The Big Changes Coming To A Post-Globalized World

The Big Changes Coming To A Post-Globalized World

This article was produced by Economy for All, a project of the Independent Media Institute.

The coronavirus pandemic has upended the global economic system, and just as importantly, cast out 40 years of neoliberal orthodoxy that dominated the industrialized world.

Forget about the "new world order." Offshoring and global supply chains are out; regional and local production is in. Market fundamentalism is passé; regulation is the norm. Public health is now more valuable than just-in-time supply systems. Stockpiling and industrial capacity suddenly make more sense, which may have future implications in the recently revived antitrust debate in the U.S.

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covid-19, coronavirus, economy

Global Pandemic Reveals World’s Rapidly Evolving Economic Changes

This article was produced by Economy for All, a project of the Independent Media Institute.

When the wealthiest country in the world is unable to produce basic medical gear to cope with a rampaging pandemic, it is dealing with a strategic vulnerability by depending on multinational supply chains to produce manufactured goods. Absent sufficient redundancies and physical reserves of resources, "just-in-time" lean supply systems can't cope with sudden disruptions. The global pandemic of 2020 is a case in point.

This pandemic continues to unfold, but it will serve as the D-Day equivalent of a new predominating economic model for the world, and which in many ways was beginning to take shape before COVID-19. At its core, developed and mixed market economies will factor in the health risk and growing military cost of sustaining international supply chains against investing in high-tech production closer to their markets, and increasingly export their goods to the rest of the world.

Dozens of economies that developed in the past 50 years by enmeshing themselves in the international supply chain on the basis of their labor price advantage will find themselves increasingly cut out of the new process. The contest for global power will increasingly pivot to the extraction and refinement of minerals and component materials that are critical to sustaining the high-tech economy model, away from carbon energy resources. We will be hearing much more about "national stockpiling" and "strategic reserves" beyond oil in the months and years ahead.

Not only has COVID-19 exposed potential health risks and costs involved (as globalized trade routes become vectors of contagion), but the champions of the offshoring phenomenon increasingly resort to myths and misconceptions that are irrelevant to a 21st-century economy. They are as obsolete as spending trillions annually on managing the supply and price of Middle East oil, which American foreign policy figures, including Martin Indyk, are beginning to openly say "isn't worth it."

Before we get into the details on the future economy, let's quickly review how the U.S. saw a massive decline in its industrial capacity. Bad ideas and pernicious orthodoxies grew like barnacles over the decades on what was once the world's leading manufacturer. First was the idea that offshoring is essential to preserving profitability. Often this assertion has been more apparent than real. As far as profitability goes, many companies have made choices to move manufacturing offshore despite continuing domestic profits on home shores. For example, the five North American plants that General Motors (GM) shut down in 2019 were still profitable, but the company, which had received a government bailout in 2009, chose to refocus on the higher-margin operations in China.

Of course, capitalism controlled by bankers and speculators gives free rein to companies to make profits on how they see fit. The consequences are that for decades, Detroit's "Big Three" automakers have consistently underperformed their German and Japanese counterparts because of their decision to embrace a Wall Street-driven culture that has prioritized short-term quarterly earnings, massive dividend payouts and unprecedented spending on stock repurchases over productive investment in innovation. And as GM's 2019 experience illustrates, the resultant profits did not go to spur domestic reinvestment, which in turn creates domestic employment, but abroad to expand China's manufacturing base. GM is but one example of the hundreds of major corporate actors that have denuded the country's industrial ecosystem, creating gaps in the U.S. workforce and shortages of vital skilled labor.

There are also multiple examples of companies acquiring smaller innovative companies "solely to discontinue the target's innovation projects and preempt future competition," according to researchers Colleen Cunningham, from London Business School, and Florian Ederer and Song Ma, both from Yale. A particularly poignant example of these "killer acquisitions," given today's ongoing ventilator shortage, is Covidien's attempted 2012 purchase of California-based Newport Medical Instruments, a smaller competing medical device company that had secured a contract from the federal government in 2010 to produce up to 40,000 mobile ventilators. But as David Dayen of The American Prospect observed, the purported rationale for the acquisition was bogus: It had nothing to do with expanding Covidien's product base and everything to do with destroying a competitor whose product "could cut into its existing profits."

For years, the political economist Seymour Melman argued that companies that embraced the soft option of downsizing/offshoring labor would ultimately create grave production weaknesses in the U.S. economy and stifle innovation. Higher domestic wages, by contrast, would induce competent managers to compensate by using and investing in more and better machinery, which in turn would lead to a virtuous cycle of production: higher profits, which can lead to higher wages, leading to better machinery and organization of work.

While American companies may think they are improving their individual competitiveness in the short term by shifting operations to low-cost labor economies, the current pandemic illustrates that they collectively undermined America's (and their own) competitiveness over the long haul.

Intuitively, Melman's forecasts make sense. A modern manufacturing "ecosystem" makes it much easier to redeploy and pivot to new priorities when there are shortages in vital areas. China, for example, has a sufficiently deep and robust industrial infrastructure to adjust production lines quickly, even as the U.S. continues to struggle with ventilator shortages. And in Germany, a flagship company like Siemens, for example, announced that it is "making its Additive Manufacturing (AM) Network along with its 3D printers, available to the global medical community to speed design and production of medical components … to enable faster and less complicated production of spare parts for machines like ventilators."

The Next Economy

A combination of existing technologies and capacities that are already in business application and on the rise will enable the new era of production and global economic overhaul and develop in motion with Melman's thinking. These include artificial intelligence computing, automated manufacturing and increasingly universal and portable manufacturing equipment, innovations in energy production and storage, high-speed data transfer, and nanotechnology. Some of these technologies are mature, profitable and business-ready. Others are still in an early phase but will be seen as more economically viable or worthy of state investment and subsidy in light of a growing awareness among policy planners that the consequences of running global supply chains are potentially more expensive.

All of these technologies are revolutionary. Their concomitant rise will create a new economic era dominated by the countries that fully integrate them into their economies:

  • AI computing has the capacity to introduce game-changing efficiencies in the production process, quality control in terms of production and blueprints for new models of production and consumption. It can handle huge volumes of administration and management of automated systems. This industry is estimated to be growing at an annual rate of over 45 percent.
  • Automated manufacturing can be expensive and requires skilled labor to maintain, but it can produce goods at precision levels beyond what people can make, as well as at increasing volumes. 3D manufacturing is a universalizing process: one machine capable of producing a dizzying number of products that already competes with some products from global supply chains. Many companies are locating back in deindustrialized New York and other U.S. cities on the back of 3D manufacturing.
  • Recent major advances in energy production—from solar and wind to geothermal and energy storage—are the holy grail of non-carbon energy sources, permitting solar and wind industries to compete on a 24-hour basis with carbon-based fuels, giving more weight for policy planners to minimize fuel imports and revisit dormant energy alternatives.
  • High-speed data transfer—enabled through satellites and huge server farms—is necessary for the multi-location management and logistical coordination of the segments of the new supply chain: the means of information transfer and the capacity of one hand to know what the other is doing.
  • The rise of nanotechnology—the capacity to engage in precision design and manufacture at a molecular scale—presents humanity with a new frontier of materials and products that have capabilities beyond what we currently know in terms of materials, products, medicines and much more. Products ranging from glass to suntan lotion are already vastly enhanced by nanotechnology production. Qualities of human-made materials such as those designed for fireproofing, bulletproofing, insulation and space travel are in the midst of being revolutionized. Medicines can be deployed through nanotechnology at the molecular level, vastly improving their effectiveness.

The collective strength of these technologies will diminish the appeal of finding cheaper labor outside a country's borders or common market—and the costs they entail. Countries that are advanced along these lines and have access to the minerals required to engage in this form of production will prosper, plugging into their existing consumer market and building up a head of steam that will eventually lead to a new chain of international exports and imports. These trend lines will accelerate the decline of brick-and-mortar retail and service industries.

Export-led economies that grew on the back of a labor price advantage will find themselves in a role reversal of having the option of importing better goods from the markets they once exported to or paying intellectual property (IP) licensing fees to produce them domestically. The geopolitical advantages that went with offering a developing country a labor role in a global supply chain will be replaced with discounts on IP licenses or imports.

The past phases of industrialization saw an ongoing contest among wealthy countries for control of petroleum, minerals and shipping lanes, using all their available powers to obtain them. The historical pattern is that residents of the resource-rich and undeveloped countries suffer far more than prosper in the mineral extraction and export process to wealthy markets. Barring a major shift in attitudes to wealth distribution or successful political resistance to exploitation, the pattern will likely continue, with the wealthy countries' preoccupations pivoting increasingly from carbon energy resources to the components of the new economy: cobalt, lithium and rare metals. Resources that sustain the present and future economies, like iron, copper and gold, will continue to retain their strategic value.

Much of Europe and Asian countries like China, South Korea and Japan are poised for the transition. Based on their traditions of rigid state-driven capitalism, these nations instinctively grasp how state capacity and direction can help drive further industrial development. It remains to be seen if the U.S. is fully capable of it. That is unlikely, if the prevailing neoliberal ideology persists, limiting the role of the U.S. government to be, at best, a neutral umpire that sustains efficient, rent-free markets able to supervise the delivery of an increasingly narrow set of public goods (as opposed to an active participant in industrial policy).

The U.S., with thousands of advanced research institutions, is certainly capable of the next stage of economic development. It has a developed market and a partial manufacturing base. But it also has a long history of wage-avoidance for its workforces and an utterly dysfunctional political process. You need nation-state competence and highly skilled labor in this new world, as well as a willingness to expand ownership and dividend models to workers and the governments that funded the research for this advanced economy.

The coronavirus pandemic will force the U.S. and other countries to stop making distinctions between low-tech business (supposedly fine to offshore) versus high value-added industry. Not only can production lines be altered to cope with shortages (as China is doing), but there is often a continuum in the industrial ecosystem.

Consider the case of surgical masks. Even though their production is ostensibly a low-tech commodified business, the critical inner filtration layer of a mask, which allows the wearer to breathe while reducing the inflow of possible infectious particles, is a high-end business: Costing "upward of [$4.23 million] apiece, the machine that creates this fabric melts down plastic material and blows it out in strands, like cotton candy, into flat sheets of melt-blown fabric for face masks and other filtration products. A similar line of machines can create a related kind of fabric, called spun-bond fabric, also used in face masks and in medical protection suits worn by health-care workers," according to a report carried by National Public Radio.

The point is that there is a continuum. One creates the demand for the other. Eliminate one industry and another potentially dies, much like a biological ecosystem. We now know that when forests are cut down, at some point if the surviving forest is too small, the whole ecosystem collapses. The ecosystem has to be large enough to encompass all of the niches that make it work.

If the machine tool industry is allocated in one country, the textile industry in another, the steel industry in another, the whole thing becomes much more delicate and inefficient, depending on a greater range of variables to succeed. Crucially, the speed with which innovations can ricochet around the system decreases significantly. When Japanese auto manufacturers have access to Japanese machine tool makers, they can get at the machine tool advances before GM and Ford. Proximity becomes a competitive advantage.

All of which helps to explain why the distinction between offshoring hardware while retaining software is not only fatuous but damaging to long-term economic welfare.

Offshoring left the U.S. unprepared for COVID-19. It has also occasioned a widespread reassessment of globalization: What was once seen as the heretical refuge of economic nationalists has now become respectable again. Even without this pandemic, the foundations of America's economic model were failing and becoming rapidly obsolete.

The question is: As the world moves to a post-carbon future, can the U.S. economy take away the primacy of rent-extracting sectors like finance, insurance and real estate; Hollywood films, smartphone apps, or increasingly irrelevant sectors like oil and natural gas exports, and join the leaders of the pack? Or is coronavirus merely the pandemic that presages a more terminal disease?

Marshall Auerback is a market analyst and commentator.

Jan Ritch-Frel is the executive director of the Independent Media Institute.

Financial Elites Seem Oblivious To Threat Of Economic Calamity

Financial Elites Seem Oblivious To Threat Of Economic Calamity

This article was produced by Economy for All, a project of the Independent Media Institute.

Can runaway booms descend into busts absent monetary tightening by the world’s central banks? I pose this question in the wake of an extraordinary exchange on January 22 at Davos between Bloomberg editor-at-large Tom Keene and Bob Prince, co-CIO of Bridgewater Associates, in which the latter posited the notion that “we’ve probably seen the end of the boom-bust cycle.”

It is striking that one of today’s titans of finance has given us what appears to be another version of “this time it’s different,” which the famous investor Sir John Templeton once described as “the four most expensive words in investing.”

My own basic take has been that the U.S. economy over the past three years has been weaker than the underlying quantitative data suggests and that there is ample historical precedent to suggest that credit cycles can end, even in the context of a low interest rate environment, notably via a deterioration in the quality of credit itself, as the great economist Hyman Minsky once explained in his financial instability hypothesis. The truth is that for decades, the U.S.—indeed the entire global economy—has been characterized by an economically unsustainable model in which larger and larger portions of GDP gains have been going to a smaller number of people at the top (who also have a higher propensity to save than people with lower incomes, which means the “trickle-down” effect is minimal to nonexistent). Wage gains also appear to be leveling off, which could have ominous implications for sustainable future growth. Yet many investors like Prince seem to accept today’s buoyant asset bubbles as a given in the absence of a concerted effort by the central banks to “take away the punch bowl just when the party gets going” (in the famous words of former Fed Chairman William McChesney Martin), via higher interest rates.

In the words of Bob Prince (quoted in Doug Noland’s Credit Bubble Bulletin):

Bob Prince…: “2018 I think was a lesson learned. The tightening of central banks all around the world wasn’t intended to cause a downturn—wasn’t intended to cause what it did. But I think lessons were learned from that. And I think it was really a marker that we’ve probably seen the end of the boom-bust cycle.”

Bloomberg’s Tom Keene: “Is it the end of the hedge fund business in modeling portfolios off the guesstimates of what central banks will do?”

Prince: “That won’t play much of a role nearly as it has. You remember the ’80s when we sat and waited for the money supply numbers. We’ve come a long way since then… Now we talk 25 plus [BPS Fed rate increase], 25 minus. We’re not even going to get 25 plus or minus and we got negative yields. That idea of the boom-bust cycle—and that history that we’ve been in for decades—is really driven by shifts in credit and monetary policy. But you’re in a situation now where the Fed is in a box. They can’t tighten, and they can’t ease—nor can other central banks, particularly the reserve currencies. And so where do you go from here? It’s not going to look like it has.”

Prince goes on to acknowledge that “cycles in growth are caused by the boom and bust in credit: Credit expansion, credit contraction,” but makes the assumption that “those expansions and contractions of credit are largely driven by changes in monetary policy.”

That may have been the case for much of the post-World War II period, but if we look back further, there is evidence to suggest that Prince’s hypothesis is another variant of the dangerous “this time it’s different” truism.

Why have so many people gotten this wrong?

The misconception probably stems from a famous statement made in 1997 by the MIT economist Rudi Dornbusch: “None of the U.S. expansions of the past 40 years died in bed of old age; every one was murdered by the Federal Reserve,” and this was more or less true of the U.S. economy from 1946 until the 2000s.

But then economic dynamics changed. Yes, the Federal Reserve raised the Fed funds rate by 400 basis points in the mid-2000s, but it reversed almost all of that move and began opening the floodgates of bailout financing by early May 2008. Nevertheless, the U.S. and global economy fell off a cliff in the second half of that year as global financial fragility erupted into a full-blown global systemic crisis to a degree unseen since the 1930s.

Why was it different that time? The reason is that there had emerged myriad asset bubbles and a related unprecedented rise in private indebtedness in the U.S. and other economies. These supports to cyclical demand expansion were unstable and unsustainable. In other words, these were conditions very similar to those that prevail today.

Hyman Minsky and Irving Fisher described how once the debt “disease” goes metastatic there will come a “Minsky moment” when euphoria gives way to concern and then to panic liquidation and credit revulsion. When that dynamic is in full flower, the Fed is powerless, no matter how much they want to bring the punchbowl back.

The U.S. and much of the global economy still have quasi-bubbleized assets and very high levels of private (and quasi-private) indebtedness. Bob Prince and many of his investment cohorts appear to remain oblivious to the threat of a Minsky/Fisher debt deflation dynamic, which the Fed and the central banking fraternity can do little to stop, if one is to judge from today’s current buoyant stock markets.

There is yet another way in which global economic growth can slow or even falter this time around, which I have discussed before (in the context of China’s economy): This thesis dates from “a very old idea from business cycle theory prior to the Second World War that private sector over-investment can become so unsustainably high that even without a fiscal/monetary shock, there could be a fall in autonomous investment. Once that begins,” a weakening edifice of highly suspect and marginal lending activity “can lead to a cumulative economic contraction even if interest rates plummet and monetary conditions ease.”

This old idea from the history of economics has largely been forgotten due to changes in the fads and fashions in academic economics. But there are grounds for thinking it is an idea whose time has come once again.

Globally, we have a glut of consumer goods, much of it emanating from China, but given increasingly weakening demand from an economy that is growing more and more skewed to the top 1 percent, we have fewer consumers able to buy it. Moreover, in China itself, modest fiscal stimulus measures undertaken at the end of last year could well be overridden by the onset of the coronavirus, which risks undermining the impact of these recent upticks in infrastructure investment, along with the potential benefits accrued from the cessation of the trade war with the U.S. government.

It follows that the world has a condition of over-investment that is unsustainable. This means there will be less investment to produce additional goods. Much like a rickety building on shaky foundations, therefore, a decline in global autonomous investment threatens to plunge us into a global economic slowdown, independent of actions by the global or national monetary authorities.

Are there any signs of this? Over the past year, global growth “recorded its weakest pace since the global financial crisis a decade ago,” according to the International Monetary Fund. This, despite buoyant risk asset markets, credit and money growth in key economies well in excess of nominal GDP, super-easy monetary policy everywhere, and an end of the fiscal restriction of recent years. Therefore, we cannot attribute this surprising softening to a “murderous Fed” (to paraphrase Dornbusch) or its cohorts in the global central banking fraternity. It is, however, possible to posit that we may be seeing a cresting of excessive global fixed investment, which eventually could cause a global recession. There is no question that our central banks and governments will try to do “whatever it takes” to postpone such a decline.

The point is that, relative to the post-war business cycle patterns in most people’s minds, the end of this global expansion does not need a “murderous Fed.” Excessive risk asset valuations and high indebtedness, even in a world of low prevailing interest rates and unprecedented central bank intervention, can nonetheless lead to negative financial and economic dynamics. And given excessive global capital spending in a world where the warranted rate of growth has now downshifted, an autonomous decline in excessive investment can do the same. Add to this the increasing risks brought about by the spread of the coronavirus, and you’ve got the ingredients for an incipient global economic calamity.

Marshall Auerback is a market analyst and commentator

New Data Show Costly Trump Tax Cut Achieved Little

New Data Show Costly Trump Tax Cut Achieved Little

The most commonly heard refrain when Donald Trump and the GOP were seeking to pass some version of corporate tax reform went something like this: There are literally trillions of dollars trapped in offshore dollar deposits which, because of America’s uncompetitive tax rates, cannot be brought back home. Cut the corporate tax rate and get those dollars repatriated, thereby unleashing a flood of new job-creating investment in the process. Or so the pitch went.

It’s not new and has never really stood up to scrutiny. Yet virtually every single figure who lobbied for corporate tax reform has made a version of this argument. In the past, Congress couldn’t or wouldn’t take up the cause, but, desperate for a political win after the loss on health care, Trump and the GOP leadership ran with a recycled version of this argument, and Congress finally passed the Tax Cuts and Jobs Act on December 22, 2017. The headline feature was a cut in the official corporate tax rate from 35 percent to 21 percent.

So did reality correspond to the theoretical case made for the tax reform bill? We now have enough information to make a reasonably informed assessment. Unless you think that tax havens like Ireland, Bermuda or the Cayman Islands, all of which continue to feature as major foreign holders of U.S. Treasuries, have suddenly emerged as economic superpowers, the more realistic interpretation of the data shows the president’s much-vaunted claims about the tax reform to be bogus on a number of levels. Even though some dollars have been “brought home,” there remain trillions of dollars domiciled in these countries (at least in an accounting sense, which I’ll discuss in a moment). If anything, the key provisions of the new legislation have given even greater incentives for U.S. corporations to shift production abroad, engage in yet more tax avoidance activities and thereby exacerbate prevailing economic inequality. Which, knowing Donald Trump, was probably the whole point in the first place.

This tax bill was constructed on a foundation of lies. To cite one obvious example, the real U.S. corporate tax rate has never been near the oft-cited 35 percent level. As recently as 2014, the Congressional Research Service estimated that the effective rate (the net rate paid after deductions and credits) was around 27.1 percent, which was well in line with America’s international competitors.

But even the new and supposedly more competitive 21 percent rate has not been as advertised. As Brad Setser (a senior fellow at the Council on Foreign Relations) has illustrated, the new tax bill also included a provision that enabled “companies that shift their profits abroad to pay tax at a rate well below the already-reduced corporate income tax…Why would any multinational corporation pay America’s 21 percent tax rate when it could pay the new ‘global minimum’ rate of 10.5 percent on profits shifted to tax havens, particularly when there are few restrictions on how money can be moved around a company and its foreign subsidiaries?” The upshot, as Setser concludes, is that “the global distribution of corporations’ offshore profits—our best measure of their tax avoidance gymnastics—hasn’t budged from the prevailing trend.”

Although this new 10.5 percent rate applies to “global intangibles,” such as patents, trademarks, and copyrights, the legislation still creates incentives for companies (notably pharmaceuticals and high-tech companies) to shift investment in tangible assets as well (such as factories) in order to maximize the benefits of this global rate on intangibles.

Many anticipated this result at the time the new law was enacted. The legislation incentivizes increased offshore investment in real assets such as factories, because the more companies invest in these “tangibles” in offshore low tax jurisdictions such as Ireland, the easier it becomes to incur a “calculated minimum tax on your offshore intangible income (the patents and the like on a new drug, for example),” according to Setser.  The effect is also to exacerbate the trade deficit. A $20 billion jump in the pharmaceutical trade deficit last year provides excellent evidence of this trend. Ironically, this works at variance with Trump’s “America First” trade nationalism, and his concomitant efforts to wield the tariff weapon in order to disrupt global supply chains and get corporate America to re-domicile investment at home.

Parenthetically, a further political by-product has been to give the deficit hawks more political ammunition in their goal to cut supposedly “unsustainable” social welfare expenditures, perpetuating even greater economic inequality, on the grounds of insufficient tax revenues to “fund” these programs. That is another lie (see this New York Times op-ed by Stephanie Kelton to understand why).

As for the other bogus arguments used to justify this legislation, it is worth noting that most of dollars allegedly “trapped” overseas are in fact domiciled in the U.S. They have been classified as “offshore” purely for tax accounting purposes. Yves Smith of “Naked Capitalism,” for example, has pointed out that Apple stored the dollars “related to its Irish sub in banks in the US and managed it out of an internal hedge fund in Arizona.” Similarly, the Brookings Institution notes that American tax accounting rules do not place geographic restrictions on where those U.S. dollars are actually held, even if the Treasury data records them as “offshore” for tax purposes. Quite the contrary: “[T]he financial statements of the companies with large stocks of overseas earnings, like Apple, Microsoft, Cisco, Google, Oracle, or Merck…show most of it is in U.S. treasuries, U.S. agency securities, U.S. mortgage backed securities, or U.S. dollar-denominated corporate notes and bonds.” In other words, the dollars are “home” and invested in the U.S. financial system.

So in what ways are the dollars actually “trapped” (i.e., unavailable for domestic use without severe tax repercussions)? They have never been so in reality. Through financial engineering, the banks that have held the dollars “offshore” on behalf of these American multinationals have extended loans against the stockpile so as to “liberate” the capital to be used as the companies saw fit. It’s a form of hypothecated lending. Not only has the resultant “synthetic cash repatriation” provided a nice margin for what are effectively risk-free loans, but it also has enabled the beneficiary companies to deploy the dollars within the U.S. while avoiding tax penalties.

But here’s the key point: Instead of investing in new plants and equipment, a large proportion of these dollars have instead been used for share buybacks or distributed back to shareholders via dividend payments. Anne Marie Knott of quantifies the totals: “For the first three quarters of 2018, buybacks were $583.4 billion (up 52.6 percent from 2017). In contrast, aggregate capital investment increased 8.8 percent over 2017, while R&D investment growth at US public companies increased 12.5 percent over 2017 growth.” So the top tier again wins in all ways: net profits are fattened, shareholders get more cash, and CEO compensation is elevated, as the value of the stock prices goes higher via share buybacks.

The dollars, in other words, have only been “trapped” to the extent that corporate management has chosen not to deploy them to foster real economic activity. “Punitive” corporate tax rates, in other words, have been a fig leaf. But the American worker has derived no real benefit from this repatriation, which was the political premise used to sell the bill in the first place.

Since the passage of the tax bill, the data show no significant evidence of corporate America bringing back jobs or profits from abroad. In fact, there is much to suggest the opposite: namely, that tax avoidance is accelerating in the wake of the legislation’s passage, rather than decreasing. Consider that the number of companies paying no taxes has gone from 30 to 60 since the bill’s enactment.

But it’s worse than that, as Setser highlights:

“Well over half the profits that American companies report earning abroad are still booked in only a few low-tax nations—places that, of course, are not actually home to the customers, workers and taxpayers facilitating most of their business. A multinational corporation can route its global sales through Ireland, pay royalties to its Dutch subsidiary and then funnel income to its Bermudian subsidiary—taking advantage of Bermuda’s corporate tax rate of zero.”

Again, the money itself does not make this circuitous voyage. These are all bookkeeping entries for accounting purposes. In another report, Setser estimates the totals in revenue not accrued by the U.S. Treasury to be equivalent to 1.5 percent of GDP, or some $300 billion that is theoretically unavailable for use on the home front.

Global tax arbitrage, therefore, runs in parallel with global labor arbitrage. That’s the real story behind globalization, which its champions never seem to mention, as they paint a story of worldwide prosperity pulling millions out of poverty. However, as I’ve written before, “a big portion of Trump voters were working-class Americans displaced from their jobs by globalization, automation, and the shifting balance in manufacturing from the importance of the raw materials that go into products to that of the engineering expertise that designs them.” During the 2016 election and beyond, Trump has consistently addressed his appeals to these “forgotten men and women.” Yet the president’s signature legislative achievement, corporate tax reform, suggests that his base continues to receive nothing but a few crumbs off the table. The tax reform also works at variance with the main thrust of his trade policy or, indeed, his restrictionist immigration policies (and it’s questionable whether these forgotten voters are actually deriving much benefit from those policies either). Not for the first time, therefore, the president’s left hand is working at cross-purposes with the right. The very base to whom he continues to direct his re-election appeals get nothing. And the country as a whole remains far worse off as a result of his policy incoherence and mendacity.

Marshall Auerback is a market analyst and commentator.

This article was produced by Economy for All, a project of the Independent Media Institute.