General Electric: How a Multi-National Corporation is Profitable

Introduction

Companies produce goods and services and are taxed by the states in which they operated. In 2014, Fortune magazine noted that the US, Japan, Argentina, Pakistan and Venezuela led the world with corporate tax rates– all more than 30% (Dumaine, 2014). A 2014 Tax Foundation report noted that the United States had the third highest general top marginal corporate income tax rate in the world at 39.1 percent, and was exceeded only by Chad and the United Arab Emirates at 40% and 55% (Pomerleau, 2014). While these state governments provide some services to businesses, corporations in these countries incur corporate tax as part of the cost of doing business. Since these businesses really don’t pay tax, they must pass this expense onto their customers in the form of elevated prices. If countries have differing rates of taxation such as China whose corporate tax rate was at 25% then if other things about the production and distribution of products and services in a global marketplace are equal the nominal corporate tax rate can put domestic US companies at a disadvantage (“China Corporate Tax Rate,” 2015).

Similarly, companies that produce goods and services must use the currencies of that country to conduct business in that country since currency is the legal tender of those countries. When the supply of money in countries exceeds the real output, these countries experience inflation (Ely, Adams, Lorenz, & Young, 1926). Inflation can be influenced by the cost of other money’s in countries that trade with the domestic market. The Nomad Capitalist reported in 2013 that the top five countries in the world with inflation were South Sudan, Iran, Syria, Sudan and Venezuela (Henderson, 2013). In the United States the rate of inflation has been reported at 1.5% in 2013 (Current US Inflation Rates: 2005-2015, 2015). When considering the supply of money and its valuation in the world markets, currencies can strengthen or weaken themselves in the marketplace. When speaking of a strong or a weak dollar the value of that dollar changes against other currencies in the world. When the dollar is strong, it means that this currency can buy more goods and services and when it is weak it means that other currencies can buy goods and services in the domestic market. These fluctuations happen on a daily basis and high speed traders can capitalize on these differences for a profit in the FOREX marketplace (Nakaso, 2011). In these instances, investors can capitalize on inequalities in the movement of those currencies as well.

Another area of macroeconomic interest is the means by which countries borrow money from each other and this metric is  more commonly called national debt. When companies buy and sell in countries the rate at which governments assume debt means that at a later point in time the government of that country will have to take first from productive entities in the economy. If they tax citizens at a higher rate, then people will have less money to buy the companies products or services. If the governments increase the nominal taxation rate on businesses they will have to pass these increases onto their customers which means that fewer people will be able to afford their products or services, or worse, will choose a competitor’s product that can be sold on the market for less. Forbes reported in 2014 that the five most indebted countries of the world are: Japan, Greece, Italy, Portugal, and Singapore (Patton, 2014). The same report matched the debt to the gross domestic product and all these countries are trending at increasing this ratio.

Continue reading

Advertisements

Limits to Expansionist Economic Policy in Argentina

Introduction

When economies experience a recession, many central banks will turn to expansionist monetary policies as an attempt to stimulate an economy. Governments who measure a significant decline in aggregate demand may observe recession and cyclical unemployment. Discretionary spending policies are often implemented to resolve this, notably increased government spending, and reduced taxation or some combination of the two (McConnell, Brue, & Flynn, 2009). Economists O’Sullivan, Sheffrin, and Perez note that, “Policies that increase aggregate demand is expansionist,” and that, “Policies that decrease aggregate demand are contractionary policies,” (O’Sullivan, Sheffrin, & Perez, 2010). The idea behind the increase in aggregate demand is that enough government spending will increase consumer spending more and thus improve conditions in the economy. This is called the Fiscal Multiplier in as much as the shift in aggregate demand remains expected to outpace the initial increase in output of government spending (Quiggin, 2013).

More recently, expansionism included the creation of liquidity by the central bank through a phenomenon called Quantitative Easing (R.A., 2015). Quantitative Easing often comes in three varieties which include: an easing interest rates through the purchase of securities, the sale of short-term debt in exchange for long term debt, and portfolio re-balancing where investors sell assets to the central bank and use the funds to buy new assets in the economy (“Q’S, or not Q’S? ,” 2012).

Continue reading

The Misnomer of Free Trade: The Uruguay Round in Ukraine

Introduction

International trade organizations attempt to promote trade between nation states by utilizing mechanisms of the state. Following World War II, the United States and its trading partners engaged in the development of a trade framework designed to liberalize trade and payment systems between countries (Irwin, Mavroidis, and Sykes 2007). The reasons behind this were because Europe needed to be rebuilt following the devastation of World War II and factories needed to be rebuilt (“International Trade Agreements: GATT and NAFTA, Why Are They Important?” 1996). Several institutions were created from these negotiations to include the International Monetary Fund, The International Bank for Reconstruction and Development, and The General Agreements on Tariffs and Trade which set up the International Trade Organization. GATT had its legal origins in the Reciprocal Trade Agreement of 1934 (The Reciprocal Trade Agreement Act of 1934). This trade agreement shifted power from Congress which gave up the ability to legislate duties on specific goods when it delegated tariff negotiating power to the executive (Irwin, Mavroidis, and Sykes 2007). Since these countries also needed to resolve conflict and other non-trade issues the United Nations also came out of these negotiations (Choi 2015). A university of Economics Professor, Dr. Choi noted that, “GATT was the result of an international conference held at Geneva in 1947 to consider a draft charter for the International Trade Organization (ITO). The US initiated negotiations with 22 other countries that led to commitments to regulate 45,000 tariff rates,” (Choi 2015).

Continue reading

How did We Get Here?-Economic Webs of US Trade

Introduction

Background. Mass production allowed the feudal system of Western Society to revolutionize production and shifted the requirement of labor in the sustainment of larger populations. These efficiencies of Western Society displaced the work force whose new found cultural freedoms stemmed from the innovative revolutions in the Printing Press, the Renaissance and Reformation. Workers moved toward opportunities created by the first corporate entities chartered in trading companies and powered the engine that became the industrial revolution where mass production, refrigeration and its developments in medicine, steam, coal, and every other aspect of life and improved the quality of life for many who had access to these mass-produced goods. As economic areas of transportation, communications, commerce, production, and resources expanded beyond national and local boundaries, this integration of systems began to accelerate development for the human race toward the late 19th century and continued into modern times. Clinton Mentor and American historian and theorist Quigley commented on this path when he summarized this time line of events in Tragedy and Hope. He noted, “It appeared as the Agricultural Revolution about 1725 and as the Industrial Revolution about 1775, but it did not get started as a great burst of expansion until after 1820. Once started, it moved forward with an impetus such as the world had never seen before, and it looked as if Western Civilization might cover the whole globe,” (Quigley 1966). This was the rise of globalism (Ambrose 2010).

Scottish Historian Niall Ferguson credited the British people for brining globalism as civilization to the rest of the world (Ferguson 2012). Following British dominance of the world, the rise and influence in the subtleties of American Empire often brought commerce and credit rather than colonization as the force of social change to all corners of the world (D’Souza 2002). This saw the expansion of roads, rail, telephone lines, sewage systems and power grids across much of the developing world. American power dominated the reorganization of Western Society away from royal governance toward constitutional democracies from outcomes of World War I and the further directed the realignment of competitive collectivist political ideologies with the outcomes of World War II.

The shifting politico-economic ideologies saw feudalism become mercantilism. This mercantilism evolved into laissez-faire capitalism and then morphed into transnational economic structures of a multinational corporatocracy we see in global companies branded as development in emerging states today. These entities function often beyond nationalism but in order to conduct business with in a political economy must engage the nation state to facilitate commerce. It is this perspective that allows us to view how a multi-national can trade with multiple countries rather than a country trading with a country.

Continue reading

Analyzing Healthcare through the Lens of the Eurozone Crisis

Overview

Global Data and others have written various reports that outline the effects of monetary policy and the healthcare systems of Ireland, Portugal, Cyprus, Italy, Spain and Greece. This particular market sector has been heavily hit in the analysis by Global Data and several reasons for this are attributed since these countries are at the heart of the Eurozone Sovereign Debt Crisis. However, there are some underlying economic causes not explored by Global Data that have tremendous impact for policy makers, economists, and investors of these countries which are teetering on insolvency. At the center of this crisis is the Greek economy. The anomalies attributed to massive debt and spending by a socialized government does not tell the complete story. This includes the building of infrastructure by foreign multi-nationals in the 1980’s and 1990’s and a financing package that was initially offered by the International Monetary Fund to finance these upgrades. There was a restructuring of debt which allowed the Greeks to hide 2% of their debt off-books and a large American banking firm helped create this illiquidity. It is suggested that further inquiry be made into these multi-nationals, their financiers and their roles in bribery and extortion of the Greek government officials leading up to the crash.

  Continue reading

An Overview of Reliability and Validity

Introduction

In the perspective of understanding research methodologies, the importance of validation and reliability must be considered at various stages of a framework and process. In the preparatory or design phase of research consideration must be given to how the data will be treated. Similar treatment of the information in the Literature Review must also occur. In addressing the research question, data must be collected and how it is treated also remains important which lent credibility to how that data is interpreted in the findings portion of research.

How data is treated required a review of whether or not it belonged in the study. This involved a perspective of validity and reliability associated with the data. The following narrative will answer the following questions:

  • What is the difference between reliability and validity? Which is more important Why?
  • What are the different ways of assessing reliability?
  • What are the different ways of assessing validity?
  • What are the different ways of obtaining validity evidence?

Continue reading

What Would a Moral Healthcare Market Look Like? Statism vs. Free Markets

Introduction

Healthcare researcher, Sara Boslaugh, compared global healthcare systems and measured them with ten different criteria: 1) Emergency Health Services; 2) Costs of Hospitalization; 3) Costs of Drugs; 4) Major Health Issues; 5) Government Role in Health Care; 6) Insurance; 7) Access to Health Care; 8) Health Care Facilities; 9) Health Care Personnel (doctor level of training, etc.); and 10) Public Health Programs, (Boslaugh, 2013). Missing from this perspective of Boslaugh’s systems research are ethical perspectives to include levels of political and social corruption in correlation with healthcare systems in the country as informed by Medical Legal and Ethics Expert Myrtle Flight (Flight, 2004). Given the broad diversity of cultures and people around the world, Flight’s approach to the social norm of morals, healthcare systems around the world remain inherent with dilemmas (Marcus, 1998) due to the diversity of perspectives found in cultural relativism (Rachels, 1998). These perspectives include those which address controlling interests of the system like access, distribution, and cost. The role of the state in relation to the healthcare system thus becomes a focal point of ethical discussion. Rothbard cast this light upon the discussion, “The State provides a legal, orderly, a systematic channel for the predation of private property; it renders certain, secure, and relatively ‘peaceful’ the lifeline of the parasitic caste in society. Since production must always precede predation, the free market is anterior to the State,” (Rothbard, 1974). In this light we can explore the idea of what a moral healthcare system would look like.

Continue reading