There is, of course, a third return which does equate to rent. This is the opportunity that the multinational company has to reduce its overall cost of capital by offering a composite risk to the investor rather than the specific risk that an individually focused activity can provide. The result is that the multinational company can fund its activities at a lower cost than individual entities can, providing it with another return that approximates to yield that is not so much earned as it is the consequence of exploitation, giving it the form of rent, yet again.
Lower financing costs as a result of lower risk through diversification is a rent now, is it?
The parent company of the multinational group is, as such, an exercise in financial engineering that, like all such exercises, seeks to make its return by exploitation of artificial factors of production that are themselves inherently unproductive in the sense that they do not add to the overall net worth of human well-being. By definition, as a consequence, they extract reward, rather than add value.
Lowering risk through diversification is not adding value?
But, but, why are people willing to invest for a lower return if that lowering of risk is not adding value?
This is also why multinational companies are so dedicated to re-engineering their businesses to create debt as a consequence of their trading wherever it is possible. So, telephone companies wish to sell phones on contracts that disguise implicit high rates of interest. And retailers seek to provide credit cards whilst care manufacturers make most of their money from extending credit to their customers, and not by making the car. That’s because the excess rates of return on capital that the implicit interest rates in these transactions implies provides the rent that multinational companies are now seeking rather than from making the product itself.
Low margins on making cars having nothing to do with making cars being a competitive marketplace?