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One of the big reasons the U.S. economy is so lousy is that big American companies are hoarding cash and "maximizing profits" instead of investing in their people and future projects.
This behavior is contributing to record income inequality in the country and starving the primary engine of U.S. economic growth — the vast American middle class — of purchasing power. (See charts below).

If average Americans don't get paid living wages, they can't spend much money buying products and services. And when average Americans can't buy products and services, the companies that sell products and services to average Americans can't grow. So the profit obsession of America's big companies is, ironically, hurting their ability to accelerate revenue growth.

One obvious solution to this problem is to encourage big companies to pay their people more — to share more of the vast wealth that they create with the people who create it.

The companies have record profit margins, so they can certainly afford to do this.

But, unfortunately, over the past three decades, what began as a healthy and necessary effort to make our companies more efficient after the malaise of the 1970s has evolved into a warped consensus that the only value that companies create is financial (cash) and that the only thing managers and owners should ever worry about it making more of it.

This view is an insult to anyone who has ever dreamed of having a job that is about more than money. And it is a short-sighted and destructive view of capitalism, an economic system that sustains not just this country but most countries in the world.

This view has become deeply entrenched, though.

These days, if you suggest that great companies should serve several constituencies (customers, employees, and shareholders) and that American companies should share more of their wealth with the people who generate it (employees), you get called a "socialist." You get called a "liberal." You get told that you "don't understand economics." You get accused of promoting "wealth confiscation." You get told that, in America, people get paid exactly what they deserve to get paid: Anyone who wants to get paid more should go out and "start their own company" or "demand a raise" or "get a better job."

In other words, you get told that anyone who suggests that great companies should share the value they create with all three constituencies instead of just lining the pockets of shareholders is an idiot.

After all, these folks say, one law of capitalism is that employers pay their employees as little as possible. Employees are just "costs." You should try to minimize those "costs" whenever and wherever you can.

This view, unfortunately, is not just selfish and demeaning. It's also economically stupid. Those "costs" you are minimizing (employees) are also current and prospective customers for your company and other companies. And the less money they have, the fewer products and services they are going to buy.

Obviously, the folks who own and run America's big corporations want to do as well as they can for themselves. But the key point is this:

It is not a law that they pay their employees as little as possible.

It is a choice.

It is a choice made by senior managers and owners who want to keep the highest possible percentage of a company's wealth for themselves.

It is, in other words, a selfish choice.

It is a choice that reveals that, regardless of what they say about how much they value their employees, regardless of what euphemism they use to describe their employees ("associate," "partner," "representative," "team-member"), they, in fact, don't give a damn about their employees.

These senior managers and owners, after all, are earning record profits while choosing to pay their employees so little in many cases that the employees have to live in poverty.

And the senior managers and owners add insult to injury by blaming the employees for this: "If they want to get paid more, they should start their own company. Or get a better job."

It is no mystery why America's senior managers and owners describe the decision to pay employees as little as possible as a "law of capitalism": Because doing this masks the fact that they are making a choice.

But it is a choice.

Importantly, if American companies were struggling to earn money, as they were in the early 1980s, we would not be having this conversation. But the "efficiency" and "shareholder-value" drive that began back then has now gone too far the other way. Just look at these charts...

CHART ONE: Corporate profits and profit margins are at an all-time high. American companies are making more money and more per dollar of sales than they ever have before. Full stop. This means that the companies have oceans of cash to invest. But they're not investing it. Because they're too risk averse, profit-obsessed, and short-term greedy.

CHART THREE: Fewer Americans are employed than at any time in the past three decades. Another reason corporations are so profitable is that they don't employ as many Americans as they used to. This is in part because companies today regard employees as "costs" instead of human beings who are dedicating their lives to the organizations that, in turn, are supporting them and their families. (Symbiosis! Imagine that!) As a result of frantic firing in the name of "efficiency" and "return on capital," the U.S. employment-to-population ratio has collapsed. We're back at 1970s-1980s levels now.

CHART FOUR: The share of our national income that American corporations are sharing with the people who do the work ("labor") is at an all-time low. The rest of our national income, naturally, is going to owners and senior managers ("capital"), who have it better today than they have ever had it before.

In short, the obsession with "maximizing short-term profits" that has developed in America over the past 30 years has created a business culture in which executives dance to the tune of short-term traders and quarterly earnings reports, instead of balancing the value created for employees, customers, and long-term owners.

That's not what has made America a great country. It is not what has made some excellent American corporations the envy of the world. It's also hurting the economy.

Skjellyfetti wrote:

If average Americans don't get paid living wages, they can't spend much money buying products and services.

houndawg wrote:the worst of it these mealy-mouthed weasels will look straight at you and talk about how "our greatest resource is our people".

Remember the good old days when the Red Brigades used to kneecap those slimy fvcks on the street? That's what we need more of in this country.

houndawg wrote:Remember the good old days when the Red Brigades used to kneecap those slimy fvcks on the street? That's what we need more of in this country.

Skjellyfetti wrote:

One of the big reasons the U.S. economy is so lousy is that big American companies are hoarding cash and "maximizing profits" instead of investing in their people and future projects.
This behavior is contributing to record income inequality in the country and starving the primary engine of U.S. economic growth — the vast American middle class — of purchasing power. (See charts below).

If average Americans don't get paid living wages, they can't spend much money buying products and services. And when average Americans can't buy products and services, the companies that sell products and services to average Americans can't grow. So the profit obsession of America's big companies is, ironically, hurting their ability to accelerate revenue growth.

One obvious solution to this problem is to encourage big companies to pay their people more — to share more of the vast wealth that they create with the people who create it.

Well, first let's look at the biggest component of GDP--Personal Consumption (consumer spending). Personal Consumption these days is a higher-than-average ~71% of GDP. Importantly, personal consumption has stayed at about that level for the last several years. It's actually higher than it was from 2000-2007 and much higher than it was in the halcyon days of the 1990s. So if we're wondering who to blame for our crappy economy, we can't blame American consumers. Despite high unemployment and lousy wage growth, consumers are still spending.

http://www.businessinsider.com/why-econ ... z2bKbTzlUt

dbackjon wrote:Great post - this is what is ruining America

Chizzang wrote:Honestly... worker production has dropped through the floor to match the crappy pay
People know they're getting under-payed
and thus meander and half-ass their way through their corporate day

We all pretty much get what we pay for
The same goes for Corporations that under-pay / they get lazy sloppy work for the crappy wage they offer

CAA Flagship wrote:No, no, no. None of this is the result of actions taken by Obama, Reid and Pelosi. Not at all. Why would any of you think that?

dbackjon wrote:Great post - this is what is ruining America

Cluck U wrote: This entire country has been scammed into buying unnecessary things...and then they complain they don't have enough money.

Seriously, are you saying people don't have enough money with which to live?

Try this...stop buying food at restaurants. Instead, buy basics and make meals. You will save a boatload of money on food (and "medicine"), you will be healthier, and feel better. Instead of paying $180/month for phone, internet, and cable TV (with the sports channels, HBO, and other unneeded crap), go to the library when you want to surf the net and check out some books that will educate you on things such as investing, good health, and any other subject you wish to learn. Drop the health club membership and walk around the nearest park. Stop spending money on cigarettes and beer. Don't ever buy a new car...you are just throwing money away. Take your money out of the typical bank and get yourself to a credit union - there is no reason to pay a bank fees to keep your money - and stay away from those check cashing places.

Stop renting...a huge waste of money. Move in with another group of people for a few years (friends, family, co-workers) to save money, keep your legs closed, learn to fix up the place instead of calling a $100/hour plumber/electrician (there are free books in the library that can help you learn and free instruction at Home Depot and other area places). Turn off the g-damned cell phone service that you don't NEED.

SAVE AND INVEST YOUR MONEY. Create your own generational wealth instead of wasting everything you have on crap while still wanting more.

Cripes, we have 18-year-old kids popping out babies and getting free housing and food stamps...and then they complain about not making enough at the local Burger King or Wal-Mart. As though they "deserve" to earn more so that they can keep up with those who made better choices. Are you kidding me?

Americans have been sold the American Dream of owning a house, or renting a "place of their own", at an early age, buying all sorts of unneeded gizmos so that they can keep up with the Joneses. What a crock of crap. Nobody needs a tenth of the stuff they consider "necessary."

Anyone can save money if they make the right choices...and make sacrifices with a long term goal in mind. But, ohhhhhhh no. To a Lib, it is criminal to make someone sacrifice consumer goods in order to plan out a better future.

Grizalltheway wrote:

CAA Flagship wrote:No, no, no. None of this is the result of actions taken by Obama, Reid and Pelosi. Not at all. Why would any of you think that?

To some extent, yes, but they're long-term economic trends that are rooted in Reaganomics.

One of the big reasons the U.S. economy is so lousy is that big American companies are hoarding cash and "maximizing profits" instead of investing in their people and future projects.

CitadelGrad wrote:Reaganomics? Really?

Cluck U wrote:

dbackjon wrote:Great post - this is what is ruining America

You really are an idiot.

This entire country has been scammed into buying unnecessary things...and then they complain they don't have enough money.

Seriously, are you saying people don't have enough money with which to live?

Try this...stop buying food at restaurants. Instead, buy basics and make meals. You will save a boatload of money on food (and "medicine"), you will be healthier, and feel better. Instead of paying $180/month for phone, internet, and cable TV (with the sports channels, HBO, and other unneeded crap), go to the library when you want to surf the net and check out some books that will educate you on things such as investing, good health, and any other subject you wish to learn. Drop the health club membership and walk around the nearest park. Stop spending money on cigarettes and beer. Don't ever buy a new car...you are just throwing money away. Take your money out of the typical bank and get yourself to a credit union - there is no reason to pay a bank fees to keep your money - and stay away from those check cashing places.

Stop renting...a huge waste of money. Move in with another group of people for a few years (friends, family, co-workers) to save money, keep your legs closed, learn to fix up the place instead of calling a $100/hour plumber/electrician (there are free books in the library that can help you learn and free instruction at Home Depot and other area places). Turn off the g-damned cell phone service that you don't NEED.

SAVE AND INVEST YOUR MONEY. Create your own generational wealth instead of wasting everything you have on crap while still wanting more.

Cripes, we have 18-year-old kids popping out babies and getting free housing and food stamps...and then they complain about not making enough at the local Burger King or Wal-Mart. As though they "deserve" to earn more so that they can keep up with those who made better choices. Are you kidding me?

Americans have been sold the American Dream of owning a house, or renting a "place of their own", at an early age, buying all sorts of unneeded gizmos so that they can keep up with the Joneses. What a crock of crap. Nobody needs a tenth of the stuff they consider "necessary."

Anyone can save money if they make the right choices...and make sacrifices with a long term goal in mind. But, ohhhhhhh no. To a Lib, it is criminal to make someone sacrifice consumer goods in order to plan out a better future.