Guest Post: Corporate Profits Soaring Thanks To Record Unemployment

Tyler Durden's picture

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
10kby2k's picture

Yep.  Even Bernank acknowledges policy change is necessary. Great time to be a corporate big wig. Fuck the people! 

Id fight Gandhi's picture

Every company that gave big bonuses or bought back shares could have hired Americans instead of overseas.

Every buy back I cringe as shareholder numbers and EPS are more important than the USA worker.

Fuck indeed

Bearster's picture

Yup, the new marxism, the same as the old marxism.  Apparently, it is the duty of corporations to:

 - maximize expenses

 - maximize tax payments

 - do less with more

 - run at breakeven; avoid profits

 - benefit society, workers, government--everyone but shareholders

snowball777's picture

Is the phrase "enlightened self-preservation" completely lost on you?

Aquiloaster's picture

I often wonder how many people who claim to disdain Marxism have actually ever read anything by Marx or know anything about him, his ideas, or the history of his ideas. I am by NO means advocating Marxism, but from personal experience I know that "Capital" by Marx AND ENGELS is a difficult lengthy read. It talks mostly about concepts such as use-value, exchange-value, labor and the means of production. The authors conclude that industrial capitalism is impoverishing because the worker is aliented from the product in that it is not wholly his AND he does not directly benefit from the sale of his product in the market. In any case, I find it doubtful that most people who claim to understand Marxism actually know anything about it. This doesn't only mean you Bearster--its just a general comment about people tending to speak definitively on that with which they are not familiar.

jeff montanye's picture

ditto keynesianism.  or capitalism in practice (as opposed to theory).

Mach1513's picture

If everyone maximizes, everyone loses in th long run, and almost everyone in the short run.

As to profits, in a true market economy profits approach 0. All real profit is economic rent.




Sean7k's picture

ORI, I would suggest this has nothing to do with corporations per se, but with tax policies that encourage overseas production and and the FED's monetary policies.

The US rewards corporate money laundering.

As for the FED, as long as you keep dumping liquidity in the market and protect these businesses from dealing with malinvestment (especially mark to fantasy), but all malinvestment (GM and Harley Davidson and all banks come to mind), it is impossible to give the clear market based signals that encourage the increases in employment we need. 

We have to put the blame where the blame belongs:The FED and their proxies (government).

rwe2late's picture

  And the Fed and government make policy at the behest of the... ?

(clue for the clueless: NOT the lower classes)

Bearster's picture

Don't the "lower classes" (to use the marxist rhetoric) want handouts in excess of tax revenues?  Handout such as:

 - Social Security

 - Medicare

 - Medicaid

 - SNAP / Section 8 / WIC / all other traditional welfare programs

 - pensions

 - union government jobs

 - free schooling for the kids, with free lunches, after school babysitting, etc.

 - many many more

I think if you looked at the vast, vast array of handouts, giveaways, loot distribution and redistribution, and other ways that government spends beyond its tax revenues, you will find something for everyone: from corporate welfare, to farm welfare, to senior citizen welfare, to child welfare, to middle class welfare, to banker welfare...

People want the Fed because they think the Fed makes it possible to have magic (a free lunch).

Bobbyrib's picture

Being from the state with the highest property taxes in the nation, I can tell you public school education is not free.

Other than that you have some nice generalizations when you use the term "lower classes."


10kby2k's picture

judging by the results of the publuc school education, it should be free

snowball777's picture

I'm sure they'd rather be gainfully employed and paid enough to afford the private equivalents, but maybe you're under the impression they enjoy waiting in long lines for the crappy version they get.

And none of those 'handouts' ever trickle into your mouth?

Never provided a service that you've used in your lifetime?

Never kept people from breaking into your house for something to sell for a profit?

Do tell what 'magic' has allowed you to accomplish this feat...

And no person who has ever taken such a handout has ever been alive later to pay taxes, right?

Or been able to work that extra hour and increase corporate productivity?

Or bought food that would otherwise rot in a ditch?

Do tell.

Sean7k's picture

The FED is a private banking corporation run by international bankers. They make the policy, which was my point. I really didn't think I'd have to spell it out, but there you go.

disabledvet's picture

"rational in the extreme."  To this i would say "Empire, Inc." meet "Empire USA."  The lines are drawn, pick your weapons.

carbonmutant's picture

They know the unemployed can't afford to do anything about it...

SilverRhino's picture

Bullets are cheap.  The unemployed still have too much to lose.  

That second situation will start changing soon enough.


AR15AU's picture

This is what corporations do in a recession. The government gave you false expectations.

gwar5's picture

Put another way, government debt would be going down if we could downsize the public unions.



disabledvet's picture

do you mean the value of the debt or the amount of said debt?  for if you mean the former there may be more to what you say than you realize....

topcallingtroll's picture

You ought to read the Little Hoover report. Gwar is probably speaking the truth on this one.

rwe2late's picture


If the government would just stop paying for anything except what's "owed" the banks,

the debt would be reduced.

Ireland or Iceland?

AldoHux_IV's picture

Another clear and evident effect of having imbalances grow within an economy.  Way to go US.

linrom's picture

This is a very good article that shows just how short-sided US Corporations are: the blueprint from 40 years ago will not work in the future.

topcallingtroll's picture

I think these companies are not short sighted.

They see an expensive labor force in a country with some of the highest marginal corporate tax rates, and a huge and complex regulatory environment with an anti business president.

They are taking the long view by incrementally placing more capital equipment overseas. Capital will go where it is respected and treated well.

disabledvet's picture

but it is treated best here.  why else would foreigners build plant and equipment and employ Americans to make their so called "foreign cars"?  there are more foreign parts in a Ford than in a Toyota.  I guess what I'm trying to say is "quality is a quantity too" and so simply "devolving a business into a profit" is perhaps the most short sighted way of doing business indeed.  i would agree with you "it is Wall Street's job."  Of course "if they were doing their job well why did they need bailout's in the first place"?  And perhaps most importantly for the ZH set--why did the government give them in the first place?  You are rewarding no truer form of incompetence.  Wall Street can't run a bank?  That sounds like a personal problem to me...

topcallingtroll's picture

Nobody should have been bailed out.

Dburn's picture

They are taking the long view by incrementally placing more capital equipment overseas. Capital will go where it is respected and treated well.

Yet emasculating the labor force ultimately will shut down the subsidized pricing schemes they use to sell cheap to foreign markets. If people won't buy Microsoft Office at $400, that makes it difficult to sell it to China for $3.00 along with every other software product they make.

In the course of rising human expectations, labor arbitrage will soon be a game that isn't worth playing. The reality is the maximum effect on net income for outsourcing particular skill sets to lower wage countries is around +20% . But when mixed with the other 90% of corporate costs the net effect is 1-2% in additional pre-tax profits for the most organized and well-managed corporations. That doesn't account for the massive technology transfers to China and India when they take over all of the production functions of a corporation and are soon selling out the back door while setting up factories to produce the same thing yet selling it at 25% of its ASP or lower. The rest of the less well-managed corporations are not saving a dime while still losing proprietary technology, but the street insists on outsourcing so C-Suites do it to see their compensation packages rise hoping that they day when local US markets are no longer available to pay sky-high prices for overpriced products to subsidize their global aspirations (bullshit), they will be long gone as the blame for margin compression falls on someone else.

Invested capital overseas is being totally offset by the free technology transfer to the rest of the world. That's one "risk factor" you don't read much about but a quick trip to Asia will show anyone that is half awake the corporate C-Suite execs are dumber than a box of rocks as they sell their shareholders down the river by the massive investment of time and capital to produce new technology only to show people who will steal it with a blink of the eye, where to source the parts, the manufacturing process and where their markets are.

The first ones to fall for this gambit was the US Car Companies in the late 80s, early 90s who duplicated at great cost much of their manufacturing in China on the promise of access to a market of 1.3 billion people . Apparently unknown to them was the average wage back then was $30 per month even for Doctors. They were so confident that it would take care of all their problems they didn't see the second group of icebergs that hit them in the early 90s. That market has now been made to look more promising with a middle class smaller than ours that makes above $600 and below $1500 a month. Thinking the rest of the company will soon catch up, CEOs are saying "we have to be there" as an excuse if their people find out no real jump in sales ever occurred despite the promises of magnificent increases; "1.3 Billion people x $500 a person equals how much? Yipee we're rich, more stock option awards now". When the massive sales increases didn't materialize, The emphasis on handing the keys to the company's overseas manufacturers/competitors quickly shifted from massive sales increases to massive price decreases on production which the C-Suites of America know is illusory at best. Knowing it's always easier to take one step more into quicksand then go through the pain of extracting oneself from it, globalization soon became as popular as re-engineering did in the early 90s and just as deadly when the labor markets reversed right as they had prematurely ejaculated into the jar of Asset-Lite.

Certainly US Capital is beloved in China and India and everywhere else. It allows them to not only steal technology instead of the uncertainty of reverse engineering and the safer bet of copying, it also must be totally gratifying that American companies pay them to take the technology and ultimately their markets too as the C-Suites and the other Very Serious People scream "Globalization".

The Chinese and other sole source states can read SEC filings too and note that most of the CEOs hold little or any of the stock they quickly sell from option awards. That's why we have become a nation of rip-off artists to our own people. It really doesn't matter who it is either. People might argue over the theory of evolution but Capitalistic Darwinism has been redefined by those who can buy govt protection and those who can't.

People who believe capital is "treated better" in other countries, have no clear idea what they are talking about since the effective corporate tax rate here is around 10% or 25% to 35% of the total taxes paid by labor. Not only that but a brown stained congress hands them the keys to the treasury when they make mistakes. The fact is, they don't need no stinking capital over here.

Yet Not having a healthy work force will no longer allow them to hide the ASPs overseas when they have to compete with their own technology and innovation. Nothing has really changed in the corporate world. There are a few leaders and the rest follow, all focused on who gets what; personally. All other considerations are only viable if it will affect their pay packages negatively on their watch.

So to satisfy the potential critics, they just mention union busting and then everything is just a-ok with anybody with money. Hell all they have to do now is get us used to living 8 to a room with one open toilet, working 14 hours a day, 7 days a week with 8 hours at a highly reduced regular rates and 6 for free to keep the job and 7 days a week too. Hell the Gilded age wasn't too bad for those who were gilded. Child labor is next and once that's down they insure their investors the savings will be massive once more since they know longer have to pay for containerized drop shipping to other countries or here at home while having all the wage abuse freedoms they had overseas.

Capital is treated just fine here. The problem is; they have to get through the big lies they told when they started moving everything overseas en-masse. Yeah, those boys and girls have a plan and we're included too. As long as the Govt gets half our reduced pay to cover any mistakes the employers make as the execs fail upward with a huge boost from their ivy league networks.

Ivy League Capitalism. Where parents insist on the very best for their scumbag kids with little or no work but amazingly high tuition rates.

It always amuses me when I hear outraged people come on this board saying people should be happy with $10.00 an hour or the same as $3.33/hour in 1980 and "get rid of those iPhones and get a fucking job". You can tell right away where their interests lie. Someone must have told them it would be happening faster than this. Why so impatient? They must feel virtually helpless that the banks and other corps might get shorted a few bucks on their multi-trillion dollar wealth transfers. That may be their bonuses they are talking about too.

Never fear, hell is here. It won't freeze over and desperate doctors will harvest organs to keep your asses alive longer to enjoy the fruits of the big lie. Good thing you all are atheists.

A Proud Canadian's picture

A brilliant analysis.  Henry Ford is turning in his least he realized that his workers needed enough pay to purchase his cars.  The current crop are greedy foresight

Slartebartfast's picture

Fuck them.  Markets change.  Without the domestic income to buy from US multinationals, the multinationals will have to become entirely foreign corporations.  Then they will die under the foot of tyrants the world over.  Good riddance to every one of them.  Meanwhile, the US will have to rebuild from scratch and from the ground up.  It's not going to be like the 60's ever again.  The Central Banking and Warfare economy is killing itself off and it is too greedy and stupid to realize it.  We will be poorer than our parents - but perhaps have  a better quality of life in the end.  A new paradigm is on the way.  

OldTrooper's picture

While I do not share your optimism that they will 'die under the foot of tyrants the world over' I do agree that we may very well end up with a better quality of life and that TPTB can go fuck themselves.

Bobbyrib's picture


Multinationals may not "die under the foot of tyrants," but it is going to be quite hilarious when China kicks them to the curb and steals all their technology. All the Boomer executives will then retire rich.

If Americans stick together and do not buy products from Multinationals we will see their power greatly diminished.

For all you lovers of economics (and fucking over the middle class), we could do it to set up an environment for "perfect competition" in the marketplace...

Vampyroteuthis infernalis's picture

This kind of BS can only go so far until the real economy collapses upon itself. No consumers because they are all unemployed. What are the rich going to do then?

linrom's picture

If peak oil and dollar losing its reserve status won't kill multinationals, unskilled US workforce will. There are so many engineers(?) needed to produce apps to run on Facebook that their CEO is so proud of. How about operating equipment and machinery that requires different skill levels?

disabledvet's picture

the rich?  these are "banks."  weren't they "the problem in the first place"?

topcallingtroll's picture

Productivity gains is what will save us.

Instead of artesans in workshops, the productivity of mass production has made almost everything cheap enough for the average individual. Sure a few artesans were unemployed in the process but in aggregate increased productivity was a real benefit to the average person if we compare a late 19th century lifestyle with a late 20thcentury lifestyle.

Creative destruction of.companies and jobs hurt in the short term but will benefit society in the long term. Any time it takes fewer people to make and service widgets we have improved productivity and a net wealthier society in the long run.

To argue otherwise makes you a Luddite.

Psquared's picture

Bullshit. Productivity gains means a company can create the same output with fewer employees.

I guess I am a Luddite.

topcallingtroll's picture

Why dont you read up on how the Luddites smashed the automated looms because they thought textile artesans would be put out of business.

linrom's picture

You make a perfect neoclassical economist argument? Look what all this productivity and labor saving measures produced---a pile of debt that they fail to consider. Nice wealthier society that is bankrupt. No!

topcallingtroll's picture

All the malinvestment and debt were not a product of neoclassical economics but a perversion of it.

Psquared's picture

This is one of the reasons I voted for him. His tune changed almost immediately when he moved into the WH. This is just an opinion, and I may be way off, but when he opened up the book of Presidential secrets he saw something that changed his mind. I don't know if that was a personal check made out to him or if it was a photograph of his original birth certificate, but something happened.

The idea of shared sacrfice does mean that bankers and corporatists put some skin in the game instead of worrying exclusively about the stock price. It ain't happenin and from what I can tell it never will.

Rhodin's picture

Maybe they showed him that a trip to "Dealey Plaza" could be arranged for presidents who don't do their masters bidding.

Bobbyrib's picture

He saw a note that read " are from Chicago."


ewmayer's picture

"labor market flexibility" = First, from a standing position, keeping your legs straight, bend down and touch your toes. Repeat until you can do this comfortably. Now gradually extend the range of your stretching by touching more and more of your hand to the floor: First all 4 fingertips, then the first knuckle of the fingers, then touch the floor with the knuckles while making a fist.

Yes, yes, we know it hurts, but keep working at it, trust us, the "shared sacrifice" will be ever so rewarding in the end.

OK, you can finally touch the entire surface of both palms to the floor? Excellent! Now grab your ankles and say "BOHICA"...

JW n FL's picture

Fantastic Read and Sited to Boot!!!


Love it!!


More PLEASE!!!!

hardcleareye's picture

Concur with you tonight JW......++++++++

More Please Tyler!!!!!!

Sophist Economicus's picture

You have got to be kidding me!   Let me get this straight, EXCLUDING FINANCIAL COMPANIES, if you are a company and have seen your top line falling with the recession, you are suposed to KEEP your cost structure the same, not lay-off workers and keep your fingers crossed that you survive?

This is the kind of rhetoric you expect from politicans and political 'think tank' groups.   Geez, why don't you collaborate with ilene and come up with a really thoughtful piece.  

Haliburton, Cheney, Carbon Footprint --  BOO!