Start-ups are good, they help erode the power of the corporate giants. Technology may have led to increased automation, but it has also lowered barriers to entry. Smaller entrepreneurial businesses may be the means by which the increasing stranglehold on GDP by larger companies is broken.
But to reduce corporation tax paid by the world’s largest companies makes no sense, it is the precise opposite of what is required to fix the problem of lack of trickle down. Indeed, evidence from the noughties, when George Bush cut corporation tax, is that rather than investment rising, as we might have hoped, we saw more mergers and acquisitions and share buybacks.
Ironically, in the long run it is not even in the interests of the larger companies – for it to be self-sustaining, capitalism needs aggregate demand to grow at the same pace as productive potential, and that cannot happen without ensuring labour enjoys a high share of the GDP cake, and that growth in median wages matches growth in GDP.
So, the answer is not to respond to the issue of $36 trillion sitting off-shore avoiding tax by cutting tax, the solution lies with global cooperation and may ultimately lie with some kind of minimum global corporation tax, of at least 25 per cent of profits in excess of $10 million, and which all members of the World Trade Organisation must agree to or they will be expelled.
Agreeing to such a deal may seem like mission impossible, but the alternative is that this decade mirrors the 1930s, and ends in much the same way.