disrupted-19

You might say, so what, rising profits are good aren’t they?

But the flip side to rising profits is falling wages. Just as US profits to GDP recently hit an all-time high, wages to US GDP fell to an all-time low.

The greatest irony of rising corporate profits is that they may not be in the interest of the companies making the profits. The rationale goes like this. When wages rise across the economy, aggregated demand rises, the economy grows, and thus, so does profits. See it this way: if profits have a smaller slice of the GDP cake, the cake is more likely to expand, and thus the absolute size of the slice taken by profits may grow. The exception to this is if companies use profits to fund investment. But this has not been happening at the moment.

So if anything, a case can be made for why corporate tax across the world should rise.

But, as the dispute between Apple and the EU demonstrates, in the era of globalisation, multinationals can shop around reducing their corporation tax bill.

The solution may lie with some kind of international harmonisation of corporation tax, this could take the money currently lying idle on corporate balance sheets, and pump it into the economy. But can you imagine the furore if there really were efforts to create a global minimum corporate tax rate? It may be a solution, but is likely to be about as popular with those who believe in the primacy of sovereignty as a tax on oxygen.