Nathan Newman wrote:
> >On Behalf Of Doug Henwood
>>
>> Nathan Newman wrote:
>>
>> >How do you measure profit share of GDP for multinationals?
>>
>> That doesn't matter for a trend measured over several years.
>
>Sure it does if an increasing share of profits is coming from overseas
>exploitation.
Over several years? Come now, that's not serious.
> As you note, there has been a slight uptick in wages in the
>US in the last few years, which could easily mean less profits from the wage
>bill in the US but more from both exploitation and sales globally.
The real wage increase is led by private services; manufacturing is
pretty flat. There is some movement of services FDI, but it's not
*that* big.
>There is also the concern that multinationals increasingly play games with
>different accounting systems globally to suppress profits by allocating
>costs to the highest tax areas, while allocating profits to subsidiaries in
>tax havens. Murdoch's NewsCorp has been most successful at this strategy,
>allocating most of its profits to subsidiaries to whom it "sells" rights to
>its films and other assets as bargain-basement prices, making profits appear
>far less in the US than they really are.
This is an ancient story. Drug companies have been allocating profits
to their Puerto Rican subsidiaries for decades.
>I won't argue for rational expectations on the future, but the sky-high
>prices for Internet stocks show plenty of investment based on expectations
>of profit in the future.
As did the South Sea bubble.
> On what basis, given that, can you argue stock
>prices are just based on short-term movements in profits?
See Robert Shiller's Market Volatility, esp the chapter "Do Stock
Prices Move Too Much To Justify Subsequent Changes in Dividends."
There's a graph of detrended stock prices vs. detrended dividends
that says it all.
>Actually, the expansion of tax shelters has exploded in just the last few
>years (as opposed to dropping rates and expanded deductions), according to
>recent reports.
The early Reagan years were full of these. CTJ did a famous analysis
of all the profitable companies that were paying no taxes. Besides,
the BEA does its best to adjust reported profits to reflect economic
reality.
> As NYT wrote last week, "With incomes rising, particularly
>among the wealthy, Americans are paying a lot more in federal taxes than
>they did before the economic expansion of the last decade. Not so, American
>corporations. Their profits are growing even faster than Americans' incomes,
>yet the taxes they pay have peaked and have begun to fall...taxes paid by
>companies on profits reported to the IRS fell to 20 cents on the dollar in
>1997, from 26 cents on the dollar in 1990."
Taxes paid on *reported* profits. The reported profits are there,
they're just not paying taxes on them.
>Again, you seem to have a US-only approach on this. You are seriously
>arguing that multinationals are not increasing exploitation globally.
No I'm not. U.S. corporate profitability rose from around 1982 to
1996, and is off a bit since. One of the reasons is higher
international exploitation. Another is higher domestic exploitation.
Another is lower interest rates.
Doug
