareholdings of a few (like Microsoft, News Ltd or Google) are prepared to fritter away money on unprofitable side projects. Even zaibatsu are less keen to expand the range of what they do now, and the chaebol were forcibly shrunk in the late 90s.
So we end up with a company like Apple, with a handful of very successful products that make a great deal of money it can’t do anything with. It has no other divisions to cross subsidize subsidize, or research to undertake (the company’s success has always been in packaging end products and not developing technology. They either cop the tax when they repatriate the money and pay larger dividends, or they let it sit in a bank account. They certainly wouldn’t pursue something outside their core – unless there was a tax dodge in it.
To be sure, owning a country would free the company from tax obligations were they to incorporate there and pay dividends there. But do they pay them in Apple dollars, get another country to let them use their currency or make sure the country they buy already has an easily currency? Think about what would be needed to support a new currency. They’d either start taxing, issuing debt, or make Apple dollars backable by Apple products – all of which seem foolish and still unlikely to make it a tradable currency (assuming shareholders want to buy things other than consumer electronics). But whom would let them use their currency, and countries that already have hard currencies are likely to be too large.
And of course, if shareholders remain in other countries, they’d be reliant on their resident states continuing to recognise Appledonia as a sovereign state in a way that prevents them taxing those same dividends. Maybe they’d also pay to join the WTO?
