Many years ago I was expressing exasperation at what I took to be the layers and layers of foolishness that meant that others couldn’t see the obvious — as defined by yours truly, of course. Did all those wise people in the year 2000 think that gene therapy for cancer was just around the corner, or that advance in genetics was synonymous with advance in medicine, or that the study of complex genetics would, by the force of some inchoate logic, lead to cures for psoriasis and eczema. How could any society function when so many of its parts were just free-riding on error, I asked? Worse still, these intellectual zombies starved the new young shoots of the necessary light of reason. How indeed!
William Bains, he of what I still think of as one of the most beautiful papers I have ever read1, put me right. William understood the world much better than me — or at least he understood the world I was blindly walking into, much better. He explained to me that it was quite possible to make money (both ‘real’ or in terms of ‘professional wealth’) out of ideas that you believed to be wrong as long as two linked conditions were met. First, do not tell other people you believe them to be wrong. On the contrary, talk about them as the next new thing. Second, find others who are behind the curve, and who were willing to buy from you at a price greater than you paid (technical term: fools). At the time, I did not even understand how pensions worked. Finally, William chided me for my sketchy knowledge of biology: he reminded me that in many ecosystems parasites account for much, if not most, of the biomass. He was right; and although my intellectual tastes have changed, the sermon still echoes.
The reason is that corporate tax burdens vary widely depending on where those profits are officially earned. These variations have been exploited by creative problem-solvers at accountancy firms and within large corporations. People who in previous eras might have written symphonies or designed cathedrals have instead saved companies hundreds of billions of dollars in taxes by shifting trillions of dollars of intangible assets across the world over the past two decades. One consequence is that many companies avoid paying any tax on their foreign sales. Another is that many countries’ trade figures are now unusable. [emphasis added].
Trade Wars Are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International by Matthew C. Klein, & Michael Pettis.