What in the world is going on with corporations today? How does one draw the line between capitalism and greed? Whatever happened to the theory that when employee hard work contributes in a positive way to the corporate bottom-line, everyone prospers? These are some issues addressed by Sally Kohn writing for The Guardian, a British national daily newspaper.
A comparison of recessions, 1980 to 2008, reveals the huge difference in the amount of corporate recovery profits going to the company, 28% in 1980 to 88% in 2008. The workers do more work for less money relative to the dollars earned by the company and yet Bank of America, Goldman Sachs and Cisco Systems just announced huge layoffs although they are all very profitable, some more than ever before. Two of these three companies are part of the financial sector of our economy.
The financial sector of our economy, once only 16% of the economic pie from 1965 to1973, has now jumped to 41% of the economy and climbing. It does not produce any goods and services but merely makes bets on other money. Few employees are needed. Cisco Systems targets the financial industry for purchase of its computer routers and networks and they are still profitable yet plan layoffs of 6,000 people this year. Also, financial institutions own many small businesses. If they do not make a profit they outsource the company to Bangladesh adding to U.S. unemployment. Many of these financial institutions were responsible for today’s recession. Even after a bailout, there is no concern or requirement that they do anything to create economic growth. A small business looking to expand must already have money to get a loan. Expansion requires capital so until consumer confidence (and employment) improves enough to provide that capital the additional jobs will not be created. Meanwhile to maintain profits the company will be forced to make do with less ? fewer employees, less quality, less service ? until it is no more.
Capitalism has served our country well in the past. Corporations considered employees assets that would continue to payoff in the future. As Ms Kohn pointed out, inherent in the pure capitalist model is some percentage of people unemployed. Most economists accept baseline unemployment of 5%. The Federal Reserve Bank of San Francisco recently suggested a new baseline of 6%. Currently the unemployment rate in America is 9.1% and NO new jobs were created in the last quarter. The opportunity to prosper should be available to all for prosperity to continue for all.
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