Posted: 8/20/2014 10:07 AM
The U.S. economy is still sputtering. Why is growth so slow and weak?
One reason is that average American consumers, who account for the vast majority of the spending in the economy, are still strapped.
The reason average American consumers are still strapped, meanwhile, is that America's companies and company owners — the small group of Americans who own and control America's corporations — are hogging a record percentage of the country's wealth for themselves.
In the past 5 years, American corporations have boosted their profits and share prices by cutting costs (firing people) and buying back stock. As a result, unemployment remains high. And wage growth for the Americans who are lucky enough to be working has been pathetic — the slowest since World War 2.
Meanwhile, America's corporations and their owners have never had it better. Corporate profits just hit another all-time high, both in absolute dollars and as a percent of the economy. And U.S. stocks are at record highs.
Even Scrooge would be appalled.
Many people seem confused by this juxtaposition. If corporations and shareholders are doing so well, why is the economy so crappy?
The answer is that one company's wages are other companies' revenues. Americans save almost nothing, so every dollar we earn in wages gets spent on products and services (including, in some cases, those of the companies we work for.) The less American companies pay their workers, the less American consumers have to spend. And the less American consumers have to spend, the slower the economy grows.
This isn't a complex concept. We're all in this together. People make it complicated by casting it as a political issue and inflaming partisan tensions. But it has nothing to do with politics.
Importantly, it doesn't have to be this way.
There's no "law of capitalism" that says that companies have to pay their employees as little as possible. There's no law of capitalism that says companies have to "maximize short-term profits." That's just a story that America's owners made up to justify taking as much of the company's wealth as possible for themselves.
Ironically, this short-term greed on the part of America's owners is likely reducing their long-term wealth: Companies can't grow profits by cutting costs forever, because their profits can't grow higher than their revenues. At some point, revenue growth needs to accelerate. But that won't happen until companies start sharing more of the wealth they create with the folks who create it — their employees.
Let's go to the charts ...
1) Corporate profit margins just hit another all-time high. Companies are making more per dollar of sales than they ever have before. (Some people are still blaming economic weakness on "too much regulation" and "too many taxes." That's crap. Maybe little companies are getting smothered by regulation and taxes, but big ones certainly aren't. What they're suffering from is a myopic obsession with short-term profits at the expense of long-term value creation.)
Business Insider, St. Louis Fed
Profits as a percent of the economy.
2) Wages as a percent of the economy just hit another all-time low. Why are corporate profits so high? One reason is that companies are paying employees less than they ever have as a share of GDP. And that, in turn, is one reason the economy is so weak: Those "wages" represent spending power for consumers. And consumer spending is "revenue" for other companies. So the profit obsession is actually starving the rest of the economy of revenue growth.
Wages as a percent of the economy.
In short, our obsession with "maximizing profits" is creating a country of a few million overlords and 300+ million serfs.
Don't believe it?
Flip through these charts ... AMERICA TODAY: 3 Million Overlords, 300 Million Serfs
Posted: 8/20/2014 2:24 PM
Posted: 8/20/2014 2:46 PM
Posted: 8/20/2014 2:52 PM
KnoxKid wrote: "In short, our obsession with "maximizing profits" is creating a country of a few million overlords and 300+ million serfs."And people are starting to wake up to it. If the republicans were smart, this is the area they could could try to correct in order to appeal to the masses and win votes. It's an area that hasn't gotten any better under Obama and they could easily point that out and offer their own strategies to combat it.If the republicans were smart, that is...
Posted: 8/20/2014 2:54 PM
VOLSAREBACK wrote: Everything you two idiots describe is completely contrary to the Constitution.The notion of either of you being wiser than the founding fathers is laughable (at best).
Posted: 8/20/2014 2:55 PM
americans are sick of politics. only 13 percent approve of the job congress is doing, a near record low. the president's approval ratings are also in the basement.
a large portion of the public doesn't even bother voting. only 57.5 percent of eligible voters cast their ballots in the 2012 presidential election.
put simply, most americans feel powerless, and assume the political game is fixed. so why bother?
a new study scheduled to be published in this fall by princeton's martin gilens and northwestern university's benjamin page confirms our worst suspicions.
gilens and page analyzed 1,799 policy issues in detail, determining the relative influence on them of economic elites, business groups, mass-based interest groups, and average citizens.
their conclusion: "the preferences of the average american appear to have only a miniscule, near-zero, statistically non-significant impact upon public policy."
instead, lawmakers respond to the policy demands of wealthy individuals and monied business interests -- those with the most lobbying prowess and deepest pockets to bankroll campaigns.
before you're tempted to say "duh," wait a moment. gilens' and page's data come from the period 1981 to 2002. this was before the supreme court opened the floodgates to big money in citizens united, prior to superpacs, and before the wall street bailout.
so it's likely to be even worse now.
but did the average citizen ever have much power? the eminent journalist and commentator walter lippman argued in his 1922 book public opinion that the broad public didn't know or care about public policy. its consent was "manufactured" by an elite that manipulated it. "it is no longer possible ... to believe in the original dogma of democracy," lippman concluded.
yet american democracy seemed robust compared to other nations that in the first half of the twentieth century succumbed to communism or totalitarianism.
political scientists after world war ii hypothesized that even though the voices of individual americans counted for little, most people belonged to a variety of interest groups and membership organizations -- clubs, associations, political parties, unions -- to which politicians were responsive.
"interest-group pluralism," as it was called, thereby channeled the views of individual citizens, and made american democracy function.
What's more, the political power of big corporations and Wall Street was offset by the power of labor unions, farm cooperatives, retailers, and smaller banks.
Economist John Kenneth Galbraith approvingly dubbed it "countervailing power." These alternative power centers ensured that America's vast middle and working classes received a significant share of the gains from economic growth.
Starting in 1980, something profoundly changed. It wasn't just that big corporations and wealthy individuals became more politically potent, as Gilens and Page document. It was also that other interest groups began to wither.
Grassroots membership organizations shrank because Americans had less time for them. As wages stagnated, most people had to devote more time to work in order to makes ends meet. That included the time of wives and mothers who began streaming into the paid workforce to prop up family incomes.
At the same time, union membership plunged because corporations began sending jobs abroad and fighting attempts to unionize. (Ronald Reagan helped legitimized these moves when he fired striking air traffic controllers.)
Other centers of countervailing power -- retailers, farm cooperatives, and local and regional banks -- also lost ground to national discount chains, big agribusiness, and Wall Street. Deregulation sealed their fates.
Meanwhile, political parties stopped representing the views of most constituents. As the costs of campaigns escalated, parties morphing from state and local membership organizations into national fund-raising machines.
We entered a vicious cycle in which political power became more concentrated in monied interests that used the power to their advantage -- getting tax cuts, expanding tax loopholes, benefiting from corporate welfare and free-trade agreements, slicing safety nets, enacting anti-union legislation, and reducing public investments.
These moves further concentrated economic gains at the top, while leaving out most of the rest of America.
No wonder Americans feel powerless. No surprise we're sick of politics, and many of us aren't even voting.
But if we give up on politics, we're done for. Powerlessness is a self-fulfilling prophesy.
The only way back toward a democracy and economy that work for the majority is for most of us to get politically active once again, becoming organized and mobilized.
We have to establish a new countervailing power.
The monied interests are doing what they do best -- making money. The rest of us need to do what we can do best -- use our voices, our vigor, and our votes.
ROBERT B. REICH's film "Inequality for All" is now available on DVD and blu-ray, and on Netflix. Watch the trailer below:
Posted: 8/20/2014 2:59 PM
Posted: 8/20/2014 3:00 PM
Posted: 8/20/2014 3:02 PM
LittleDipper wrote: KnoxKid wrote: "In short, our obsession with "maximizing profits" is creating a country of a few million overlords and 300+ million serfs."And people are starting to wake up to it. If the republicans were smart, this is the area they could could try to correct in order to appeal to the masses and win votes. It's an area that hasn't gotten any better under Obama and they could easily point that out and offer their own strategies to combat it.If the republicans were smart, that is...Maximizing shareholder wealth is and should be the primary focus of a corporation.
Posted: 8/20/2014 3:04 PM
Posted: 8/20/2014 3:09 PM
volbrigade wrote: Yeah, but...if someone could make billions and billions of dollars -- enough to procure everything this brief life has to offer -- power, sex, fabulous living conditions, unlimited travel (beyond first class), the ability to do whatever their heart desires, even to secure the kind of medical treatment that could extend their natural lives (we only get one, and then that's it. Finito -- right?), and their ability to enjoy them, for years -- may even decades; maybe forever (transhumanism) --And the ability to pass all of those advantages and luxuries on to their genetic progeny, fulfilling their evolutionary mission and purpose in life (the only one we have) --all of it while being insulated from the teeming rabble and hoi poloi of flyover country, and those nasty wogs that clog the Third World --I mean, who wouldn't do it?I think you guys are being very judgmental and intolerant of these people. And if you were offered an opportunity to change places with them -- after experiencing their lifestyle for a month -- you'd jump at it.Which makes you hypocrites.Quit trying to muck with evolution all the time. Evolution has put these people at the top of the pyramid. All it has provided to you is the ability to be jealous of them.Besides, even if you could tear them down, and take all they have, you'd just screw everything up, and increase the misery. And then another oligarchy of the most evolutionarily advanced would take their place.Only it'd be a few centuries before they let their guard down enough to let their displacement occur again.You're a plebe. Either do what it takes to join the uber-elite, if you've got the stuff, the evolutionary material --or accept the mediocrity of your condition.Either way -- why not shut the f--- up?
Posted: 8/20/2014 3:15 PM
indyv wrote: hell we all have portfolios......but not at the demise of the nation......every citizen has a responsibility to his nation....corporations have a responsibility to the nation as well as to the bottom line......
Posted: 8/20/2014 4:08 PM
Posted: 8/20/2014 4:11 PM
The reason the economy stinks we have a democrat President and a demcorat controlled senate who are bigger idiots than you and that's saying a lot.
Posted: 8/20/2014 6:21 PM
Posted: 8/20/2014 7:00 PM
indyv wrote: ok i'm a dumass......explain what part of the Constitution any of this is against
Posted: 8/20/2014 7:41 PM
"In short, our obsession with "maximizing profits" is creating a country of a few million overlords and 300+ million serfs".....Indy 8/20/14
The very idea of trying to maximize profits. Maybe they should take anyone out that tries to maximize profits and shoot them,...or at least have the IRS audit them since this administration is very good at that sort of thing.If profits weren't maximize there would be zero jobs left in these United States.If a corporation didn't attempt to maximize profits the Board of Directors would be firedIf a small business didn't attempt to maximize profits they would not be in business.I never cease to be amazed at the garbage that some people post. I thought I had seen some stupid post on this forum before but I'm still amazed.
Last edited 8/20/2014 7:46 PM by roadvol
Posted: 8/20/2014 7:52 PM
Posted: 8/20/2014 10:06 PM