Greg Bensinger has some strong words.
‘Twitter’s board of directors [decision] to accept a takeover bid from Elon Musk means the company thinks the social media company would be best served by the ownership of a man who uses the platform to slime his critics, body-shame people, defy securities laws and relentlessly hawk cryptocurrencies.’
He goes on to highlight Musk’s corporate track record. During the pandemic and lockdowns, Musk forced Tesla workers back to work, violating local health regulation. The same company has been the subject of allegations of racist abuse, discrimination, and sexual harassment. Similar allegations occurred among SpaceX employees. A California regulator sued the company over reports of racial discrimination against hundreds of employees [Musk told the workers to be ‘thick-skinned’]. Is anyone surprised that Musk was found guilty of threatening people – even illegally firing one – for attempting to organise a union at Tesla?
But, hey, isn’t our Elon an ‘entrepreneur’ – mercurial, maybe; but a visionary, an example of what the private sector can do if only those darn government regulators would get off its and his back?
No.
The classic definition of entrepreneur, first formulated by Kerry-born economist Richard Cantillon in the 18th century, is someone who organises and risks their own money pursuing a business venture.
This is not what Elon Musk does. He has built a career living off other people’s money; notably, the US taxpayer. He is a sponge capitalist, soaking up whatever public subsidy is going. His reliance on government handouts is chronic and long-standing. There’s just one twist: the public pays the money and he keeps the profit.
[Note: sponge capitalism should not be confused with SpongeBob SquarePants which apparently contains many anti-capitalist messages.]
Let’s start with the now famous Los Angeles Times investigation into Musk’s financing.
‘Elon Musk has built a multibillion-dollar fortune running companies that make electric cars, sell solar panels and launch rockets into space. And he’s built those companies with the help of billions in government subsidies.’
Jerry Hirsch compiled data showing that, by 2015, Tesla, SolarCity and Space X received nearly $5 billion government (US) subsidies. This included grants, tax breaks, factory construction, discounted loans, and environmental credits and rebates. Some of these are subsidies are particularly remarkable. Again, according to Hirsch writing in 2015:
‘New York state is spending $750 million to build a solar panel factory in Buffalo for SolarCity. The San Mateo, Calif.-based company will lease the plant for $1 a year. It will not pay property taxes for a decade, which would otherwise total an estimated $260 million.’
A $1 lease and no property tax. And Nevada agreed to provide Tesla with $1.3 billion in incentives to help build a massive battery factory near Reno.
And none of this accounts for the $5 billion-plus in public procurement contracts Musk’s companies received. No wonder a hedge fund manager stated:
‘Government support is a theme of [Musk’s] companies, and without it none of them would be around’.
All that comes from a 2015 investigation. What has our Elon been up to since then? Old habits are hard to break. Business Insider points out that Musk received a public sector contract last year from NASA worth $2.9 billion to bring "commercial" humans to the moon. He got another contract worth $653 million from the US Air Force in 2020. And while Tesla was grabbing some of the stimulus corporate grants during the pandemic in 2020, Musk tweeted that a government stimulus is not in the best interests of people.
Jacob Silverman identifies more public subsides:
‘[A government] program designed to spur new investment in impoverished areas has done little of the sort, instead providing tax breaks for space-travel moguls like Musk, Jeff Bezos, and Richard Branson. The Qualified Opportunity Zones program has been criticized for doling out its benefits to huge businesses seeking the latest tax advantage, rather than the scrappy local entrepreneurs it was supposed to help . . . By moving to Texas and pushing more of his money into opportunity-zone ventures, Elon Musk may save billions in taxes.’
Silverman also doubts Musk’s entrepreneurial foundation:
‘It’s entirely possible that this carnival barker of a CEO will continue finding crafty ways to extract tax breaks and favorable contracts from government entities for the rest of his career. But we should be alive to the ways in which Musk’s reputation is built on a faulty foundation of borrowed money and worker exploitation . . . For all his supposed brilliance in developing electric vehicles and rockets, this may be his greatest talent: grifting the government.’
What lessons can we draw from all this? Going beyond Musk-bashing, there are three issues.
First, if investors should be rewarded for the proportion of resources they put into a venture (a simple business maxim), this should be applied to taxpayers’ money. If a public agency provides a subsidy - either through direct grants, tax breaks or an in-kind contribution – they should receive a proportionate amount of equity or stake in the company or venture. This is a simple business maxim. We wouldn’t expect the private sector to invest without any stake. Why do we allow this to happen with the public sector?
Second, public procurement contracts should come with clauses regulating best-practice behaviour. How can public agencies award contracts to businesses that are being sued by public agencies for discrimination, that break labour laws, and whose executives conduct themselves publicly in shameless attacks on individuals? Public procurement should be a tool to create high-road, efficient and socially-responsible companies that are democratically accountable.
Third, yes, we need entrepreneurship (however that is defined) and entrepreneurs. That is why we need greater democracy in the workplace and more employee involvement in the firm-level decision-making process. We need to mobilise the ideas and contributions of people working across the economy – something that doesn’t happen now because capital, not labour, is privileged; companies are organised around top-down hierarchical structures; and people are just treated as just another commodity or input. Instead of celebrating publicly-subsidised, bonus-soaked CEOs and owners, we should be acclaiming the entrepreneurial abilities of all workers, and pursuing policies that promote them.
We need direct returns on public investment, more efficient and socially-responsible companies, we need more entrepreneurs.
That’s why we don’t need more Elon Musks.
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