US Economy is Not Suffering from Underconsumption

Robert Reich wants a more equitable distribution of after-tax income and so I do but to blame weak aggregate demand on a lack of consumption is odd as Paul Krugman notes:

But how, exactly, do you reconcile this assertion with the fact that we have a negative savings rate, and that consumption is at a near-record share of national income?

Paul wrote this even before the BEA’s release of the 2008QII data, while my graphs include them. James Hamilton has a nice summary of the latest BEA information:

The main reason that the final GDP number was weaker than predicted was the big drawdown in inventories. Without that negative contribution from inventories, real final sales grew at a robust 3.8% annual rate. Housing subtracted 0.6% from the annual real GDP growth rate, though that's actually the smallest negative contribution we've seen in a year. Remember that new home construction has to be worse (on a seasonally adjusted basis) than it was the previous quarter in order to make a negative contribution to the GDP growth rate. Bigger exports and smaller imports each boosted the GDP growth rate by over 1%. Complain as you like about the Fed permitting such a big slide in the dollar, but at least it's having the intended effect on aggregate demand through the international channel. Without the gains on net exports, real GDP would have actually fallen, making one worry about recent indications of a global economic slowdown. Real personal consumption spending also grew, though less than I had been expecting, given the presumed stimulus from the tax rebate.

Just as the 2001 recession was an investment led slump, investment demand as a share of GDP is also on the decline. The consumption/GDP ratio was 71.16% last quarter, while government purchases relative to GDP were 20.13%. These figures compare to the figures for 2000QII where consumption/GDP was 68.09% and government purchases/GDP was 17.51%. In other words, the gross national savings/GDP ratio fell from 14.4% to only 8.72%. If we assume that depreciation represents about 10% of GDP, then we do have a negative savings rate with what little net investment we are seeing being financed by a large current account deficit.

Many economists – including myself – have noted that exports are growing relative to GDP. We should note, however, that the import/GDP ratio has been rising as well. While dollar devaluation may indeed encouraging more exports, we are not going to reduce the current account deficit as long as national savings remains below what little net investment we have.

If You Subsidize the Production of Something, Less of it Will Be Produced

That’s the economic wisdom behind an op-ed piece in today’s NYT by Victor Davis Hanson, a former classics professor and current columnist for the National Review (where he extolled the “humane treatment” of Guantanamo inmates in a recent offering). Far be it from me to defend the current level and especially pattern of subsidies, which go largely to the wrong people for growing the wrong things in the wrong way, but I’d love to see the economic model that shows how agricultural subsidies lower food output in a hungry world.

A Shortage of Lawyers

Here is a situation that Shakespeare might appreciate. A shortage of lawyers is plaguing Japan. Really? A New York Times article seems to suggest that.

One regression estimates that the optimum number of lawyers is 23 per 1000 workers. The U.S. has 38; Japan, 20; Germany, 27; France, 7; Hong Kong, 7; U.K., 12; Spain, 33; India, 34; Chile, 47.

Stephen P. Magee and William A. Brock. 1984. "The Invisible Foot and the Waste of Nations: Redistribution and Economic Growth." in David C. Colander, ed. Neoclassical Political Economy: The Analysis of Rent-seeking and DUP Activities (Cambridge, MA: Ballinger): pp. 177-85.

According to an estimate during the 1980s, lawyers constitute 42% of the House; 61% of the Senate.

Here is the article:


Onishi, Norimitsu. 2008. "Lawyers in Rural Japan: Low Supply, Iffy Demand." New York Times (29 July).

The article describes the arrival of a lawyer, Katsumune Hirai, to Yakumo, a northern Japanese town, population 19,743, had never had a lawyer before. Few people seem interested in his services.

Japan, in contrast to the United States, has long suffered from a shortage of lawyers, especially in the countryside. If it was not unusual for towns with five times Yakumo's population to have no lawyer, how could Yakumo hope to secure one just for itself? And yet, thanks to a national campaign to raise the number of lawyers, and to dispatch them to lawyerless corners of Japan, Yakumo welcomed its first one in April. The Yakumo Legal Office opened shop, behind gray blinds and under blue awnings, in the square facing the train station.

... half of Japan's lawyers are concentrated in Tokyo, leaving only one lawyer for every 30,000 Japanese outside the capital, according to the federation. The Japanese government is trying to increase the number of lawyers as part of broader judicial reforms that have included establishing 74 law schools since 2004. Under the system that will be abolished in 2011, anyone could take the national bar exam, though it was so difficult that the annual pass rate was about 3 percent.

IRA STEWARD BIBLIOGRAPHY

by the Sandwichman

I intend to write more about Ira Steward's eight-hours theory when my move to the house on the hill is complete. Meanwhile, I had suggested some readings by and on Steward in response to a comment by YouNotSneaky and I'm moving those up to this blog post. YNS pointed out a good overview of Hours of Work in U.S. History by Robert Whaples in the EH.Net Encylopedia.

Ira Steward poses a challenge of isolating and reconstructing the usable kernel of his argument. He wrote propaganda. George Gunton, his 'disciple', also wrote propaganda. That was fair enough considering that most of the reputable political economists of the day essentially wrote propaganda from the employers' side.

I would recommend reading Steward with some context. A good place to start is Dorothy W. Douglas's "Ira Steward on consumption and unemployment" in the Journal of Political Economy, August 1932. Henry Mussey's 1927 essay, "Eight-hour theory in the American Federation of Labor" (in Economic Essays, edited by Jacob Hollander) is sympathetic but critical. Reading Mussey's essay in juxtaposition to Douglas's is instructive because they fall on opposite sides of the stock market crash and start of the depression. Different "consensuses" are evidently in play.

Steward's tract, "A reduction of hours an increase of wages" is available through Google Books and also through the Internet Archive in John R. Commons' Documentary History of American Industrial Society. George Gunton produced a more systematic exposition of Steward's theory in his 1889 pamphlet, "The economic and social importance of the eight-hour movement", which can be found in the anthology, Wages, hours and strikes: L
labor panaceas in the 20th century, (edted by Leon Stein and Phillip Taft).

A couple of more contemporary discussions of Steward are Lawrence Glickman's "Workers of the world, consume" in International labor and working class history Fall, 1997, and David Roediger's "Ira Steward and the anti-slavery origins of the American eight-hour theory, Labour History, 1986.

A couple of points I would like to make about Steward, Gunton and their interpretors. First, Steward's theory appeared without a frame or, more accurately, outside of and in opposition to the frame of classical political economy and its wages-fund theory. There are loose ends in it that I suggest could be resolved within a Keynesian frame. Keynes himself alluded to the possibility of such a reconciliation in his war time remarks on the reduction of working time as the "ultimate solution" to unemployment. Second, no one has ever re-evaluated Steward's theory in the light of Chapman's theory of the hours of labor. I strongly believe that a reconciliation of Steward, Chapman and Keynes (throwing in Luigi Pasinetti for good measure) is feasible and would be extremely invigorating for heterodox economic thought.

Neoliberal “freedom” = Government coercion, violence. The non-market.

In the last few decades many individuals and politicians, with rather privileged access to global mass media outlets[1], have spread an ideology of political persuasion known as ‘neoliberalism’ or ‘neoconservatism’. It has been confused by many – and it seems that this confusion may be deliberate[2 ] - as the simple reiteration of ‘liberalism’ [3 ]. However, critiques of neoliberalism indicate that this doctrine focuses on only one aspect of the traditional liberal doctrine – that of ‘economic liberalism’ which is the belief that “states ought to abstain from intervening in the economy, and instead leave as much as possible up to individuals participating in free and self-regulating markets.” [4 ]

How strange! This doctrine has emerged at the very time when the evidence for the effectiveness of ‘self-regulation was virtually non-existent and after governments gave birth to the giant corporation with heavy-handed protectionist approaches. It was promulgated when a large body of economic literature showed that industry in developed nations had become extraordinarily concentrated and was exerting undue political influence over and within governments. Environmental scientists, independent journalists and even the Secretary General of the United Nations were warning that nations had a very limited amount of time “to improve the human environment, to defuse the population explosion and to supply the required momentum to development efforts” before planetary problems would reach “such staggering proportions that they will be beyond out capacity to control.”[5 ] If there was ever a time for governments around the world to reign in the excesses of industrial pollution, wasteful production methods and excessive and unnecessary consumption it must surely have been the last 30-40 years.

For all the incessant talk of freedom and markets the reality on the ground is that governments are fully in league with large transnational corporations and both have moved not to foster market relations but to actually prevent ordinary citizens from engaging as producers and sellers in markets.



This has been done through forced evictions [6] , a mountain of new regulation, tax privileges and resource agreements that allocate almost an entire region’s forests, water, land etc to only a select few enterprises. In Australia, for instance, the Federal Liberal and Labor governments have encouraged investors to put their money into a small number of selected corporations that are engaged in the clearfelling and woodchipping of huge stands of government-granted native forest. Forests that have been taken out of the hands of the public through the passing of ‘resource guarantee’ legislation where citizens and every other unselected enterprise (almost every one) are banned from the purchase and access to forest resources. ‘Managed Investment Schemes’ (MIS) are the tool used by government to redirect economic resources away from viable and sustainable forms of business. Those investors with capital gains that need to be offset are “generally driven into MIS by their tax deductibility - you put in $100,000 and you get $100,000 of deductions against other income” [7 ]

The biggest native forest woodchipper in Tasmania is Gunns Ltd. Two of its major investors are the AMP (Australian Mutual Provident) Society and Perpetual Investments. Both companies have links with the Fairfax [8 ] and Murdoch [9 ] media empires. Rupert Murdoch’s ‘News Corporation’ is one of the three largest international media groups, operating in most sectors and most continents. Are these media organisations using their investments to access a very cheap source of newsprint for their publications? The question has to be asked.

I believe that a careful unraveling of the corporate networks involved in Tasmania’s contemporary environmental holocaust[10 ] [11] need to be performed. Will such research reveal a host of transnational corporations co-owned by each other? Will we find that these entities are, in effect, exchanging goods between their own enterprise both within Australia and, by way of intra-corporate transactions, across national boundaries? If so, we cannot view this as even a form of trade [12] ; it is all ‘in-house’. They will be seen simply to be using cheaply or freely acquired public resources, with government granted exclusion of competitors from the market place to take advantage of the most extraordinary profit-making opportunities in history. How convenient it appears to be, to use these inaptly entitled ‘free trade’ agreements that allow for avoidance of tariffs along with the employment of a host of other questionable mercantile mechanisms.

‘Market’? ‘Freedom’? ‘liberalism’? Will we find any of those? I doubt it.

[1] Money and power are now sustaining global media concentration. This poses serious questions about the state of democracy in nations.

[2] One of the innumerable examples is Ronald Reagan stating in his speech at Moscow State University on May 31, 1988: “Entrepreneurs and their small enterprises are responsible for almost all the economic growth in the United States. They are the prime movers of the technological revolution.” http://www.nationalreview.com/document/reagan_moscow200406070914.asp

This was said at a time when a vast literature was well established warning of the dangerous levels of economic concentration in the US and the implications for political influence/policy setting priorities in Government. Further most of the most successful companies and countries of the 20th century did not develop according to free-market principles; successful countries protected and nurtured their industries.

[3] Liberalism. http://en.wikipedia.org/wiki/Liberalism

[4] What is Neoliberalism? By Dag Einar Thorsen and Amund Lie, Department of Political Science University of Oslo
www.statsvitenskap.uio.no/ISVprosjektet/neoliberalism.pdf

[5] UN Secretary General U Thant in 1969.

[6] IMMINENT FORCED EVICTION OF TWENTY-SIX COMMUNITIES UNDER THE LEKKI FREE TRADE ZONE (LFTZ) PROJECT IN LAGOS, NIGERIA. By Felix C. Morka
Social and Economic Rights Action Center (SERAC). Late 2007
http://www.serac.org/Pages.asp?id=295

[7] Investors wield the axe as Futuris blames forest scheme for downgrade
Ian McIlwraith, June 26, 2008. imcilwraith@theage.com.au
http://business.smh.com.au/business/investors-wield-the-axe-as-futuris-blames-forest-scheme-for-downgrade-20080625-2wx3.html

[8] Sir James Reading Fairfax was a founder and director of the Perpetual Trustee Co. and a director of the Australian Mutual Provident Society the Bank of New South Wales, the Commercial Banking Co. of Sydney and Burns, Philp & Co. Ltd. Other members of the Fairfax family past and present have been directors of AMP.

[9] Australia's AMP lets Murdoch off the hook over News Corp. relocation.
http://findarticles.com/p/articles/mi_hb5553/is_200410/ai_n22257898

[10] Paradise lost - with napalm
http://www.guardian.co.uk/comment/story/0,,1197159,00.html
By RICHARD FLANAGAN

[11] LORDS OF THE FOREST
Australian Broadcasting Corporation
FOUR CORNERS
http://www.abc.net.au/4corners/content/2004/s1132778.htm

[12] It’s NOT International Trade. Don’t be Fooled. By Brenda Rosser on 24th July 2008.
http://econospeak.blogspot.com/2008/07/its-not-international-trade-dont-be.html

The Military Basketball Complex

Because of the Tim Donaghy gambling scandal, the NBA hired Army Maj. Gen. Ronald L. Johnson as senior vice president of refereeing operations. He is uniquely suited to the job because he was responsible for overseeing $18 billion of reconstruction in Iraq.

Another Nice Review of The Confiscation of American Prosperity

The Crime of the Century

Michael Perelman, The Confiscation of American Prosperity: From Right-Wing Extremism and Economic Ideology to the Next Great Depression. Palgrave Macmillan. 239 pp.

Economist Michael Perelman has written a whodunit about a heist, but not just any heist. His new book dissects the grandest bit of thievery in modern human history, the robbery that snatched away the economic security of the great American middle class and made America’s rich the richest rich the world has ever seen.

How did all this happen? Perelman takes us back to the initial crime scene, the United States of the early 1970s, a society then completing a quarter-century of unparalleled prosperity. Most Americans had shared in those good times. Most expected them to continue.

But not everyone felt that way. Corporate America’s movers and shakers, back in the early '70s, sensed a world spinning out of — their — control. They feared marketplace challenges from abroad. Western Europe and Japan had rebuilt their war-torn economies. They also feared challenges at home, from social activists and angry workers. Even consumers were organizing.

Corporate leaders, amid these challenges, panicked. They rejected the basic assumption behind America's good times, that balance in economic life — and prosperity for all — requires an active role for trade unions and government regulators. Corporate leaders would instead link up with radical conservatives and help speed what Michael Perelman calls a “right-wing revolution.”

That revolution would rewrite the nation’s economic rules and leave in its wake a deeply and ferociously unequal United States.

Michael Perelman names names as he fills in the outline of this broad sweeping story with intriguing detail on who did what when. He introduces us, for instance, to Lewis Powell, the corporate lawyer — and future Supreme Court justice — whose 1971 memo for the U.S. Chamber of Commerce rallied the nation’s power-suits to rise up and “save” free enterprise.

“Each time the United States has increased income inequality,” author Perelman reminds us along his story-telling way, “disaster has followed.”

And disaster, Perelman notes, will surely follow our contemporary right-wing revolution. Perelman explains why, patiently laying out how top-heavy distributions of wealth deflate broad-based consumer demand, pump up speculative asset bubbles, and invariably invite a “culture of corruption.”

Perelman ends his whodunit with a look at “the presumptive cops” on the beat, his fellow economists, the academics who could have and should have blown the whistle on the right-wing’s frontal assault on American prosperity. They did not. Michael Perelman has. More power to him.

Tom Coburn

The New York Times has an article today about Tom Coburn, a right-wing, antiabortionist, ultraconservative, probably wingnut.

Coburn makes a practice of putting folds on legislation techniques that needs with this disapproval. Where was the Democratic senator who hold the spying bill or war funding?

I do not know if he has strong principles or if he is just playing to his conservative constituency, but I wish that the Democrats have somebody with a tenacity to do something other than to cower before the right-wing.

The vital gore

I spent the better part of the weekend with the wonderful Gore Vidal - reading the new selection of his essays by Jay Parini. I had forgotten how brilliant his take-down of the Kennedys, "The Holy Family," was. The comparison of JFK and BO has often been made - let's hope it is wrong. In Vidal's account, JFK's charisma masked as ambitious a politician as ever walked the earth, whose only principle was to to get to the top and who, once there, had no idea what to do.

Did you know - as I learned in his essay on William Dean Howells - that Howells was alone among the literary intelligentsia of the day in condemning the trial and execution of the Haymarket Martyrs? Conspicuously silent was Samuel Clemens, sad to say - who knew better.

Looking Ahead Toward the Housing Crisis.

After decades of relative stability, the rate of U.S. homeownership began to surge in the mid-1990s, rising from 64% in 1994 to a peak of 69% in 2004, near which it has hovered ever since . . . [S]ome of the explanation likely stems from innovations in the mortgage market that resulted in greater access to credit, lower down payment requirements, and easy and low-cost access to the equity in a house, which makes homeownership more attractive.

Doms, Mark and Meryl Motika. 2006. "The Rise of Homeownership." Federal Reserve Bank of San Francisco Economic Letter (3 November).

Thanks to an old Timothy Taylor column in the Journal of Economic Perspectives

Obama Sweeps the World, but McCain Moves Ahead of him Colorado Polls: What Gives?

So, Obama has had a nearly flawless foreign trip, which he clearly needed to make given the drumbeat of criticism about his "inexperience" from the McCain camp. It went better than anybody could have expected, with such bonuses as Iraqi PM al-Maliki coming out for his withdrawal timetable, that huge and favorable crowd in Berlin waving US flags for his thoughtful and charismatic speech, and even that shot through the hoop from behind the three-point line on the first try before cheering troops in Kuwait. Meanwhile, McCain was making gaffe after gaffe while visiting such outstanding places as the Fudge Haus in the German Village in Columbus, OH (yes, I know, swing city in a swing state), with almost nobody in attendance. But here we get it: McCain is now two points ahead of Obama in the latest polls out of Colorado after Obama being ahead of McCain for months, and reports have McCain making gains in Minnesota, Wisconsin, and Michigan as well, enough so that he might be ahead in MN if he picks Pawlenty for VP and ahead in MI if he picks Romney for it. So, what gives?

Probably the best explanation is that this trip has put foreign policy at the top of the debate and voters' consciousnesses, and for all the favorable photo ops and publicity, the hard fact is that McCain continues to hold a substantial lead on this issue over Obama. So, focusing on it has helped McCain, despite his constant references to Czechoslovakia (heck, confusing Slovakia with Slovenia did not hurt Bush in 2000). Of course, Obama needed to make this trip, and hopefully it will help in the longer run, weakening all those presumptions of foreign policy inexperience and incompetence (he looked plenty presidential and commander-in-chiefish, even if many more progressively oriented types may have found his hawkish rhetoric on some issues uncomfortable). But, now that he is back home, he should hope that the attention and the discourse shift back to such issues as the economy, where he clearly has a big lead over McCain.

Two great sentences from yesterday's Times

From Elizabeth Bumiller's article about McCain:

'I am again deeply disappointed that Senator Obama would not recognize the fact that the surge has succeeded', Mr McCain said in typical, now-daily comments before the refrigerated case of shredded cheese in Bethlehem, Pa.

I know she means the "now-daily" to apply to the comments alone, but the image of McCain returning daily to the shredded cheese case in Bethlehem to whine about Obama is priceless.

Then, from an article about the oil spill in the Mississippi near New Orleans, a LtCmdr in the Coast Guard is quoted on the oil:

this is a heavy, nasty product, problematic in the cleanup.

It won't be difficult to clean up, it will be "problematic in the cleanup!" I love it: The Bureaucratic Sublime.

Come to think of it, McC seems to me lately a nasty product, problematic in the sense-making.

Could Afghanistan become Obama's Vietnam?

Over on economists view, "anne" has been vigorously denouncing Obama's speeches about Afghanistan and Pakistan, and indeed it was a centerpiece of his dramatic speech in Berlin yesterday. Of course he has been able to effectively beat Bush and McCain over the head with how going into Iraq let the US not catch bin Laden and mess things up in Afghanistan, and clearly it is good electoral politics in the US now to take a hawkish position on Afghanistan/Pakistan. The question is whether it will prove to be such a good idea to follow through on all this hawkish talk if he does get elected (which is far from obvious, given that polls have actually been moving towards McCain in this week when Obama has had it about as good as it gets, while McCain has bungling around all over the Sausage Haus of Columbus, Ohio).

After all, as "anne" points out, it was Democratic presidents, Kennedy and then Johnson, who really got us deep into Vietnam, pushed by a pressure not to appear "weak on Communism." If he gets in Obama will certainly be feeling such pressure about being the "War on Terror," which most of us know is a bad misnomer, especially if he does follow through on seriously removing troops from Iraq. Maybe things will go well in Afghanistan/Pakistan, but there are plenty of reasons to be worried, especially about the Pakistan part, where the central government does not want us going in unilaterally, but clearly where the guys we most want to get are hanging out. While Karzai wants us in Afghanistan, the situation there seems to have been gradually deteriorating, and it is far from clear that increasing US (or European) troop presence there will help more than it will hurt by alienating the local population, as happened in Iraq before (and Vietnam longer ago). Overly ambitious promises and an unresolvable situation on the ground could indeed sour an Obama presidency, making those countries his Vietnam. Let us hope not.

California Budget Crisis

California has a deficit estimated at $15 billion. The state is legally bound to balance its budget, but it never does so by resorting to various gimmicks.

California requires a supermajority to approve any budget. Republicans have said they will not accept any budget that involves tax increases and they have enough votes to block any budget. Arnold has suggested raising money by selling the rights to future lottery money, but that is far from sufficient.

His latest ploy is to demand that the state pay workers the minimum wage so long until a budget is passed. As a student of supply-side economics, I know that the best way to get out of a recession is to ruthlessly cut government spending. Business will be so impressed that it will invest even though he cannot afford to buy anything.

If that does not work, Arnold probably have some friends in special effects who could do the trick.

It's NOT international trade. Don't be fooled.

Many people around the world understand that our modern era of globalisation is one in which international trade is between countries. We also tend to believe that such trade involves the indisputable benefit of greater freedom to engage in the act of purchasing and of selling goods and services between peoples of different nations. For example, Tom Palmer from the Cato Institute questions the understanding of people who are unhappy with this vast expanse of trade by asking “Should American wheat farmers be allowed to buy cell phones from people in Finland? Should Ghanian weavers be allowed to sell the shirts and pants they make to German autoworkers?”.[1]

The reality of international commerce paints a vastly different picture, however. Giant multinational corporations dominate the area of international exchange and a very large share of world ‘trade’ is actually between branches of these same corporations. In North America trade associated with U.S. parent multinationals or their foreign affiliates accounted for 54 percent of U.S. exports of goods and 36 percent of imports.[2] Forty percent of trade between the US and Canada in 1998 was intra-corporate.[3]. “Forty percent of the US-Europe trade is between parent firms and their affiliates, and in respect of Japan and Europe, it is 55 per cent; with regard to US-Japan trade, it is 80 %.”[4]


This intra-corporate form of trade appears to be increasing at a rapid rate. In 2005 “U.S. imports between U.S. MNCs and others increased 13.5 percent, and imports between U.S. parents and foreign affiliates increased 8.6 percent.”[5]

John Ralston Saul highlights this new phenomenon in his book ‘The Collapse of Globalism’. He asks why such an “astonishing and continuous expansion in trade [does] not produce broad economic growth, spread wealth and reduce unemployment”[6] There is good reason for alarm. The form of economic growth experienced today is associated with rising productivity rather than increased employment. Real wages have dropped for workers and sources of taxation revenue for one government after another have declined to a point where regressive taxations regimes have now been imposed on domestic populations and public services have been cut back significantly.

Saul also asks whether the trade between subsidiaries of the same transnational corporations should be counted as trade at all. Then he goes on and adds a few other important queries. Does intra-corporate trade actually have the effect of trade? Why are profits rarely made at each stage of movement? Saul then asserts that these large firms actually intend to create losses in order to avoid taxation; this form of international commerce – unrelated to market competition - makes it possible.

Giant corporations produce goods in countries where governments provide cheap labour and lax (or non-existent) environmental regulations. That’s how they make goods where their constituent parts are put together at the lowest possible cost and then sold as a final product at the highest possible price somewhere else. If we add ‘transfer pricing’ to that strategy[7] and throw in escalating concentration of industry through mergers and acquisitions; well, what have we? I think we have a recipe for global economic meltdown!

1 'Globalization is Grrrreat!' by Tom G Palmer, Senior Fellow, Cato Institute. Cato's Letter - a quarterly message on liberty
Fall 2002, Volume 1 - Number 2

2 United States Bureau of Economic Analysis (USBEA) . As quoted from the ‘Monthly Trade Bulletin’ Volume 3 Number 10

3 United States Bureau of Economic Analysis (USBEA) . As quoted from the Trade Bulletin’ Volume 3 Number 10‘Monthly

4 General Concept of Transfer Pricing
By: Khurram Khan. [t-price.pdf]

5 United States Bureau of Economic Analysis (USBEA) . As quoted from the Trade Bulletin’ Volume 3 Number 10‘Monthly

6 ‘The Collapse of Globalism – and the reinvention of the word’ by John Ralston Saul. Viking Press, published 2005. Page 142.

7 where multinational corporations arbitrarily set unrealistic prices in transactions between parent and affiliates in order to reduce taxes and tariffs, avoid exchange controls and optimize profits.