The old adage about it being a recession if your neighbour is out of work and a depression if you are out of work is, I think, particularly apt these days. The jobless are in agony, and the large businesses are laughing all the way to the bank.
A study recently covered in The New York Times claims that the “intervention” efforts (stimulus, Wall Street’s bailout, the Fed’s asset purchases) helped us avoid entering a second Great Depression.
If we hadn’t done all those things, the article claims, “…the nation’s gross domestic product would be about 6.5 per cent lower this year. In addition, there would be about 8.5 million fewer jobs, on top of the more than 8 million already lost; and the economy would be experiencing deflation, instead of low inflation.”
Sounds like we did good!
Except, the problem is that American big business has found an ingenious loophole, as it always does: the Man has discovered he can thrive, even without doing his part to get America back to work.
So the workers have been fired, and the companies continue to churn out record profits. Every day, we get a bit closer to becoming a third-world banana republic, where shareholders make tidy returns and workers are, well, out of work… A whole segment of our once productive population has been reduced to playing Halo and attending Tea Party protests on weekdays.
An America without an employed middle-class might be a drastically different place. An uncomfortable place.
For now, it’s good news for the companies, even if the American consumer is getting beaten down and ignored: big business has found new markets, such as China, where goods can be sold.
Luckily I am not the only person who realises this is happening. The Washington Post‘s Harold Meyerson recently wrote in his column: “Ain’t no hiring. And ain’t likely to be any for a good long time. The problem isn’t merely the greatest downturn since the Great Depression. It’s also that big business has found a way to make big money without restoring the jobs it cut the past two years, or increasing its investments or even its sales, at least domestically.
In the mildly halcyon days before the 2008 crash, the one economic outlier was wages. Profit, revenue and GDP all increased; only ordinary Americans’ incomes lagged behind. Today, wages are still down, employment remains low and sales revenue isn’t up much, either. But profits are the outlier. They’re positively soaring.
Among the 175 companies in the Standard & Poor’s 500-stock index that have released their second-quarter reports, the New York Times reported Sunday, revenue rose by a tidy 6.9 per cent, but profits soared by a stunning 42.3 per cent. Profits, that is, are increasing seven times faster than revenue. The mind, as it should, boggles.”
Eventually, this may all come back to bite corporate America’s manhood off, as it will be responsible for wiping out one of its largest consumer bases. The Chinese won’t buy our stuff forever. But for now, business is good.