Pack93z
  • Pack93z
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14 years ago
I found this interesting, for all the outcry.. the banks and corporate America are beginning to thrive again.. so much for the Dems robbing the rich to feed the poor theory. ;)

Point is, savvy businesses men will find a way within the system to turn a profit.. even a record profit is a weak economy, albeit with a large push from the very government entities that they lash against.

http://www.newsweek.com/2010/08/31/ceo-crybabies.html 


CEO Crybabies
Corporate bosses are whining, even though they're reporting record profits.

It's hard out there for a CEO. There's a Democrat in the White House, and Washington is being ruled by a coalition of socialists and anticapitalist thugs. There's uncertainty about taxes and policy. Business leaders are constantly being vilified for taking home huge paychecks without providing meaningful returns to shareholders, or creating jobs, or boosting wages. The newly passed financial-reform bill requires CEOs of public companies to measure and report the ratio of their pay to that of their workers. Blackstone Group CEO Stephen Schwarzman is complaining that the Obama administration is like Hitler invading Poland.

With government and the media making life so difficult for CEOs, it must be nearly impossible to turn a profit. Right? Um, not really.

The headline number from the quarterly GDP report released by the Commerce Department last Friday was the sorry 1.6 percent growth rate of the economy in the second quarter. But the release also provided detailed data on corporate profits. And while the GDP number was disappointing, the latter was impressive. Corporate profits, which stood at $1.5 trillion in 2007, fell sharply to $1.26 trillion and essentially stagnated in 2009. But since the Obama presidency started, the trajectory in quarterly profits has reversed. Quarterly profits (reported at an annualized rate) rose from $1.18 trillion in the second quarter of 2009 to $1.42 trillion in the fourth quarter of 2009 to $1.64 trillion in the second quarter of 2010. In the second quarter of 2010, corporate profits were up 39.2 percent from the year-before quarter.

Corporate profits aren't just rising in absolute terms, they're rising in relative terms. Corporate profits as a percentage of GDP are back up to nearly record highs. Check out this assemblage of quarterly GDP data for the last several years. If you divide line 17 (corporate profits with inventory and capital-consumption adjustments) into line 1 (overall GDP), you can calculate corporate profits as a percentage of GDPi.e., the chunk of the economy that corporations are keeping as profits. If companies and business were under assault, you might expect that this proportion would be falling. But as the chart here shows, that's not what is happening.

After hitting a low point in the fourth quarter of 2008, the measure has risen in every quarter and checked in at 11.25 percent in the second quarter of 2010the highest level since the last quarter of 2006. In other words, the chunk of the economic pie being reserved for business owners and bosses has been growing sharply in the past couple of years, despite slow growth, and is generally back at the levels it was during the business-friendly Bush administration.

Why is corporate America doing well when so many powerful forces seem to be arrayed against it? Some sectors are benefiting from government policy. Banks are profiting from low interest rates and the ongoing federal subsidies and guarantees. Even as the industry squawks loudly about demonization and tough regulation, banks just reported their best quarter results in three years, according to the FDIC.

CEOs Behaving Badly But CEOs deserve most of the credit for this turnaround. When the economy slowed dramatically in late 2008 and early 2009, they prepared for Armageddon: they slashed costs, restructured, made cold and swift decisions, and relentlessly pursued productivity and efficiency. The result: America's CEOs collectively reengineered their businesses so they could produce profits with a lower volume of business. They've also continuedand intensifiedtheir longstanding practice of beating the living daylights out of America's labor force. Despite Democratic control of Washington, labor has never been weaker. Organized labor continues its long decline. Union membership fell again in 2009 as a percentage of the workforce, to 12.3 percent, down from 13.4 percent in 2000. And in an age of excess capacity and high unemployment, disorganized labor isn't doing so hot either. In the past year, employee compensation as a percentage of GDP has fallen a bit.

To review: Corporate profits have largely recovered to pre-crisis levels. A disproportionate share of economic growth is finding its way into the coffers of corporate America. CEOs are in an extremely strong negotiating position vis--vis their employees. And yet America's bosses think they are members of an oppressed minority.


"The oranges are dry; the apples are mealy; and the papayas... I don't know what's going on with the papayas!"
Nonstopdrivel
14 years ago
It doesn't surprise me that employee compensation is decreasing. Average incomes (in real dollars) of men in this country have been stagnant since the 1970s. The only reason why average household incomes in this country have risen has been the increase in women in the workforce.

I have little to no sympathy for the plight of the labor unions, however. With their intransigence over the decades, they kept labor costs high, which resulted in high product costs, and eventually spurred companies to take jobs overseas. If labor unions were actually effective at anything but calcifying the workforce, membership would be thriving instead of dwindling.

The increase in corporate profits is a bit deceiving. It doesn't represent a real increase in economic activity, merely the effect of dramatically lowered labor costs.
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Formo
14 years ago

It doesn't surprise me that employee compensation is decreasing. Average incomes (in real dollars) of men in this country have been stagnant since the 1970s. The only reason why average household incomes in this country have risen has been the increase in women in the workforce.

I have little to no sympathy for the plight of the labor unions, however. With their intransigence over the decades, they kept labor costs high, which resulted in high product costs, and eventually spurred companies to take jobs overseas. If labor unions were actually effective at anything but calcifying the workforce, membership would be thriving instead of dwindling.

The increase in corporate profits is a bit deceiving. It doesn't represent a real increase in economic activity, merely the effect of dramatically lowered labor costs.

"Nonstopdrivel" wrote:



Nice post. I especially like the middle paragraph. 🙂
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Thanks to TheViking88 for the sig!!
Cheesey
14 years ago
True. At one time, unions DID help the workers. But now, it's pretty much useless. Now though, they do more harm then good. It's just greedy people taking care of themselves, and the hell with the "little guy".
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Nonstopdrivel
14 years ago
Yes, they helped workers get higher wages, but did that really help them in the end? All that did was drive up prices. Sure, the workers who first enjoyed the higher wages got ahead for a while, but everyone else got screwed, and in the end it balanced out.

It's analogous to the situation with oil speculators. The investors who speculate earliest make excellent returns, but everyone else gets screwed because increasing oil prices drives up the cost of everything in our economy. So in the end no one is significantly ahead.

Like fractional reserve banking and oil speculation, labor unions are an inherently inflationary institution.
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Formo
14 years ago
I always use the UPS vs FedEx example.

UPS is union. FedEx is not. UPS drivers, after 3-5 years (I think) top out at their pay scale. I hear it's around $20+/hour. Now while that sounds great to the first year courier, it sucks if you worked there for more than 8 years.

FedEx, on the other hand.. Doesn't get that close with their pay. I don't know how much the driver at our station gets paid that has worked there for over 25 years, but I know it's not the same as the $20+/hour that UPS drivers make. But what we have at FedEx is a far superior benefit system. I get the same exact benefits (401k, health, life, dental and vision insurance) as every manager at our station, including the region manager. UPS does NOT get the smokin' bennie that we get. I didn't even touch on union dues. It balances out in the end, budget wise. But people wise? I think FedEx got UPS beat.
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Thanks to TheViking88 for the sig!!
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