If corporations and shareholders are making such gargantuan piles of money, why is the economy so crappy?
The answer is that one company's employees are other company's customers. Americans save almost nothing, so every dollar your employees earn in wages gets spent on other companies' products and services (including, in some cases, yours). The less American companies pay their workers, the less American consumers have to spend. And the less American consumers have to spend, the worse the economy is.
This isn't a complex concept. We're all in this together.
There's also no "law of capitalism" that says that companies have to pay their employees as little as possible or "maximize profits" to please their owners. That's just a story that the owners made up to justify taking as much of the company's wealth as possible for themselves.
And the longer American corporations and shareholders insist on taking an ever-greater share of the country's wealth for themselves, instead of sharing it with the people who create it (employees), the longer our economy will suffer....
In short, the main reason our economy is still weak is that our obsession with "maximizing profits" is creating a country of a few million overlords and 300+ million serfs.Business Insider
Henry Blodget
Yep, neoliberalism sucks.
9 comments:
OK,
My numbers wrt the SP500:
Earnings of 1T of which they pay out 500B in dividends, spend 350B on CAPEX, and save 150B...
I guess Blodget is complaining about the dividends and savings, as capex is spent back into the economy and "my employee is your customer...."
These numbers are for global operations, almost half of this business is external to the US.
So I guess he is complaining about half of the dividends and half of the savings as far as the US economy... so that would be 250B of dividends and 75B of savings, I guess what Blodget thinks is that if these firms would distribute these flows more equitably, everything would be fine...
Ok so add these up you get 325B divide that by all 310m US citizens and you get $1048 per year...
Obviously the problem is not what Blodget asserts here...
rsp,
"Ok so add these up you get 325B divide that by all 310m US citizens and you get $1048 per year..."
Matt, $1048/person/year is a $4200/year increase in family income...that would be a significant boost to GDP since the spending multiplier is about 2.5.
All remaining funds not saved by consumers would end up right back in the hands of the businesses and shareholders it came from...they can't really lose.
Of course no one is saying that shareholders should give back all of their gains as you have shown in your example...just a fair share.
It's the money removed from the system that kills it..accumulating higher and higher levels of profits, which end up mostly as savings for someone in the top 0.1%, kills the flow for everyone else.
Paul if you look at that multiplier and assume it would somehow lead to a 2.5x to that family of 4 illustration you make then that would amount to about 10k (2.5 x 4k) which would be about enough to purchase a healthcare policy for the family and not much else....
Its not enough...
Look at these tax refunds going in this month that is about say 200B going in over about 2 months right now that will probably be spent.... divide that over the 110m or so US households and that is about 1800 per household in 2 months and it is so inconsequential that nobody other than those who read this blog even realize it is happening....
govt leading flow has to be greatly increased for as Dan indicates:
"the US government should be accumulating more public wealth, and commanding more of the nation’s capital as part of a commitment to an expanded strategic direction-setting role, with a new activist determination to drive innovation and structural transformation through mission-driven public investment."
This imo would require in excess of 1T per year of increased SUSTAINED FLOW in the leading govt spending, ie not "pump priming" (metaphor alert!!!!).....
The firms are not in authority and have no authority to be correcting anything as Blodget asserts here.... they have NO AUTHORITY.... the government institution does though...
rsp, matt
http://economistsview.typepad.com/.a/6a00d83451b33869e201a3fcca7fb7970b-popup
The numbers alone aren't what's degrading relative standing of the US Middle Class.
I'd say that it's the loss of purpose which is leading our electorate (including corporations) astray.
The method is the general effect of misguided thinking on policy.
And the outcome is the relative neglect of aggregate demand, which equates to slow demise of the MiddleClass.
https://plus.google.com/104140272098689841413/posts/AWxX3WXrb6V
Tom,
total govt spending is up almost 1/3rd since 2008.... without which neither equipment investment nor residential investment would be up...
This is some sort of economist moron graph you've linked to there....
rsp,
http://delong.typepad.com/sdj/2014/03/noted-for-your-evening-procrastination-for-march-1-2014.html
"govt leading flow has to be greatly increased for as Dan indicates:"
Matt that's pretty obvious....the problem is 99% of the population...and the leadership...believes we have to tax to acquire the funds.
Secondly, higher profits removes funds more quickly from the system and with our current wage structure the system is biased towards profits...increased productivity accrues to profit...so the system peters out before enough spending can take place among consumers to generate healthy economic activity. The ripples in the pond don't reach as far.
No matter how we slice it the bulk of all spending settles out as accumulated dollar wealth among the 0.1% cohort and above
If they have it we don't, it's that simple, and there is no plausible transfer mechanism that can move those funds back to consumers. Every successful act of capitalism removes funds from the group that is sold to.
So the government must spend more, but it doesn't matter as much as it used too because profits are stripped away so fast the onrush of spending peters out before it can reach everyone.
Btw, spending growth over the past 4 years has been slightly lower than the previous 20 years pr so and lower than the historical average.
Well Paul then just use those profits as we are right now which is that those flows go to provision our seniors in retirement... they are out of the workforce...
Already, half of profit flow is distributed as dividends, much of which goes to institutional accounts and pension funds which are the funds that generate the retirement pension flows... this way the profits are given in most cases indirectly to people who are out of the workforce and have built up savings over their lifetimes in anticipation of retirements...
The flow in this way can be used to provision retired households who will spend the profit flows in the next time period.... and so on...
rsp,
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