Skip to main content

The Fortune 500 are raking in the profits as never before. Indeed, corporate profits overall are back to pre-recession levels.
The Fortune 500 generated a total of $824.5 billion in earnings last year, up 16.4% over 2010. That beats the previous record of $785 billion, set in 2006 during a roaring economy. The 2011 profits are outsized based on two key historical metrics. They represent 7% of total sales, vs. an average of 5.14% over the 58-year history of the Fortune 500. Companies are also garnering exceptional returns on their capital. The 500 achieved a return-on-equity of 14.3%, far above the historical norm of 12%.
But business investment? Running about 16.5 percent vs. a pre-recession rate of 20 percent, according to the International Institute for Labour Studies.

And hiring? Still limping along. Millions of new private sector jobs created over the past three years, but far short of the number required. The last jobs report, at a seasonally adjusted 115,000 jobs, was just barely above the level required to absorb increases to the working-age population, although the number of new hires will probably be revised upward 10-15 percent when the next report appears in June.

Meanwhile, the biggest U.S. non-financial corporations are sitting on an estimated $2 trillion in cash instead of using the money to hire more workers or invest in new projects.

At present, cash accounts for more than 6 per cent of the assets on the balance sheets of US non-financial companies. That is the highest in at least six decades, and represents the fruit of record high profit margins. Companies cut costs through redundancies during the post-Lehman economic swoon, while negligible interest rates reduced their borrowing costs. As a result, US corporate profits are higher, as a share of gross domestic product, than at any time since 1950.

But as uncertainty persists, groups are reluctant to repay that cash to shareholders by buying back stock or — particularly — paying dividends. The pay-out ratio (the proportion of earnings that go in dividends) for the S&P 500 index is at its lowest since 1900.

Got that? Corporate profits are higher, percentage-wise, than in more than 60 years. The dividend pay-out ratio is lower than in more than a century. And the companies are sitting on piles of money that make Scrooge McDuck look like an Occupy activist.

Meanwhile, extensive productivity gains during the recovery have benefited employers and stock prices but not workers. While the profits have rolled in, wages have risen less than two-thirds the level of inflation in the past 12 months.

Forbes notes that this can't last. Employers have squeezed about as much as they can out of their layoff-shrunken work-forces. Soon, it is claimed, they will have to hire more workers to meet growing consumer demand. There is, it is true, evidence in the data that more and more part-time workers who have been hankering for full-time jobs are finally getting them. And that could be a precursor to vastly more hiring and rehiring. Which, if it isn't just another verse in the siren song we've been hearing for two years straight, would obviously be music to the ears of the 25 or so million Americans who are officially jobless or underemployed, as well as those millions who have fallen off the radar completely.

But, given the actual play of the economy recently, best to believe it when we see it.

Originally posted to Daily Kos Labor on Mon May 07, 2012 at 11:02 AM PDT.

Also republished by ClassWarfare Newsletter: WallStreet VS Working Class Global Occupy movement and Daily Kos.

EMAIL TO A FRIEND X
Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags

?

More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

  •  Radio said the oil companies continue to make (18+ / 0-)

    killer bank off gas prices.
    When the hiring kicks in let's hope it happens in this country and it isn't all part time and no-benefits- no overtime type gigs like the wal-mart model.

    Time for real hiring and real jobs.

    Occupy- Your Mind. - No better friend, no worse enemy. -8.75, -6.21<> Bring the Troops Home Yesterday

    by Thousandwatts on Mon May 07, 2012 at 11:12:18 AM PDT

  •  GOPers love to brag about uncertainty (13+ / 0-)

    and spread hope that America will FAIL.
    Patriots, my ass!

    "Tax cuts for the 1% create jobs." -- Republicans, HAHAHA - in China

    by MartyM on Mon May 07, 2012 at 11:13:09 AM PDT

    •  The GOP is going to bring another (2+ / 0-)
      Recommended by:
      Maggie524, MartyM

      debt ceiling fiasco in 2013.  They are ready to risk more US credit downgrades and default.  Maybe that is what corporations are concerned about.

      I'm not liberal. I'm actually just anti-evil, OK? - Elon James White

      by Satya1 on Mon May 07, 2012 at 06:56:43 PM PDT

      [ Parent ]

      •  I believe they have other plans..... (2+ / 0-)
        Recommended by:
        My two cents worth, MartyM

        I believe they are going to pull some shenanigans before the election to sink the economy and or pulls the bottom out of jobs in order to blame President Obama. They are certainly cooking up something as we speak and Americans had better be prepared...they are desperate and will do ANYTHING to unseat President Obama and put their robot with 5 fingers....as Grover Norquist said he wants.....just to sign the legislation he is TOLD TO.  

        We need to rise up lke a tsunami and vote those buggers out of every office and keep them out for a decade or more to teach them a stong lesson!

        Prejudice is a shadowy mist, which in our journey through the world often dims the brightest and obscures the best of all the good and glorious people and objects that meet us on our way. L. Shaftesbury

        by Maggie524 on Mon May 07, 2012 at 08:30:05 PM PDT

        [ Parent ]

        •  The groundwork is being laid in the states (1+ / 0-)
          Recommended by:
          MartyM

          with voter suppression laws and every roadblock they can get away with.

        •  I totally agree (1+ / 0-)
          Recommended by:
          MartyM

          Bain Capital approach, sell off the assets, get rid of the unions and minimum wages, keep the women either sick or pregnant.  They will do everything in their power to protect the profits of the investors and corporations.   Taking us back to landed gentry, royalty, upstairs/downstairs, life before the Mayflower sailed.  Romney, Ryan, Cantor all rich white men who feel they are the only ones entitled to the riches.

      •  Debt (0+ / 0-)

        "Corporate profits are higher, percentage-wise, than in more than 60 years."  

        In an admittedly banner year for after tax profits, you would still need to double the amount of profit and tax it at 100% in order to close the deficit.  The Fortune 500, on its own would be the second largest economy in the world.  We are spending too much.

  •  There used to be a law; (7+ / 0-)

    someone here will know it, that was repealed maybe as early as Nixon's presidency, that limited the amount of cash a company could sit on and instead required that it be paid out in dividends or else there was a tax penalty.

    Time to dust it off & re-enact.  

    Republicans: if they only had a heart.

    by leu2500 on Mon May 07, 2012 at 11:24:19 AM PDT

  •  Corporate America is sitting on a pile of cash (11+ / 0-)

    If the economy tanks again, they can buy assets for pennies on the dollar.

    If Romney get re-elected, they misguidedly believe they will profit even more.

    They are wrong but they are greedy.

    Daily Kos an oasis of truth. Truth that leads to action.

    by Shockwave on Mon May 07, 2012 at 11:30:42 AM PDT

  •  Business uncertainty waits on the Facebook IPO. (2+ / 0-)
    Recommended by:
    blueoasis, happymisanthropy

    Kidding. I think the 2013 first quarter will show less uncertainty and improvements - after the first Tuesday in November. BTW:

    companies are sitting on piles of money that make Scrooge McDuck look like an Occupy activist
    : LOL
  •  Corps Not Hiring, Banks Not Lending. (11+ / 0-)

    Looks like an ownership strike to me. I said a long time ago these would be coming. It was obvious from their behavior back into the 80's.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Mon May 07, 2012 at 11:44:53 AM PDT

    •  They're also striking against Obama (7+ / 0-)

      as per yesterday's NYT magazine:

      Messina told them he had a problem: New York City and its suburbs, Obama’s top source of money in 2008, were behind quota. He needed their help bringing the financial community back on board.

      For the next hour, the donors relayed to Messina what their friends had been saying. They felt unfairly demonized for being wealthy. They felt scapegoated for the recession. It was a few weeks into the Occupy Wall Street movement, with mass protests against the 1 percent springing up all around the country, and they blamed the president and his party for the public’s nasty mood. The administration, some suggested, had created a hostile environment for job creators.
      *
      One of the guests raised his hand; he knew how to solve the problem. The president had won plaudits for his speech on race during the last campaign, the guest noted. It was a soaring address that acknowledged white resentment and urged national unity. What if Obama gave a similarly healing speech about class and inequality? What if he urged an end to attacks on the rich? Around the table, some people shook their heads in disbelief.  

      This WH has been incredibly solicitious of these people, and they still feel slighted.

      Some men see things as they are and ask why. I dream of things that never were and ask why not?

      by RFK Lives on Mon May 07, 2012 at 07:06:51 PM PDT

      [ Parent ]

      •  There's more where that came from (3+ / 0-)
        Obama far outraised his Republican rival, John McCain, on Wall Street — around $16 million to $9 million — and Goldman Sachs executives sent Obama more money than employees of any other company in the world. But four years, one recession and a host of battles — over financial regulation and the nomination of Elizabeth Warren, over Dodd-Frank and the Buffett Rule — have taken their toll. Some on Wall Street are apoplectic. One former supporter, Dan Loeb, compared Obama to Nero; the president’s enemies insinuated worse. In 2010, Stephen A. Schwarzman, a founder of Blackstone, said that an Obama proposal to raise taxes on “carried interest” — the main source of income for most private-equity managers — reminded him of “when Hitler invaded Poland in 1939.”
        The disparate treatment of Wall Street and Main Street in economic policy past 3 years and Wall Street's reaction to that disparate treatment is one of the more disturbing features of contemporary politics.  While I welcome their hatred is simply not Obama's style, maybe a more hands-off approach towards such people might be more appropriate.

        Some men see things as they are and ask why. I dream of things that never were and ask why not?

        by RFK Lives on Mon May 07, 2012 at 07:45:10 PM PDT

        [ Parent ]

      •  And _Salon_with a rebuttal by Alex Pareene (3+ / 0-)
        Recommended by:
        RFK Lives, desert rain, TKO333

        America’s Idiot Rich

        The entire piece is worth reading...

        The money shot below:

        But appeals to logic, history and common sense will not get you far with a roomful of very rich guys who feel paranoid and victimized. The Wall Street types asked to become Obama donors wanted assurances that the president would not criticize his opponent’s finance industry record. It’s not enough that they’re ridiculously wealthy: They wish to be utterly above criticism. That’s the most important thing to remember: These people, the .01 percent, are mostly childish idiots. Idiot children have now accumulated all of the nation’s wealth and they are terrified that someone might try to take some of it away.

        The important and difficult job is never to find the right answers, it is to find the right question. For there are few things as useless–if not dangerous–as the right answer to the wrong question. -- P. Drucker

        by The Angry Architect on Mon May 07, 2012 at 08:37:10 PM PDT

        [ Parent ]

  •  Dividend tax rates... (0+ / 0-)

    ..are set to reset in 2012.  I'd imagine most companies want to know if it's going to be worth it to pay large dividends.

  •  Yeah, those job creators (13+ / 0-)

    who have to have their taxes cut.

    "There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning." —Warren Buffett

    by Joan McCarter on Mon May 07, 2012 at 11:49:43 AM PDT

    •  taxing "job creators" (3+ / 0-)
      Recommended by:
      historys mysteries, rbird, mithra

      A modest proposal -- take them on on their own terms.
      Legislate a Buffett rule, or otherwise raise the capital gains tax up to a level commensurate with the rates for wages or other "sweat of your brow" income -- BUT, add a new tax break for decent-paying actual jobs that they really create.  This way, rather than rely on some vague hope that the Romneys of the world will choose to fund a start-up instead of lighting their cigars with $100 bills, the so-called "job creators" would be able to justify their greed only by doing what they say they would do.  (Oh, there are details to be worked out -- like the jobs can't go to kin or cronies -- but it would once again put the lie to the "hippo crits" on the other side.

      When the people are being beaten with a stick, they are not much happier if it is called "the People's Stick." ~ Mikhail Bakunin

      by Sick Semper on Mon May 07, 2012 at 06:47:51 PM PDT

      [ Parent ]

  •  asdf (6+ / 0-)

    Number Of PhD Recipients Using Food Stamps Surged During Recession: Report

    http://www.huffingtonpost.com/...

  •  OT: One of those Corporations, Exxon Mobil, (9+ / 0-)

    is apparently very well described in this book: Private Empire - Exxon Mobil and American Power.

    Your diary made me go back and check out what I heard this morning in the radio about it. In an interview the author Steve Coll said this among others:

    Steve Coll, to get back to ExxonMobil, the—as you say, this is one of the largest and most profitable corporations in the history of the United States. Yet, compared to several of the other corporations—a Wal-Mart, an Apple, a Microsoft—they get very little attention or very little coverage in the press, generally, other than the business pages. Why is that?

    STEVE COLL: Well, it’s because that’s their policy, and they’re very good at carrying it out. I mean, their public affairs policy, even they joke, is to say, "No comment," in 50 different languages. It’s their business strategy to keep a low profile. And when you think about the kinds of partnerships that they’re engaged in on the ground overseas in places like Chad or Ecuatorial Guinea or in Aceh, you can understand why they’d like to keep a low profile. It’s in their interests, is the way they would put it.

    I found them, as a journalist—you know, I’ve been reporting on governments and corporations for a long time now, and I’m used to public affairs strategies and to hard targets and to corporations or subjects that don’t want you to write about them. I would say that ExxonMobil was about the hardest target I have ever taken on, not only because of their resistance to journalism or scrutiny by public groups, but also they’re just very disciplined. And they’re very well funded. And so, when they start going in a direction, such as the media strategy they have, they have the resources to really push. And so, anyway, it’s—it doesn’t—it’s an invisible company because it wants to be invisible.

    AMY GOODMAN: .... And also, you spend a great deal of time looking at Lee Raymond, the former ExxonMobil chief executive, a close relationship with Dick Cheney, and what all this means, what you were most surprised by in writing Private Empire?

    STEVE COLL:  ...But I think, to answer your question about what was surprising, you know, I sort of assumed that the relationship between ExxonMobil and the United States government would be more complicated than I thought or that it wouldn’t be easy to just sort of describe it in one sentence, but what surprised me was the extent to which ExxonMobil really sees itself, proudly, as an independent sovereign, as its own government, in effect, and that it has its own foreign policies, its own economic policies. And I came to sort of think of them as sort of like France in the sense that they were aligned with the United States sometimes, they were opposed other times, but mostly they were just trying to run their own global system without necessarily worrying too much about what the government in Washington wanted.

    But the exception to that was the very personal relationship between Lee Raymond, the chairman of ExxonMobil, and Dick Cheney, the vice president. They were friends and neighbors in Dallas before Cheney went to Washington. When Cheney ran Halliburton and Raymond ran ExxonMobil, they were business partners. But more important, they were hunting friends, and they came from a similar background in the Midwest, and they sort of saw the world—they had the same kind of outlook on the world. And so, when Cheney was in Washington, Raymond had his own channel to the U.S. government that was very efficient. He found lobbying at the State Department or going through the bureaucracy very frustrating, and he tried to stay away. And he could afford to stay away, because he had a one-call relationship with the Vice President, where they could exchange views about what was happening in the world.

    Makes me want to get the book. Your diary just reminded me of that.

    It's the forever stupid, stupid ! - with h/t to weatherdude's ... "but stupid is forever" diary.

    by mimi on Mon May 07, 2012 at 01:15:37 PM PDT

  •  I'm listening to Chris Hays as Rachel Maddow's sub (2+ / 0-)
    Recommended by:
    JML9999, historys mysteries

    tonight, discussing David Vitter's holds on the Fed nominees.
    When is Vitter going to be impeached? Scumbag.

    I'd rather have a buntle afrota-me than a frottle a bunta-me.

    by David54 on Mon May 07, 2012 at 06:34:04 PM PDT

  •  Just give them all the money, and we'll beg with (2+ / 0-)
    Recommended by:
    JML9999, happymisanthropy

    tin cups.  It's the R vision.

    You have exactly 10 seconds to change that look of disgusting pity into one of enormous respect!

    by Cartoon Peril on Mon May 07, 2012 at 06:42:18 PM PDT

  •  "Too Much uncertanty to Hire" "Too Much Risk....." (2+ / 0-)

    Or so the usual refrain from the CNBC crowd....

    Fortune 500 are supposed to be getting the big buck to take a certain amount of risk and have their Golden Parachutes for when they screw up.....

    Response: If you "got it" you wouldn't be a republican

    by JML9999 on Mon May 07, 2012 at 06:45:16 PM PDT

  •  They're trying to keep the economy stalled (3+ / 0-)
    Recommended by:
    JML9999, gorgonza, dougymi

    If they can dig in their heels long enough, they hope Romney and the Republicans will sweep in November and they'll have free rein to gut more regulations so they can make more money even faster.

  •  It's all wage deflation (2+ / 0-)
    Recommended by:
    rbird, happymisanthropy

    Holding onto cash and keeping hirings lean has not only squeezed productivity-by-fear out of the remaining work force, it's exerted an artificially low amount of pressure on the supply and demand of the labor force. This is, of course, abetted by the extreme anti-inflationary approach of the fed and the "austerity" program of the deficit hawks. It's all about the corporate bottom line and not the nation's.

    There's one way to fix this: tax them to put the money back to work. Let's see how fast they re-invest with some aggressive new taxation rates to spur re-use of the capital.

    Some people are intolerant, and I CAN'T STAND people like that. -- Tom Lehrer

    by TheCrank on Mon May 07, 2012 at 06:57:30 PM PDT

  •  I know one of the reasons (3+ / 0-)

    that profits are high.

    At Lowes, they have taken away the commission structure that employees could use to make a little extra monthly. And now Lowes has increased the required production of the employees by 67% in some cases.

    Lowes wants to be Home Depot. The stock prices are too different for Lowes liking, so they are starting to teach their employees like Home Depot.

    A liberal is someone who thinks the government should help all the people. A conservative is someone who thinks the government should help none of the people.

    by KatGirl on Mon May 07, 2012 at 06:59:03 PM PDT

    •  Treat their employees.... (0+ / 0-)

      A liberal is someone who thinks the government should help all the people. A conservative is someone who thinks the government should help none of the people.

      by KatGirl on Mon May 07, 2012 at 07:00:16 PM PDT

      [ Parent ]

    •  What these corporations are loath to admit (1+ / 0-)
      Recommended by:
      KatGirl

      although I'm sure their economists have been telling them this, is that by cutting spending on labor and supplies and such drastically, they've undercut their own markets, because there's less money going out to the people who would buy their products. They've been caught in a trap of their own making, due to strategic corporate policies that were designed in part to decrease spending. But when you decrease spending, you decrease maximal potential revenue, and at a certain point, revenue declines outpace expenditure declines, and you're make less profit.

      I've got to suspect that their profit curves have just peaked, and they're going to go down soon, which will make them spend even less, which will only feed into this loop, and extend the recession absent government intervention. I think it's quite clear that whether out of legitimate or greedy self-interest, corporations by themselves simply can't fix the economy. The government has to step in with stimulus spending and other policies to fix this mess.

      "Liberty without virtue would be no blessing to us" - Benjamin Rush, 1777

      by kovie on Mon May 07, 2012 at 08:06:40 PM PDT

      [ Parent ]

  •  Time to do some #Occupying. n/t (0+ / 0-)
  •  Raise the minimum wage (0+ / 0-)

    to match inflation adjusted highs, if not higher and you'll give consumers back some purchasing power. All wages will adjust up a bit, but employers will have higher costs from these wage increases offset by increased demand for their product or service what with consumers having some money to spend for a change.

    With simultaneous implementation of higher corporate tax rates and higher income tax rates for the top brackets, the tax revenues at the local, state and federal levels will go through the roof.  As employment is increased, costs for state and federal assistance will go down.

    Infrastructure projects can then be financed with the increased tax revenue, without resorting to any of the draconian cuts that have already been made (and continue to be proposed). This can be a self sustaining process, especially if the investments are made in clean, renewable energy projects along with modernization of the power grid, allowing us to reduce our dependence on damaging non-renewable sources.

    Once you get an economy like ours going, corporations will be falling all over themselves repatriating their offshore funds so they can get in on the boom, more tax revenue.

    I know I'm just flagrantly displaying my ignorance about economics at all levels, and I am aware that economies such as ours are extraordinarily complex and multinationally dependent, but shit, people are suffering.  We have to do something differently than what we've been doing for the last 30 years.

    Rant over, I will now go back to my regularly scheduled activities.

    Skeptical scrutiny is the means, in both science and religion, by which deep thoughts can be winnowed from deep nonsense. Carl Sagan

    by sjburnman on Mon May 07, 2012 at 07:54:21 PM PDT

  •  IANAE (I am not an economist) (2+ / 0-)
    Recommended by:
    happymisanthropy, mojo workin

    But it seems fairly self-evident that after having spent decades on "optimizing" their operations in order to maximize revenue, minimize expenses (including labor, taxes and purchases), and thus maximize profit, and having reached or passed some sort of point of diminishing returns in terms of investing further in such optimization (which includes optimal production and employment levels), large corporations have basically run out of low to mid-risk and low to mid-cost opportunities to increase profits in today's economic conditions.

    They can make more of what they make but there's a fair risk that not enough people will buy it to make it worth their while. Most large corporations are very conservative in the risks that they're willing to take (for all sorts of reasons, many beyond their control, e.g. market reaction), and unless they have a fair amount of confidence that spending X more dollars on increasing production will bring in Y more dollars in revenue, where the spread between X and Y is beyond a certain level, they're not going to do it. Instead, they'll wait things out for as long as it takes until something in the economy changes to justify, in their view, ramping up production. And then they'll start spending more, including on labor.

    Left alone, there's a decent chance that the economy will change, and improve, in ways that will convince large corporations to increase production and spending. At which point it will be a self-reinforcing phenomena as yet more companies do so in response to such increased spending, and we'll be back in a growth cycle.

    Thing is, even putting aside the great hurt that waiting things out causes people and companies, some of it irreparable, while it makes perfect economic sense for corporations to wait things out, from their own individual points of view, we as a country don't have to wait things out. Large-scale stimulus spending (financed by debt, of course, as it's always been and always will be), in the right places, will accelerate an increase in economic activity dramatically, leading corporations to increasing production, spending and hiring well before they otherwise would have, and the increased profits that will eventually result will more than pay back the stimulus spending. You don't have to be an economist to understand this.

    You do, though, have to be sane, and reasonably intelligent and informed.

    I.e. not a teabagger or Republican.

    "Liberty without virtue would be no blessing to us" - Benjamin Rush, 1777

    by kovie on Mon May 07, 2012 at 08:00:13 PM PDT

    •  The growth paradigm is the problem (0+ / 0-)

      in our new global economic reality, IMHO.  

      Our current economic system says that we should only expend capital to build things, hire more people, etc. only if it can be done at a profit.  But, if every dollar deployed everywhere has to generate "rent" for its owner, how can the tab ever get paid?  The answer: only with more growth.  

      Profits for businesses and returns for the investor class are the core driver of our economy.

      What if, however, natural limits of planetary resources means growth must stop?  If future prospects for returns looks too risky because of the potential for super-spikes in the price of oil, for example, then businesses wont invest in expansion.  I think a highly uncertain global economic outlook caused by resource limits is the underlying cause.  Over the past decade profits have been generated more and more by cutting costs (i.e. wages) and financialization, NOT by building things (i.e. real investment in production).  But, as the middle class gets gutted in this process, the prospects for future demand look even more dim, so it will continue.  

      The way out: find new ways to grow, or change the rules of the game to be consistent with a resource constrained world and low-to-zero growth.  In the latter case, the fundamental rules of western capitalism have to be re-written.

      The intrinsic nature of Power is such that those who seek it most are least qualified to wield it.

      by mojo workin on Tue May 08, 2012 at 07:08:34 AM PDT

      [ Parent ]

      •  I think that on a certain level (2+ / 0-)
        Recommended by:
        mojo workin, WheninRome

        businesses began to sense years ago that we were beginning to approach an era of either zero net economic growth, or so little growth as to effectively be zero (especially once you factor in the true cost of previously ignored externalities like pollution, global warming and rising obesity), and that it was no longer wise to attempt to profit from true growth, and they should instead focus on profiting from wealth and asset reallocation, e.g. financialization, and from cost-cutting through efficiency, layoffs and offshoring. Which isn't really profit so much as squeezing the economy dry to get its last drops. But even this was bound to run dry eventually, like eating your seed corn or butchering your dairy cows.

        This model has basically played itself out and has hit a wall. To pursue it further is to eat into economic bone. Individual companies can still do it and succeed at it, for a time at least, and many are, but collectively, it's not just unsustainable, it's suicidal. And it's futile to wait for companies to figure this out and adopt a more sustainable profit model one their own, as Repubs like Romney and Ryan appear to want us to do, because companies always look out for their own, narrow self-interest (and even then, often in short rather than long-term ways, also due to overfinancialization). The only entity that could possible change this model to a more sustainable one is the federal government. Which has always been the case. Historically, government has been the underlying engine of economic prosperity and sustainable growth (not to mention fairness and equity), not the market. The notion of a rational, fair and moral self-regulating, sustaining and correcting free market is a fantasy. Never happened, never will. People and companies act out of self-interest. Only governments can get them to act collectively.

        As for whether even with wise and commanding government leadership we can have a growth-based economy, I'd say yes and no. No if it's based on endless population growth, rising obesity, fossil fuel-based energy, financialization, etc. But if we move away from these things--and I think we can, over time, with good policy--I think we can return to an era of reasonable and sane growth for many more years. And ONLY government can make this happen, with sound progressive policy. As has been the case historically. Laissez-faire is suicide.

        "Liberty without virtue would be no blessing to us" - Benjamin Rush, 1777

        by kovie on Tue May 08, 2012 at 10:22:54 AM PDT

        [ Parent ]

  •  In the corporate world, employees are (1+ / 0-)
    Recommended by:
    mojo workin

    considered liabilities, costs to be cut, rather than valuable assets who produce goods and services. No candidate for president has personified this better than Mitt Romney and his  horde of locusts at Bain Capital.

  •  Wall Street seems in their own world and its hard (0+ / 0-)

    to figure out their paranoia. They definitely are not lending like they did. I think most big corporations are simply reacting to the lack of demand in the economy. If you ask them through polls, they will say lack of demand is by far the biggest driver in the slow hiring. It is also quite popular to think that the massive increases in efficiency simply allows companies to maintain or increase existing capacity without hiring. I think this is a bit overblown, but has a high degree of truth.
    I mostly don't buy into some anti-Obama conspiracy. Most businesspeople / management are focused on running their businesses, not on who is in the White House (again, Wall Street may be the exception...) That said, some businesses are clearly avoiding repatriating profits hoping the federal government will give them a tax break. Of course, Romney will deliver in that regard.
    Really, given the shocks from the housing bubble / financial crisis and poor fiscal condition of state and local government, things are better than we could hope for. Going forward lets hope we can reasonably resolve any attempts at serious austerity at the federal level and stop any serious debt ceiling talk. Re-eleciting Obama is imperative to prevent the economically suicidal Ryan Budget from becoming law. Otherwise....

  •  Companies are waiting till Nov 7th. (0+ / 0-)

    That's what I believe anyway !

  •  Looks like we need some inflation (0+ / 0-)

    If businesses saw their hoards of cash start to evaporate under the force of inflation, they'd put some of that money back to work - some of us, too.  

  •  They're going to keep doing so until there's a maj (0+ / 0-)

    I don't foresee any company doing much about this of their own volition.

    They are taking advantage of a situation they helped create. At some point you could have said that was coincidental, but in the face of these profits, cash reserves and executive payments while hiring and worker salaries remain where they are? It's not coincidental.

    They've made a job climate where people are desperate. Where they have to work twice as hard, get no raises and see cuts in their benefits. It's that or not have a job at all.

    And once these employers realized that, hey, we can they Sally to do her work and Bob's work too... Why would they ever feel a need to hire a replacement? They know they can ride their employees into the ground.

    They're going to keep doing so until there's a major incentive or punishment.

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site