Burger King's Smart Move

The Capital Express Is On the Move

"Progressive"  ideology is generally anti-business, anti-profit , pro-taxes and pro-redistribution of property.   But in our modern world, "time" has moved on; capital and labour are now more global and international than ever before. Because trade is increasingly global, pay rates in China affect trading conditions in New Zealand.  Capital and labour are more mobile than ever and can move relatively freely around the world. 

In the face of this growing internationalism (theoretically favoured by progressive ideology) progressives have actually become more and more regressive, wanting to drive national economies back to a more autarkic past with higher taxes and more government interventions to control wages, prices, and business activity.  One manifestation of this retrogression is the complaint of governments that "business" is evading tax by setting up in lower foreign tax jurisdictions, channelling their profits through the lower tax regime and maximising returns thereby to their shareholders.  President Obama has moaned about this tax leakage in terms which suggest he regards the practice as unpatriotic, if not corrupt.  Left-wing politicians in New Zealand have chanted the same mantra with respect to multi-nationals doing business in New Zealand.

Naturally the most easy and straightforward solution to a shrinking corporate tax base is to lower corporate tax rates.  If taxes are lower, businesses are encouraged to stay put; international businesses are encouraged to set up shop if the tax rate is competitive.  But since progressive ideology calls for an ever vaster government, lowering taxes is a hard trick to perform.   Meanwhile, business is driven by economic rationality and the globalisation of business requires that one must remain competitive world-wide or eventually be driven under.

The most recent high-profile example is international conglomerate, Burger King which is moving its business headquarters out of the United States to Canada, where its tax burden will be less.

The Pillage of Progressive Government

Evasive Action Increasing

It's a hard lesson to learn, but sooner or later even the antediluvians amongst us will begin to comprehend.  Point #1: Capital and labour are the core components of any commercial enterprise.  Point #2: Capital and labour are mobile.

Now this has not always been the case.  Before the development of technologies that can move people relatively quickly and inexpensively from one side of the globe to the other, labour was relatively immobile.  In a particular area, the number of jobs were necessarily limited; in times of recession, sometimes severely limited.  That meant that employees were effectively reduced to being "price takers".  They had little economic leverage to increase wages.  The number of employment opportunities was small or fixed; there was often surplus labour chasing those jobs.

Now, labour is globally mobile--more so than at any time hitherto in our age.