The last of the 'pullover' videos deals mainly with issues relating to tax competition:
If you want me to suggest a company that has no clue what to do with its money start with Apple. It's cash pile exceeds $100 billion.
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I used to say that that there are two Big Things that no-one talks about in economics. Now that Piketty’s got us talking about inequality, I’m down to this one: the secular shift from productive investment, into rent-seeking.
I view the practice of hoarding cash as a part of that – although ‘hoarding’ is properly used as a label for withdrawing capital from the economy, rents and production alike, and sitting on it as ‘dead money’.
Apple’s money is, of course, in ‘near-cash’ assets: mostly T-Bills, and that’s a rent on the American taxpayer.
Rent seeking is the basis of neo-feudalism
Richard, thank you for this observation, as it suddenly clarifies for me what should have been blindingly obvious, which is that the whole mediaeval feudal economy was also based on rent, with very little of the creative innovation of a capitalist economy.
Wealth had to be tangible, in the form of coinage or plate and precious metals, forcing monarchs to raise taxes ahead of expenditure (the opposite of today’s situation), with modern banking (on which the Medici based their power – its not for nothing that the pawnbrokers symbol is based on the Medici coat of arms).
So what you refer to – companies sitting on piles of cash, seems to be not pre- AND post-capitalist. And, alas, it would seem to me that that means such companies are in the position of wealthy feudal monarchies, which often used their wealth for territorial expansion. In a word, these companies sitting on cash mountains may – perhaps already do – turn their wealth-seeking and hoarding instincts to war. They’ve shown no interest in innovating, so perhaps they will turn to rapine and plunder, by financing mor ludicrous and ineffective actions in the “war on terror” – as Halliburton showedcin Iraq, a great way to boost shareholder value!
Agreed
Exactly. Capitalism is supposed to be the deployment of capital in productive enterprise: Things of value are created, services that add value are performed, a workforce is paid and recirculates the cash by consuming goods and services…
Rent-seeking is the extraction of value created by others: neofeudalism describes it well, because those ‘rents’ are sometimes harder to spot than the coerced labour of serfs under Feudalism-Classicâ„¢.
I get a useful tutorial on rent-seeking on my train journey to work, over tracks that the taxpayer used to own.
Meanwhile, it’s rather telling that tech companies – Apple included – put more money into purchasing rents, in the form of patents and copyrights, than they invest in R&D.
In the film about Werner’s book ‘Princes of the Yen’ it says that Nissan motor company’s financial arm made more money in the financial markets than from making cars.
Considering also what happened to the American automobile industry after 2008 (was it low sales or gambling on the stock market – answer on a post card please) so there seems to be gathering evidence that rent seeking is growing rather than the role of making stuff to sell.
These days its all about making money out of money that has already been made, money that already been made, money that already been made etc.
One of the things that irks me is how other econoimcal phenomenan are then used to hide this increasing use of rentier culture – such as ‘Oh, technology is now making people redundant’.
Oh really? It’s not necessarily technology making people redundant – it’s a move away from production AS WELL AS technology. One is a result of progress; the other is a choice that is made to make lots of cash out of well….cash – and a bad one for the real world at that.
Almost all car companies make more out of finance than they do out of cars
Cars are just a means of creating debt
I explored this in The courageous State
Yes indeed.
I’ve just started Chapter 6 of your book after my post. I know people who work in the industry who say that car makers also make a killing on the after sales services too.
Apologies for typos and commissions in above: the sentence on “modern banking” should say after the closed bracket “only emerged towards the end of the Middle Ages in the pre-Renaissance period”. And the sentence beginning “So what you refer to” should say “both pre- AND post-capitalist”. Richard, you might choose to amend my earlier post accordingly, and delete this one.
On iPad so will have to do both – sorry
I suspect, given its latest results, that it has a damn sight better clue what to do with its money than you do, Richard.
Bizarrely, much of it is invested in US Treasury stocks
Hmm,I wouldn’t put them at the top of my investment list!
I understand that China, on of the biggest holders is trying divest itself of dollars and will take gold in exchange a fraction of the value of a dollar.
Any comments Ed?
According to Robert Johnson (economist at INET) there is so much concentrated wealth that those who have it are getting so nervous that they are planning ‘escape routes’ which include buying up remote tracts of land to be guarded by private armies. perhaps Syriza has injected a bit more pace into these plans.
See: http://rt.com/op-edge/227103-wealthy-inequality-income-social/
Mr Murphy,
You appear to be mis-informed. Corporate profits as a share of GDP is currently 11%, by far the highest level since world war 2 and probably an all-time high. Please find here a graph of that time series http://research.stlouisfed.org/fred2/graph/?g=cSh
I am truly happy I was able to help further your understanding on this issue.
MR
Oh dear
You really do not understand, do you?
Profits and rents are not the same thing economically but ate confused when recorded in national statistics as the income of companies
Rents are undoubtedly rising
Profits are not
I am pleased to have sent you back to you economics primer so you might reacquaint yourself with the economic notion of rent
I understand Apple currently makes more money out of its money than it does out of making Apple goods. Something has clearly gone wrong…
I have to say I doubt that is true, by some way