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Guest Post: Corporate Profits Soaring Thanks To Record Unemployment

Tyler Durden's picture


Submitted by Mark Provost of The Economic Populist

Corporate Profits Soaring Thanks to Record Unemployment

In a January 2009 ABC interview with George
Stephanopoulos, then President-elect Barack Obama said fixing the
economy required shared sacrifice, "Everybody’s going to have to give.
Everybody’s going to have to have some skin in the game." (1)
For the past two years, American workers submitted to the President’s
appeal—taking steep pay cuts despite hectic productivity growth. By
contrast, corporate executives have extracted record profits by
sabotaging the recovery on every front—eliminating employees, repressing
wages, withholding investment, and shirking federal taxes.

The global recession increased unemployment in every country, but the
American experience is unparalleled. According to a July OECD report,
the U.S. accounted for half of all job losses among the 31 richest
countries from 2007 to mid-2010. (2) The rise of U.S. unemployment
greatly exceeded the fall in economic output. Aside from Canada, U.S.
GDP actually declined less than any other rich country, from mid-2008 to
mid 2010. (3)

Washington’s embrace of labor market flexibility ensured companies
encountered little resistance when they launched their brutal recovery
plans. Leading into the recession, the US had the weakest worker
protections against individual and collective dismissals in the world,
according to a 2008 OECD study. (4) Blackrock’s Robert Doll explains,
“When the markets faltered in 2008 and revenue growth stalled, U.S.
companies moved decisively to cut costs—unlike their European and
Japanese counterparts.” (5) The U.S. now has the highest unemployment
rate among the ten major developed countries. (6).

The private sector has not only been the chief source of massive
dislocation in the labor market, but it is also a beneficiary. Over the
past two years, productivity has soared while unit labor costs have
plummeted. By imposing layoffs and wage concessions, U.S. companies are
supplying their own demand for a tractable labor market. Private sector
union membership is the lowest on record. (7) Deutsche Bank Chief
Economist Joseph LaVorgna notes that profits-per-employee are the
highest on record, adding, “I think what investors are missing - and
even the Federal Reserve - is the phenomenal health of the corporate
sector.” (8)

Due to falling tax revenues, state and local government layoffs are
accelerating. By contrast, U.S. companies increased their headcount in
November at the fastest pace in three years, marking the tenth
consecutive month of private sector job creation. The headline numbers
conceal a dismal reality; after a lost decade of employment growth, the
private sector cannot keep pace with new entrants into the workforce.

The few new jobs are unlikely to satisfy Americans who lost careers.
In November, temporary labor represented an astonishing 80% of private
sector job growth. Companies are transforming temporary labor into a
permanent feature of the American workforce. UPI reports, “This year,
26.2 percent of new private sector jobs are temporary, compared to 10.9
percent in the recovery after the 1990s recession and 7.1 percent in
previous recoveries.” (9) The remainder of 2010 private sector job
growth has consisted mainly of low-wage, scant-benefit service sector
jobs, especially bars and restaurants, which added 143,000 jobs, growing
at four times the rate of the rest of the economy. (10)

Aside from job fairs, large corporations have been conspicuously
absent from the tepid jobs recovery. But they are leading the profit
recovery. Part of the reason is the expansion of overseas sales, but
the profit recovery is primarily coming off the backs of American
workers. After decades of globalization, U.S. multinationals still
employ two-thirds of their global workforce from the U.S. (21.1 million
out of 31.2 million). (11) Corporate executives are hammering American
workers precisely because they are so dependent on them.

An annual study by USA Today found that private sector paychecks as a
share of Americans’ total income fell to 41.9 percent earlier this
year, a record low. (12) Conservative analysts seized on the report as
proof of President Obama’s agenda to redistribute wealth from, in their
words, those ‘pulling the cart’ to those ‘simply riding in it’. Their
accusation withstands the evidence—only it’s corporate executives and
wealthy investors enjoying the free ride. Corporate executives have
found a simple formula: the less they contribute to the economy, the
more they keep for themselves and shareholders. The Fed’s Flow of Funds
reveals corporate profits represented a near record 11.2% of national
income in the second quarter. (13)
Non-financial companies have amassed nearly two-trillion in cash,
representing 11% of total assets, a sixty year high. Companies have not
deployed the cash on hiring as weak demand and excess capacity plague
most industries. Companies have found better use for the cash, as
Robert Doll explains, “high cash levels are already generating dividend
increases, share buybacks, capital investments and M&A activity—all
extremely shareholder friendly.” (5)

Companies invested roughly $262 billion in equipment and software
investment in the third quarter. (14) That compares with nearly $80
billion in share buybacks. (15) The paradox of substantial liquid
assets accompanying a shortfall in investment validates Keynes’ idea
that slumps are caused by excess savings. Three decades of lopsided
expansions has hampered demand by clotting the circulation of national
income in corporate balance sheets. An article in the July issue of The
Economist observes: “business investment is as low as it has ever been
as a share of GDP.” (16)

The decades-long shift in the tax burden from corporations to working
Americans has accelerated under President Obama. For the past two
years, executives have reported record profits to their shareholders
partially because they are paying a pittance in federal taxes.
Corporate taxes as a percentage of GDP in 2009 and 2010 are the lowest
on record, just above 1%. (17)

Corporate executives complain that the U.S. has the highest corporate
tax rate in the world, but there’s a considerable difference between
the statutory 35% rate and what companies actually pay (the effective
rate). Here again, large corporations lead the charge in tax arbitrage.
U.S. tax law allows multinationals to indefinitely defer their tax
obligations on foreign earned profits until they ‘repatriate’ (send
back) the profits to the U.S. U.S. corporations have increased their
overseas stash by 70% in four years, now over $1 trillion—largely by
dodging U.S taxes through a practice known as “transfer pricing”.
(18)Transfer pricing allows companies to allocate costs in countries
with high tax rates and book profits in low-tax jurisdictions and tax
havens—regardless of the origin of sale. U.S. companies are using
transfer pricing to avoid U.S. tax obligations to the tune of $60
billion dollars annually, according to a study by Kimberly A. Clausing,
an economics professor at Reed College in Portland, Oregon. (18)

The corporate cash glut has become a point of recurrent contention
between the Obama administration and corporate executives. In mid
December, a group of 20 corporate executives met with the Obama
administration and pleaded for a tax holiday on the $1 trillion stashed
overseas, claiming the money will spur jobs and investment. In 2004,
corporate executives convinced President Bush and Congress to include a
similar amnesty provision in the American Jobs Creation Act; 842
companies participated in the program, repatriating $312 billion back to
the U.S. at 5.25% rather than 35%. (19) In 2009, the Congressional
Research Service concluded that most of the money went to stock buybacks
and dividends—in direct violation of the Act. (20)

The Obama administration and corporate executives saved American capitalism. The U.S. economy may never recover.

1. ‘This Week’ ABC News with George Stephanopoulos, January 2009.
2. OECD report, U.S. lost most jobs among rich countries. EMMA VANDORE AP Business Writer
3. Carnegie Endowment for International Peace. Policy Brief 89.
November, 2010. Uri Dadush & Vera Eidelman. Five Surprises of the
Great Recession.
4. OECD Indicators of Employment Protection.,3343,en_2649_37457_42695243_1_1_1_3745...
5. The Wall St. Journal. June 8, 2010. Robert Doll. Opinion. The Bullish Case for U.S. Equities.
6. Bureau of Labor Statistics. International Labor Comparisons. Updated Dec. 2, 2010.
7. Bloomberg Businessweek. January 22, 2010. Holly Rosenkrantz.Union membership in the private sector declines to record low:
8. Joseph Lavorgna quote: CNBC. When will profits translate into jobs?
9. UPI. Temp work becomes a fixture. Dec. 20th, 2010.
10. Restaurant industry’s hiring helping to revive economy. DAYTON, Nov
28, 2010 (Dayton Daily News - McClatchy-Tribune Information Services via
11. Tax Notes, Martin A. Sullivan. U.S. Multinationals Cut U.S. Jobs While Expanding Abroad.
12. USA Today. May 26, 2010. Private pay shrinks to historic lows as gov't payouts rise.
13. New York Times. Economix blog. Catherine Rampell. Nov. 23, 2010. Visualizing Booming Profits.
14. $262 billion in equipment and software investment, calculated from EconStats.
15. ABC News. Dec. 20, 2010. Mark Jewell. S&P 500 Companies More Than Double Buybacks in 3Q.
16. The Economist. Companies’ cash piles: Show us the Money.
17. Corporate Income Tax as a share of GDP, 1946-2009.
18. Bloomberg. May 13, 2010. U.S. Companies Dodge $60 Billion in Taxes with Global Odyssey.
19. Bloomberg. Jesse Drucker. Dec 29, 2010. Dodging Repatriation Tax Lets U.S. Companies Bring Home Cash
20. Center for Budget priorities. Robert Greenstein and Chye-Ching
Huang. Feb. 2009. Proposed Tax Break For Multinationals Would Be Poor
“Dividend Repatriation Tax Holiday” Failed in 2004, Unlikely to Work Now.


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Mon, 02/28/2011 - 17:33 | 1004992 10kby2k
10kby2k's picture

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

Mon, 02/28/2011 - 17:59 | 1005080 Id fight Gandhi
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

Mon, 02/28/2011 - 18:03 | 1005097 Bearster
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

Mon, 02/28/2011 - 18:34 | 1005209 snowball777
snowball777's picture

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

Mon, 02/28/2011 - 21:40 | 1005636 snowball777
snowball777's picture

Fair enough; Germany can and will continue to wax that ass, punks.

Mon, 02/28/2011 - 23:42 | 1005893 Aquiloaster
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.

Tue, 03/01/2011 - 07:14 | 1006400 jeff montanye
jeff montanye's picture

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

Tue, 03/01/2011 - 09:15 | 1006586 Mach1513
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.




Mon, 02/28/2011 - 18:24 | 1005184 Sean7k
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).

Mon, 02/28/2011 - 19:48 | 1005410 rwe2late
rwe2late's picture

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

(clue for the clueless: NOT the lower classes)

Mon, 02/28/2011 - 20:24 | 1005479 Bearster
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).

Mon, 02/28/2011 - 20:50 | 1005528 Bobbyrib
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."


Tue, 03/01/2011 - 01:28 | 1006180 10kby2k
10kby2k's picture

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

Mon, 02/28/2011 - 21:45 | 1005664 snowball777
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.

Mon, 02/28/2011 - 21:58 | 1005685 Sean7k
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.

Mon, 02/28/2011 - 17:34 | 1004999 disabledvet
disabledvet's picture

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

Mon, 02/28/2011 - 17:36 | 1005005 carbonmutant
carbonmutant's picture

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

Mon, 02/28/2011 - 18:03 | 1005096 SilverRhino
SilverRhino's picture

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

That second situation will start changing soon enough.


Mon, 02/28/2011 - 17:41 | 1005017 AR15AU
AR15AU's picture

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

Mon, 02/28/2011 - 17:41 | 1005018 gwar5
gwar5's picture

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



Mon, 02/28/2011 - 18:08 | 1005117 disabledvet
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....

Mon, 02/28/2011 - 18:25 | 1005183 topcallingtroll
topcallingtroll's picture

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

Mon, 02/28/2011 - 19:58 | 1005428 rwe2late
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?

Mon, 02/28/2011 - 17:43 | 1005028 AldoHux_IV
AldoHux_IV's picture

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

Mon, 02/28/2011 - 17:44 | 1005031 linrom
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.

Mon, 02/28/2011 - 18:06 | 1005099 topcallingtroll
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.

Mon, 02/28/2011 - 18:14 | 1005134 disabledvet
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...

Mon, 02/28/2011 - 18:21 | 1005169 topcallingtroll
topcallingtroll's picture

Nobody should have been bailed out.

Tue, 03/01/2011 - 00:34 | 1006054 Dburn
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.

Tue, 03/01/2011 - 15:27 | 1008192 A Proud Canadian
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

Mon, 02/28/2011 - 17:50 | 1005046 Slartebartfast
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.  

Mon, 02/28/2011 - 18:43 | 1005230 OldTrooper
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.

Mon, 02/28/2011 - 21:21 | 1005605 Bobbyrib
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...

Mon, 02/28/2011 - 17:56 | 1005065 Vampyroteuthis ...
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?

Mon, 02/28/2011 - 18:24 | 1005101 linrom
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?

Mon, 02/28/2011 - 18:16 | 1005142 disabledvet
disabledvet's picture

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

Mon, 02/28/2011 - 17:58 | 1005070 topcallingtroll
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.

Mon, 02/28/2011 - 17:59 | 1005079 Psquared
Psquared's picture

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

I guess I am a Luddite.

Mon, 02/28/2011 - 18:16 | 1005118 topcallingtroll
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.

Mon, 02/28/2011 - 18:17 | 1005152 disabledvet
disabledvet's picture

"sobotuers."  i hear that's a crime.

Mon, 02/28/2011 - 21:26 | 1005615 Bobbyrib
Bobbyrib's picture


Mon, 02/28/2011 - 18:14 | 1005136 linrom
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!

Mon, 02/28/2011 - 18:17 | 1005156 topcallingtroll
topcallingtroll's picture

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

Mon, 02/28/2011 - 17:56 | 1005072 Psquared
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.

Mon, 02/28/2011 - 21:11 | 1005585 Rhodin
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.

Mon, 02/28/2011 - 21:28 | 1005620 Bobbyrib
Bobbyrib's picture

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


Mon, 02/28/2011 - 18:07 | 1005114 ewmayer
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"...

Mon, 02/28/2011 - 18:12 | 1005127 JW n FL
JW n FL's picture

Fantastic Read and Sited to Boot!!!


Love it!!


More PLEASE!!!!

Mon, 02/28/2011 - 21:57 | 1005683 hardcleareye
hardcleareye's picture

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

More Please Tyler!!!!!!

Mon, 02/28/2011 - 18:16 | 1005150 Sophist Economicus
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!


Mon, 02/28/2011 - 18:20 | 1005168 disabledvet
disabledvet's picture

you take government money--you provide a government service now.

Mon, 02/28/2011 - 20:26 | 1005480 JW n FL
JW n FL's picture

The Ber-Nake two InfiniTimmy and BEYOND!!!!!!

Mon, 02/28/2011 - 18:20 | 1005171 Carl Spackler
Carl Spackler's picture

This article is laughable...and by extension, so is the author.

Private economic entities cut expenses and decrease production when demand decreases for their goods/services decreases.  This action is called market discipline.  Supply seeks out equilibrium with demand, and when demand drops, so does supply. Otherwise waste or "externalities" occur.

So, the [communist] author implies that private interests are expected to serve the public interest, one of which he includes as "entitlement to a job," rather than let supply and deman find equilibrium.


A more profound topic to scientifically analyze would be "the unexpected consequences of Quantitative Easing".....namely, to  per capita consumption, savings, investment, and the U.S. labor force.







Mon, 02/28/2011 - 18:31 | 1005202 topcallingtroll
topcallingtroll's picture

Huge increases in productivity is about the only thing that can save us from this mess and give us something approximating your former lives and incomes

Mon, 02/28/2011 - 21:11 | 1005583 Yes_Questions
Yes_Questions's picture

Productivity gains are sought to benefit the capital side of the equation, not labor.

Now, if achieving Huge Increases in productivity means endless dividends for all to the extent NO ONE has to toil for a pay check..

Tue, 03/01/2011 - 09:24 | 1006608 TheEternalTriangle
TheEternalTriangle's picture

The main issue is that extraordinary productivity gains (which is not driven by cheap labour, productivity is output per hour worked not return on dime invested) have occured at the same time as a large pool of potential labour became available.

Even though the savings from tapping that labour pool was marginal the simple addition of all that labour supply drastically eroded the bargaining position of workers in developed economies.

It is depressing to note that some of the biggest gain in individual rights and improvement in individual wages and conditions were after the Black Death and in the 50s following the World Wars. In both cases a large section of the labour pool had just been killed off or died.

Mon, 02/28/2011 - 19:27 | 1005352 ebworthen
ebworthen's picture


Oh dear.

Mr. Spackler,

If you act with will power and sincerity you may be able to escape the black hole of one dimensional thinking.

Quickly, grab hold of an unemployed parent, a Demican, a Republictrat, Ronald Reagan's autobiography, Mein Kampf, Communist Manifesto, and Atlas Shrugged and sneeze three times while saying "bullshit" before you are sucked into the polarity of helleaven.

Mon, 02/28/2011 - 21:30 | 1005630 Bobbyrib
Bobbyrib's picture

Yes and the buying back of stock and increasing of dividends is certainly scaling back!

Mon, 02/28/2011 - 22:47 | 1005799 Ying-Yang
Ying-Yang's picture

There is something to be said for not pissing in the pool you swim in. When is a national company no longer national? Think about supporting those around you and they support you, investing in people where you live.

Ya feel safe? Things keeps goin like they are where will you lay your head?

"author implies that private interests are expected to serve the public interest."

Expected? Who raised you numb nuts? Something to be said for doing the right thing.

Tue, 03/01/2011 - 07:43 | 1006418 TheEternalTriangle
TheEternalTriangle's picture

The only problem is that with the current dynamics you then enter into a vicious cycle.

Demand is low because un-employment is high and wages have been supressed. Based on this companies scale back, try to pare back costs further and retain more of their profits. This keeps wages supressed and drives unemployment up even further which further supresses demand and forces companies to scale back...

At the moment we're not settling into a stable equilibrium we're slowly dropping to one extreme.

One more thing I would like to point out is that you're saying that you are also implying the "private interests are expected to serve the public interest". I your case the private interest of individual employees has been subverted for the putative public interest of having growing corporate profits.

As has been pointed out individual productivity in the US has been rising steadily for decades whilst wages have been stagnating or falling. This isn't "entitlement to a job" this is being justly compensated for the work you provide.

Mon, 02/28/2011 - 18:26 | 1005173 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

Transnational corporations owe allegiance to no one other than their profit. The profit motive destroyed any semblance of risk management into the financial crisis, greed vastly overcame fear. Stupidity was leveraged. Now, the US taxpayer shells out for the Pax Americana, where the high seas remain open for commerce and where war on a global scale remains unthinkable because there really is only one super power, even if it is living off of borrowed time. Yet small proxy wars bleed American blood of the heartland. Transnationals pay little or no tax, offshore jobs and benefit from the Pax Americana and the US Taxpayer put when things go wrong. GM, GE, GS etc. etc. All bailed out by people living in little pink houses, like you and me. Who has caused more suffering, the Transnational corporation milking you dry, or the "terrorists"?

Mon, 02/28/2011 - 20:05 | 1005446 PulauHantu29
PulauHantu29's picture

Business in Grand Cayman is brisker then ever I saw on the internet. Condos there at The Ritz start at $2 million...mostly selling to WS folks who "want a second home away from the hoi poloi.

Mon, 02/28/2011 - 18:25 | 1005182 Aceuphisleev
Aceuphisleev's picture

This article basically describes the firm I worked for before I gave them the big middle finger and quit.  Yes, I may have put myself out on the street, so to speak, but I was tired of being taken advantage of just so the directors could squeeze out a couple extra points of profit at the workers' expense.

Mon, 02/28/2011 - 19:30 | 1005367 spank-of-america
spank-of-america's picture

I know the feeling. Worked for a "mom & pop" company that had annual revenue of around 10 million. Owner told scary stories everyday to make employees afraid of losing their jobs. Then he wouldn't give anyone a raise. I found it funny how he said he couldn't afford to give raises, but we were busy enough to hire more people to work in the warehouse where we shipped products out of... Found another job and quit.  He had a co-worker call me back and offer me more money, he only offered me what I should have been making for the past two years. Turned him down.

BTW, if you have a job, now is the time to look for another one. Your resume will get placed on the top of the pile.  Too bad they almost all pay 36k a year no matter how many skills or responsibilites they want from you.

Mon, 02/28/2011 - 18:46 | 1005244 10kby2k
10kby2k's picture


I want to transfer price my 1099's

Mon, 02/28/2011 - 18:52 | 1005260 10kby2k
10kby2k's picture

And the little guy thinks he's participating by owing a share of stock. Just keep the stock options coming it's all part of the ponzi.

Mon, 02/28/2011 - 19:18 | 1005323 XRAYD
XRAYD's picture

It's never enough for big business ...


 “The head of one of the US’s biggest industrial groups has launched a scathing attack on Barack Obama’s attempts to repair relations with companies, dubbing him ‘anti-business’. Manufacturers could shift production out of the US to Canada or Mexico as a result, warned George Buckley, chief executive and chairman of 3M. ‘I judge people by their feet, not their mouth,’ he told the Financial Times. ‘We know what his instincts are – they are Robin Hood-esque. He is anti-business.’ …  

Mon, 02/28/2011 - 20:29 | 1005485 Arkadaba
Arkadaba's picture

Saw that article and was surprised - I thought Obama was playing nice?

Mon, 02/28/2011 - 20:04 | 1005442 PulauHantu29
PulauHantu29's picture

Yes, I was amazed to see how cheerful the CNBC folks were today talking to Peter Schiff bragging to him how "wonderful" the economy is ..."just look at the strong corporate profits..that proves you're wrong Peter...the economy is great."

They dismissed his references to soaring commodity prices and massive increase in the money supply.


Mon, 02/28/2011 - 20:42 | 1005473 Xkwisetly Paneful
Xkwisetly Paneful's picture

those damn elitists how dare they make capital available to anyone at 5%.  maybe they should roll back the clock 40yrs where the only folks that could borrow were those who didn't need to.

those damn elitists how dare they accumulate more worthless currency than the next idiot.

 made the entire concept of unaffordable luxury banal.

despite the moronista protests to the contrary.

 Takes 10 people to wade through the red tape to create one job. Beyond a joke.

 as is shared sacrifice in a country where 50% pay no federal income tax and another 16% work for the government.

 as is the failure of capitalism in a nation where the government is the largest of everything.

 just followed the eurotrash lead right into that socialist blackhole completely devoid of innovation. shouldn't surprise anyone with the majority of union membership now governmental.


I need a job can one you devout marxists create a non governmental one for me?

Mon, 02/28/2011 - 21:34 | 1005639 Bobbyrib
Bobbyrib's picture

Maybe CNBC is looking for an intern.

Mon, 02/28/2011 - 21:41 | 1005655 Xkwisetly Paneful
Xkwisetly Paneful's picture

Maybe I should write a book on US class warfare?

call it "Live Like Royalty, Better Than Immediate Ancestors Could Dream About, Yet Whine Like Little Biatches"

The guide to living like Bill Gates and calling oneself a victim.

Tue, 03/01/2011 - 07:38 | 1006414 Bobbyrib
Bobbyrib's picture

Maybe you should realize that current living standards for the middle class in this country are going to be unsustainable for most.

Tue, 03/01/2011 - 08:07 | 1006434 Xkwisetly Paneful
Xkwisetly Paneful's picture

But it is the 35th amendment in the Bill of Rights-the right to live way above one's means and call that the new normal.


Maybe you should realize no one forced anyone to borrow the net present value of their lives the last 5years.

Tue, 03/01/2011 - 08:15 | 1006441 TheEternalTriangle
TheEternalTriangle's picture

The only issue is that whether you did or didn't borrow is immaterial; as long as you're not a CEO/Director/Senior Manager or work in Banking you're still shafted.

The median person who didn't borrow saw nothing of the gains accrued from the rising productivity of his work, the person who borrowed got to enjoy the phantom of it.

Tue, 03/01/2011 - 08:52 | 1006458 Xkwisetly Paneful
Xkwisetly Paneful's picture

Of course insure live in a society where the prudent actor gets shafted while the irrational one goes along largely unfettered.

Who is really getting screwed here?

The people forgoing trillions in interest, the savers and fixed income folks.

otherwise the winners pay all the vig as usual and the losers pay virtually none. They started with no skin in the game in the first place anything they got out of it is icing.



For sure shafted living like royalty in some countries. Better than immediate ancestors could have dreamed of, anyone not a functioning adult under Carter have largely lived in good economic times and yet still somehow no shortage of perpetual victims.

100% screwed, avg poverty level citizen lives in a 3br 2 ba house with a car and basically the same amenities as the people screwing them.  People who teach their kids all taught in the same schools, their doctors taught by the same people, eat the same food, crap in the same toilets-oh the most significant difference is the one guy has a huge pile of depreciating currency and the screwee doesn't?

Access to higher education?  Maybe curtail all the fake demand from the government subsidizing a huge number that shouldn't be there in the first place and/or rail against the university hierarchy that sees teachers doing personal research first and teaching second, maybe eliminate all the BS like sports that college tuition shouldn't be paying for in the first place.  Even scream about uni presidents and their million dollar pay packages.





Exactly because unabridged access to cheap capital has nothing to do with anything and one using it for instance to further one's education vs wall papering their house in plasmas does nothing for earning power.

 On the money! immigrants speaking no english, with little or no education die coming to the land of opportunity and become tax paying business owners while the domestically educated can't get out of their own way to save their own lives.


I get it already,  delusional devout marxists who will stand in the way of anything and everything to ensure there are no super powers left in the end.  Taxed and regulated the nation to death between the beaurocrats and unions one would have to be out of their frickin mind to start any labor intensive business here.





Tue, 03/01/2011 - 09:10 | 1006548 TheEternalTriangle
TheEternalTriangle's picture

"Precisely because higher profits means lower wages."

How does that follow?

We are talking about what was a growing pie. This should have been a rising tide lifting all ships scenario.

In any case you don't need Marxists to wreck superpowers. What you need is the subversion of the state and its institutions to serve narrow interests. This can be done by Roman landholders, communist apparatchiks or bankers.

These institutions are supposed to mediate and ease tensions between many interests and if too many get subverted to serve only one of these interests then it is only a matter of time before a crisis occurs.

Mon, 02/28/2011 - 20:38 | 1005509 Mefistofeles
Mefistofeles's picture

I think a big part of the problem is just the legal structure in the US.  If you want to open a factory in China the local government is the only entity you need to deal with.

On the other hand in California if you want to open a factory you have to get county and state permits for whatever you need in addition to paying thousands for some BS environmental study.  The laws are so strict here you that you'll probably run afoul of OSHA regulations if you want to spray paint,which is requirement for high end manufacturing.  Workers comp is another issue in California because for certain jobs in can actually exceed worker wages.

Another issue of course is healthcare.  Healthcare costs were the final nail in the coffin for the large auto companies and they are a huge issue if you open a plant in the US.

Related to healthcare cost is the issue of medical malpractice insurance.  In Los Angeles County at least if a doctor wants to open his doors he needs to come up with 100K just to pay for his malpractice insurance before he even see's a single patient.  We need big time medical tort reform in the US.

If the Feds and State governments want to corporations to start doing business in the US they need to take major steps to make it easier to do business.  In addition we need universal healthcare and Obamacare a thinly viewed plan to jack up profits for the insurance companies.   We also need medical tort reform so doctors don't need to fork over insane amounts of money just to keep their doors open.

Unfortunately I really doubt any of this will happen.  The United States is more like Rome or Constantinople when the Roman empire collapsed, their leaders were too busy playing politics to pay attention when the barbarians were at the gates.    They were more caught up with stupid political games than running the empire.   It's shocking how often history repeats itself.     

Tue, 03/01/2011 - 09:14 | 1006427 TheEternalTriangle
TheEternalTriangle's picture

Err, I wouldn't use China as the shining star...

I would on the contrary argue that one of the strength of the US is its legal system and governance. Mostly for the things most inhabitants of "The West" would take for granted.

Rules are generally set down in writing, petty corruption is low, the judiciary generally isn't corrupt and is in most cases independent from political presssure (though of course having elected Judges in parts of the US makes that moot at times) etc.

If you want to set up a new business in the US it is far easier to figure out what steps you need to take and what authoristations you will need and how much it will ultimately cost.

In many other jurisdictions, including China, it is far harder to do as you often have to first find a trustworthy insider (who might turn out to not be as trustworthy as you thought) and then navigate a network of informal channels to make sure your requests don't get sidelined etc. Not to mention that if you work in a contentious sector (i.e. anything to do with communications or the internet in China, anything to do with raw materials in Russia) you can suddenly find yourself on the wrong side of the authorities and your business deep sixed.

Mon, 02/28/2011 - 21:04 | 1005561 grid-b-gone
grid-b-gone's picture

Just as unions paved the way for higher wages and working conditions in the early 1900's, corporate America has created a pro-business climate that can be tapped into today. And now that 26% of all new jobs are low-wage temp jobs without benefits, one more barrier for the small business owner has been eliminated.

Especially for skilled workers who have experience in a particular industry, you already know the customers, their needs, and how they can be served better. Corporations have workers sign non-compete agreements because they realize the value of this knowledge.

If your former employer is making a fat margin in this environment, go take some of it from them. You can make more mowing lawns than you would at a temp staffing agency, so there's not much to lose. Paying workers a modest wage and no benefits makes a lot of jobs competitive that are now being off-shored to countries with 10+% inflation.

Tue, 03/01/2011 - 00:42 | 1006075 Delphi
Delphi's picture

The problem facing our country-USA-is not financial,it is political. We should not be debating the merits or shortcomings of fiat monetary policy, implementation of which is spearheded by the FED on behalf of the international banking cartel. We should realize that fiat monetary policy creates very high debts for all countries. Debts that can only be serviced by sucking all available resources. 

Usurious FED policies, high property taxes,prohibitive  healthcare policy costs, outrageous college and university tuitions burden the backs of all of our citizens. Black, white, yellow, brown. We need to change this system!  Eliminate the FED, adhere to the constitution, restore the republic.  There is only one way to do this, revolution against all bankers and banking families around the world.

Tue, 03/01/2011 - 02:17 | 1006242 msjimmied
msjimmied's picture

Don't make is so easy for companies to label jobs as temporary and watch it change. There are way too many jobs are really permanent in nature, but people are plugged in there temporarily just so the employers can save money, temporary agencies can keep 1/3 of what the workers make and the worker as usual gets shafted.

Tue, 03/01/2011 - 07:41 | 1006417 Bobbyrib
Bobbyrib's picture

A major difference in temporary and permanent employees is how they are paid. One doesn't receive benefits and doesn't make as much as the other. Would you like to take a guess which group of employees doesn't get benefits and is paid less money?

Tue, 03/01/2011 - 08:07 | 1006436 TheEternalTriangle
TheEternalTriangle's picture

Make the label irrelevant, pro-rata healthcare and other benefits and make sure temp workers get similar rights to permanent staff. Make the only main difference the terms on the length of employment.

It is really annoying that employers are willing to pay such a huge surcharge to an agency just for the ease of hiring and firing. It certainly isn't down to temps having a lower cost/hour because they tend to work out more expensive.

*Temp Agency Rant* It isn't as if temp agencies offer much of a service beyond being a directory. The vetting most temp agencies I had the joy of signing up with was minimal (favourite was when I walked into a temp agency as a student took a typing test and then was placed into a position dealing with sensitive customer databases in a company the next day...). And for this they take a huge cut of the paycheck.

Tue, 03/01/2011 - 08:57 | 1006531 Xkwisetly Paneful
Xkwisetly Paneful's picture

I wonder why that is that they are willing to pay 30%?


Have anything to do with full time coming with a >=30% governmental taxation and regulation surcharge? afterall if they have to invest time training a temp that is a sunk cost that could easily walk out the door for the next temp gig.

and of course the temp agency isn't a non profit either.

the poster child industry for the repeated failures of big government in America-the solution just legislate them out of existence that is what big labor does well.



Tue, 03/01/2011 - 08:19 | 1006447 Bitch Tits
Bitch Tits's picture

The criminal Bush family is responsible for this debacle. They set up the average citizen pretty darned well, by gutting the rule of law, making declarations of bankruptcy much more difficult, and by encouraging predatory business practices. Survival of "the fittest" so to speak, with "the fittest" being those criminal sociopaths bent on collecting rent, come hell or high water.

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