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Corporate Profit Not Necessarily Good For US

Corporate profit and national health are no longer
directly tied together. In some case they are
antithetical.

The basic idea behind allowing businesses to prosper
was that the expansion would entail employing more
people. Those people would then spend their money
on the necessities of living, creating demand for those
products/services. That would expand demand in
those sectors - increasing employment in those
sectors. Of course, all those employees would pay
taxes - allowing the running of government. It?s really a
very simple system.

The system worked best in the period from the end of
WW 2 through 1975 (the last year that showed actual
economic gain for the middle and lower classes). That
is why people from the WW 2 generation through
people now about 70 years old are, in real dollars, the
wealthiest generations in America. If you don?t choose
to believe this, why has the average period of home
mortgages grown from 15 years to 30 years since 1975
(the year I bought my home)? Because, otherwise,
people could not afford the monthly payment. Car
loans stayed at 3 years forever. Now you can get a 7
year. loan - so as to afford the payments.

Today, companies can manufacture profit by getting rid
of American employees and setting up shop in places
that pay sweatshop wages. When the company reports
large profits, a very small minority of employees - high
corporate officers - are rewarded with stock options
worth millions. You end up with maybe 10 people
sharing a prize of 80 million bucks. The actual
American employment of that company shrinks. The
wages of the fired Americans go way down, drastically
reducing their ability to spend and fuel the economy.
This, in turn, reduces demand in other sectors. The
vast majority lose.

One of our clients typifies this. They?re a large, national
seller of office furniture. They?re the type of outfit that
furnishes, let?s say, a call center. Their sales are
directly tied to employment. When companies hire they
do well. They have laid off about 40% of their
employees due to slow sales. Their ?growth? area, in
the last 2 years, has been in liquidating used furniture
for companies that no longer need it, and the office
space they once occupied. They make far less money
on liquidations than they do on new installations, so
they have to let people go. If companies were hiring,
their sales would grow. They would hire people.
Those people would spend money and further fuel the
economy.

So you see John? Profits of large corporations do not
necessarily tie into the national welfare any more. In
some cases, those increased profits are actually
detrimental to the national welfare.

Posted by: j.m.galvin   Posted on: 01/23/04 You are currently: a Guest | Members login | Terms of Use

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