Capitalism works like this: a small class of people own the means of production, and everyone else has to sell their labor to survive. The cheaper the costs of labor for the capitalist, the higher the profits. A capitalist enterprise needs to keep generating profit to sustain itself, so minimizing labor costs — through suppressed wages, long work hours, and relentless job insecurity — is always one of its primary objectives.
While I don't think that economic theory of the neoclassical/neo-liberal kind has lots of answers to our problems, something that should be tested is the argument that because profits tax is dependent on profit and not on output, employment or other size metric. It doesn’t shift cost relationships at all, therefore, increasing profits tax has no effect on a company’s choices of pricing, outputs, etc etc. The Business Council argument that the rate of profits tax changes decisions about companies’ activity should therefore be treated by our neoliberal friends as nonsense. Why do we not see this argument advanced in the public discussion?
- Dr John Nightingale