Article 43
Revelations
Sunday, July 04, 2010
The Next Depression Part 43 - Things Will Get Worse Before They Get Better
The doorstep to the temple of wisdom is a knowledge of our own ignorance.
- Benjamin FranklinThe economic downturn we are experiencing will get worse before it get’s better
- Vox Day
Great Depression 2.0: An interview with Vox Day
by Ilana Mercer
World Net Daily
July 2, 2010
The “infamous Internet Superintelligence,” Vox Day, author of THE RETURN OF THE GREAT DEPRESSION needs no introduction. My WND colleague and fellow libertarian dishes it out on the impending depression, D.C. dummies (down to their position under The Bell Curve) and a DARK FUTURE. As always, Vox makes this glum stuff fun.
Ilana: Republican President George Bush was as good as if not better than Clinton and Carter at laying the legislative foundation for the minority mortgage meltdown. Comment with reference to the thesis of your book (and mention some other Republicans who’d like ditto-heads to forget their political pedigree).
Vox: Like Carter and Clinton, George W. Bush pushed government programs designed to boost homeownership among low-income families that couldn’t afford to meet the debt obligations they were assuming. These programs were focused on minorities, particularly Hispanics, which is why the four states where the majority of defaults have been located to date are California, Arizona, Nevada and Florida. However, it should be kept in mind that these inept and bipartisan housing programs were not the cause of the core problem; they were merely a consequence of the overall problem of debt chasing a dwindling pool of borrowers.
Ilana: “Too much aggregate savings reduces growth.” “A global savings glut” got us into the depression. So say the money mavens. Unpack this intellectual fraud for us. Why is it important that our readers grasp that Keynes’ General Theory, received wisdom by both parties, is a political theory, not an economic one?
Vox: First, on the theoretical level, it’s incorrect. Second, on the empirical level, it’s simply false. There was no savings glut. It’s not possible for there to have been too much aggregate savings, because even if one doesn’t bother to correct for inflation, the savings rate was declining in the USA and elsewhere around the globe. This should be obvious given the way in which the global debt statistics clearly show that the various Asian economies that supposedly had too much savings didn’t actually have any net savings at all. If I have $5,000 in the bank but have racked up $10,000 of debt on my credit card, what have I saved? It’s an absurd argument, false on every level. The reason it’s important to understand that the General Theory of Employment, Interest and Money is a political theory, not an economic one, is because most of the macroeconomic statistics reported are based on Paul Samuelson’s practical application of it. So, the statistics used are intrinsically politicized and therefore unreliable.
Ilana: You point out that the “Communist Manifesto” calls for the kind of system of credit we already have, and both parties champion. Democratic lackeys are either mortified or mocking when we say “socialism” vis--vis BHO (you and I would apply the socialism designation to Bush Babies, too). Comment (with reference to the financial overhaul bill). What other economic edifices and legislation, pending or passed, would meet Marxist maxims?
Vox: There is nothing capitalistic or free-market about the present U.S. economic system. To claim that a central bank monopoly established by the federal government is somehow indicative of laissez-faire economics is ridiculous on its face, especially given that “centralization of credit in the banks of the state” is the fifth pillar of the Communist Manifesto. Other openly Marxist institutions are the FCC and FAA, which centralize the means of communication and transportation as per pillar 6, the death tax (pillar 3), the progressive income tax (pillar 1) and of course the government-funded school system, which is referenced in the 10th pillar.
Ilana: The other day, I watched Newt Gingrich twist like a cirque du soleil contortionist in trying to excuse his support for the Bush bailout, or TARP. He blamed the experts. As you tell it, Nobel Prize winner F.A. Hayek knew and liked Keynes the person, but disliked Keynes the political operative. The economic mast Hayek claimed Keynes “was [not] a master of the body of economic theory,” and that “his main aim was always to influence current policy, and economic theory was for him simply a tool for this purpose.” What accounts for the refusal of establishment “intellectuals,” politicians and media sorts against all standards of reason - to recognize the same? Is it a case of “No one knows anything”? “Intellectual inertia”?
Vox: It’s partly that. The dirty little secret of politics is that most politicians are of barely above average intelligence and possess very narrow educations. They’re mostly people with IQs of around 120 and a law degree. So, they know literally nothing about economics and lack the capacity to see that what the experts are telling them doesn’t add up. Given those circumstances, it should come as no surprise that they so readily embrace the economic theory that tells them exactly what they want to hear. “Go, thou, and spend, and thus shall the economy be saved. And lo, thou shalt be the savior of thy people!” That’s a lot more palatable than being told that the nation is in DIRE STRAIGHTS and their careers are in jeopardy due to the actions of their predecessors, and that there’s not much they can do about it. So, they listen to the self-interested parties and blindly go about making the situation worse.
TARP was like something out of “Kafka.” Imagine it were the NFL instead of the Wall Street banks. Everyone would have laughed if the NFL suddenly called a press conference and declared that unless each NFL team was immediately given $20 billion, cats and dogs would start living together and martial law would have to be declared. But because it was the banks, naturally the politicians panicked and started HANDING OVER THE MONEY, no questions asked.
Ilana: “The Democratic Party’s first candidate” ran, in 1829, on a “fiscally conservative, anti-central-bank platform,” and all but eliminated the federal debt. What was Andrew Jackson thinking? It’s hard to believe that the fear of the inflationary Fed resulted in “the foundation of the Democratic Party.” Comment.
Vox: Yes, it is amusing that so few Americans can envision an economy without the Federal Reserve given that it is the fourth central bank with which the nation has inflicted itself. The same thing has happened every time. The central bank inflates like crazy, eventually the economy collapses, and the politicians are finally forced to step in and get rid of it. Eventually, people forget and fall for the temptation of cheap credit and the process starts again. Who knows? Perhaps the tea party will evolve into the modern version of the Jacksonian Democrats.
PART II
Ilana: To mention the Fed today as anything but a hedge against inflation is to qualify as Worst Person in the World. Early Americans were not nearly as baffled about what the Fed did. Comment with reference to the on-and-off attempts to eradicate this Federal Frankenstein. What good would an audit of the money mafia do?
Vox: Keith Olbermann should have stuck to sports. He has no idea what hes talking about when it comes to economics. The Fed isn’t a hedge against inflation, it is the primary engine of inflation just as its three predecessors were. A genuine audit of the Fed will immediately end its political viability and probably its existence, which is why the Fed is fighting so desperately against the Ron Paul bill. But the end result is inevitable. The Fed can’t hide behind fictional statistics forever, as with the Soviet Union, people eventually begin to notice that they are not, in fact, wealthy and well fed.
Ilana: My second favorite line in your book: “ the only sense in which mainstream economic theory is worthy of serious study is the sense that a flight recorder demands intense examination after an airplane crash.” (One quibble with this analogy would be that the flight recorder contains retrievable immutable truths.) What hope is there for an awakening if mainstream economic theory is precisely what is being seriously studied and heeded by those among us who are not reading Dick Morris?
Vox: The only hope is for economic sensibility to be restored post-crash. There are some positive signs, such as the widespread mocking of Paul Krugman’s belated warning of a “third depression” after the failure of the second stimulus. Krugman said a $600 billion stimulus package was needed, OBAMA got a $787 billion package through the Congress, and it failed anyhow. But the fact that these Neo-Keynesian clowns are still taken seriously and their models dominate the political discourse is an indication that a serious theoretical retooling will not happen until after the Great Depression 2.0 is well underway.
Ilana: At first the pols conceded that what they had given us was a jobless recovery, which is a lot like a housewarming for the homeless. They’ve quit that Big Lie and are now touting all the jobs BHO has created. Whats going on? Tell us why official indices such as unemployment and GDP are not to be trusted.
Vox: Unemployment is dependent upon reducing the size of the labor force. So, if you’re out of work and aren’t jumping through the BLS hoops, you don’t count as UNEMPLOYED. Its a joke. GDP counts spending but doesn’t subtract debt, so its like saying that you’re rich because you maxed out your platinum Mastercard. Until the debt is paid back, you cant properly count it as economic growth. And almost all of the GDP growth over the last 20 years has been nothing but debt growth. And now that the debt is shrinking as people and governments default, GDP will begin to contract too.
Ilana: I know who the Zulus are; Im from that part of the world. You lost me with “Whisky Zulu.” Explain.
Vox: It’s just my personal reference to Weimar and Zimbabwe, two famous cases of hyperinflation. The Whisky Zulu scenario I consider is the hyperinflationary one that many inflationists favor. Its a credible scenario anticipated by many very smart people, but I believe events are demonstrating that the debt-deflation scenario is the one that is playing out instead.
Ilana: I agree with you that the Great Depression 2.0 will be worse than its predecessor. Debt. Consumption. Credit. Have at it (p. 211).
Vox: Its pretty simple. I give 10 reasons in the book, but two should suffice for here. First, the amount of outstanding US debt to GDP is proportionately greater. It hit a peak of 287% in 1933, and 375% in 2009. Second, stimulus plans that extended and exacerbated the Great Depression were limited to the USA. This time around, Europe, Japan, and China have been actively engaged in their own stimulus packages as well, so the economic blowback is going to be much larger on a global level than it was in the Thirties. Except for Germany, which had its own particular issues related to losing WWI and the strictures imposed by the Treaty of Versailles, the problems faced by Europe did not rise to the level of a Great Depression because Europe’s leaders didn’t make it worse by listening to the Keynesians as Hoover and Roosevelt did.
Ilana: Its befitting that we end with perhaps the most important right in a free society. My favorite line in your book: “one should always be deeply skeptical of any economic theory which serves as a justification to allow one man to dispose of the property of another.” Private property has become a dirty word in an increasingly collectivist America. Not even Rand Paul, in his valiant defense of “private businesses vis-a-vis the Civil Rights Act,” could bring himself to speak to the sanctity of private property. People are comfortable alluding to freedom of association but not to what a man owns. Your thoughts with a view to what lies ahead.
Vox: Government can’t fix what GOVERNMENT HAS BROKEN. All of the desperate attempts to fix the global economy according to Neo-Keynesian and Monetarist principles are going to fail, state, local, and even national governments are going to default on their debts, and i’s going to be a very difficult road ahead for the next two decades. There will probably be a major WAR or two as well, as usually happens in times of large-scale economic contraction. But it is a second Great Depression, its not the Ragnarok. This isn’t a Democratic problem or a Republican problem and although the politicians will do their best to take partisan advantage of the situation, it is a structural crisis that CANNOT END UNTIL THE STRUCTURE COLLAPSES and is replaced with a more economically realistic one. Needless to say - OWNERSHIP, SELF-OWNERSHIP, PROPERTY OWNERSHIP - will not fare well.
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Sunday, June 27, 2010
The Awakening Part 1
Whoever has ears ought to hear these words.
- Revelations 13:9
The Powers-That-Be Are Terrified of the Mass Awakening Taking Place Worldwide
Washington’s Blog
June 27, 2010
Our situation is admittedly DIRE.
Oligarchs are seizing more overt control in most countries in the world, the worldwide economy is on course for another - even bigger - train wreck, countries are cracking down on freedom and becoming more tyrannical, we are in a permanent state of war, and companies like BP are destroying our natural resources without any checks and balances.
But as Andrew Gavin Marshall points out, the elites are actually terrified of the mass political awakening which is occurring worldwide.
Marshall collects quotes from flexian Zbigniew Brzezinski - Obama’s former foreign affairs adviser, National Security Adviser to President Carter, creator of America’s strategy to lure Russia into Afghanistan, and creator of America’s plans for Eurasia in general - to make his point.
Listen to Brzezinski’s own words (consolidated from various writings and speeches, and edited as if they were a single passage):
For the first time in history almost all of humanity is politically activated, politically conscious and politically interactive. Global activism is generating a surge in the quest for cultural respect and economic opportunity in a world scarred by memories of colonial or imperial DOMINATION.
For the first time in human history almost all of humanity is politically activated, politically conscious and politically interactive. There are only a few pockets of humanity left in the remotest corners of the world that are not politically alertand engaged with the political turmoil and stirrings that are so widespread today around the world. The resulting global political activism is generating a surge in the quest for personal dignity, cultural respect and economic opportunity in a world painfully scarred by memories of centuries-long alien colonial or imperial domination.
America needs to face squarely a centrally important new global reality: that the world’s population is experiencing a political awakening unprecedented in scope and intensity, with the result that the politics of populism are transforming the politics of power. The need to respond to that massive phenomenon poses to the uniquely sovereign America an historic dilemma: What should be the central definition of America’s global role?
The people of the world are WAKING UP to the reality of WHAT IS HAPPENING. If we wake up fast enough, we can RECLAIM OUR POWER and dignity, and SHAKE OFF THOSE who would steal everything we have, including our MONEY, opportunity and freedom.
[T]he central challenge of our time is posed not by global terrorism, but rather by the intensifying turbulence caused by the phenomenon of global political awakening. That awakening is socially massive and politically radicalizing.
It is no overstatement to assert that now in the 21st century the population of much of the developing world is politically stirring and in many places seething with unrest. It is a population acutely conscious of social injustice to an unprecedented degree, and often resentful of its perceived lack of political dignity. The nearly universal access to radio, television and increasingly the Internet is creating a community of shared perceptions and envy that can be galvanized and channeled by demagogic political or religious passions. These energies transcend sovereign borders and pose a challenge both to existing states as well as to the existing global hierarchy, on top of which America still perches.
The youth of the Third World are particularly restless and resentful. The demographic revolution they embody is thus a political time-bomb, as well. With the exception of Europe, Japan and America, the rapidly expanding demographic bulge in the 25-year-old-and-under age bracket is creating a huge mass of impatient young people. Their minds have been stirred by sounds and images that emanate from afar and which intensify their disaffection with what is at hand. Their potential revolutionary spearhead is likely to emerge from among the scores of millions of students concentrated in the often intellectually dubious “tertiary level” educational institutions of developing countries. Depending on the definition of the tertiary educational level, there are currently worldwide between 80 and 130 million “college” students. Typically originating from the socially insecure lower middle class and inflamed by a sense of social outrage, these millions of students are revolutionaries-in-waiting, already semi-mobilized in large congregations, connected by the Internet and pre-positioned for a replay on a larger scale of what transpired years earlier in Mexico City or in Tiananmen Square. Their physical energy and emotional frustration is just waiting to be triggered by a cause, or a faith, or a hatred.
Politically awakened mankind craves political dignity, which democracy can enhance, but political dignity also encompasses ethnic or national self-determination, religious self-definition, and human and social rights, all in a world now acutely aware of economic, racial and ethnic inequities. The quest for political dignity, especially through national self-determination and social transformation, is part of the pulse of self-assertion by the world’s underprivileged
The misdiagnosis [of foreign policy] pertains to a relatively vague, excessively abstract, highly emotional, semi-theological definition of the chief menace that we face today in the world, and the consequent slighting of what I view as the unprecedented global challenge arising out of the unique phenomenon of a truly massive global political awakening of mankind. We live in an age in which mankind writ large is becoming politically conscious and politically activated to an unprecedented degree, and it is this condition which is producing a great deal of international turmoil.
That turmoil is the product of the political awakening, the fact that today vast masses of the world are not politically NEUTERED, as they have been throughout history. They have political consciousness. It may be undefined, it may point in different directions, it may be primitive, it may be intolerant, it may be hateful, but it is a form of political activism.
The other major change in international affairs is that for the first time, in all of human history, mankind has been politically awakened. That is a total new reality. It has not been so for most of human history until the last one hundred years. And in the course of the last one hundred years, the whole world has become politically awakened. And no matter where you go, politics is a matter of social engagement, and most people know what is generally going on in the world, and are consciously aware of global inequities, inequalities, lack of respect, exploitation. Mankind is now politically awakened and stirring. The combination of the two: the diversified global leadership, politically awakened masses, makes a much more difficult context for any major power including, currently, the leading world power: the United States.
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Friday, February 26, 2010
The Corporate Shell Game
...when such rates cannot be achieved by organic growth in the business, executives start shaving off perceived fat and before they know it they’re cutting off the muscle and then shaving off bone chips. And when they’ve gotten to the bone chips they borrow other peoples money to buy new companies, load up those companies with debt and extract equity form them and then because it looks like the parent is still growing award themselves huge bonuses. It’s a shell game.
- The Agonist
The Corporate Shell Game
By Bob Franken
Huffington Post
February 16, 2010
"Cut costs at all costs.” If there is any holy gospel in the corporate world, that’s it. The god of profits is worshiped by the high priests—highly paid, by the way—who endlessly chant “Cut costs at all costs,” or words to that effect.
Their SALVATION THROUGH DESTRUCTION is camouflaged in expressions like “Efficiencies” and “Synergies” and “Workforce Reductions” and “Belt Tightening” and “Outsourcing” and “Consolidations” and a big one, “Mergers,” where companies get larger and smaller at the same time.
They exact a TERRIBLE HUMAN PRICE for their greed every time they toss millions into the rubble with one layoff after another. In the process, their ONCE-SUCCESSFUL businesses are ground into failure as their product and reputation earned over decades are frittered away leaving empty shells.
The shell game is hardly unique to the US. It’s played all over the world. The latest case in point is TOYOTA. It’s still unclear when the auto manufacturer’s legendary quality became a myth...a fiction that persisted as the reality of deterioration was obscured in the haze of image management.
“Bigger Bigger Bigger” became the Toyota plan instead of “Better Better Better.” The company kept spreading out and spreading thin, until it reached the breaking point. “Breaking Point” means being found out, inevitably getting caught when shoddiness and deception can NO LONGER BE HIDDEN and come crashing down on the carefully cultivated “brand”
As for the CONSUMERS, so many companies in effect tell them to ”LIKE IT OR LUMP IT.” Their claims of SUPPORT FOR CUSTOMERS are bogus.
The usual reply from executives is that they are acting on behalf of the stockholders. But as we so painfully learn, the stockholders get hosed too, sooner or later, usually sooner.
While “Cut Costs at All Costs” is the article of faith, it’s not an absolute. There’s no cost-cutting for THOSE AT THE TOP, who stay there EVEN AS THEIR OPERATIONS CRUMBLE beneath them. And they continue to receive their millions in salary from the money they’ve squeezed out by choking the companies.
In the process, they have done serious damage to them, as well as the millions who depended on them for employment and the security of knowing they could pay for food and medical care and a roof over their heads.
Where no expense is spared is what it takes to keep Washington at bay. Spreading a few bucks around to all the willing politicians works wonders at keeping the United States from reordering corporate policy and regulation.
As for the shells of those one-proud businesses, it’s on to new mergers, new cutbacks new layoffs. Finally, there’s nothing left. It doesn’t matter how big a hull is when it’s empty. It’s like the expression “Cut at all Costs” when there’s nothing left to cut.
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Thursday, December 31, 2009
Marvel At The Beast - Part 5
The beast that you saw existed once but now exists no longer. It will come up from the abyss and is headed for destruction. The inhabitants of the earth whose names have not been written in the book of life from the foundation of the world shall be amazed when they see the beast, because it existed once but exists no longer, and yet it will come again.
-Revelations 17:8Little children, it is the last time: and as ye have heard that antichrist shall come, even now are there many antichrists; whereby we know that it is the last time.
- I John 2:18It is human nature to hate the man whom you have hurt.
- Tacitus - Roman Senator, Consul, Governor, Historian. - AD 56 - 117
Welcome to Orwells World 2010
By John Pilger
December 30, 2009
In Nineteen Eighty-Four, George Orwell described a superstate called Oceania, whose language of war inverted lies that passed into history and became truth. “Who controls the past,” ran the Party slogan, “controls the future: who controls the present controls the past.”
BARAK OBAMA is the leader of a contemporary Oceania. In two speeches at the close of the decade, the NOBEL PEACE PRIZE winner affirmed that peace was no longer peace, but rather a permanent war that “extends well beyond Afghanistan and Pakistan” to “disorderly regions and diffuse enemies.” He called this “global security” and invited our gratitude. To the people of Afghanistan, which America has invaded and occupied, he said wittily: “We have no interest in occupying your country.”
In Oceania, TRUTH AND LIES are indivisible. According to Obama, the American attack on Afghanistan in 2001 was authorised by the United Nations Security Council. There was no UN authority. He said “the world” supported the invasion in the wake of 9/11 when, in truth, all but three of 37 countries surveyed by Gallup expressed overwhelming opposition. He said that America invaded Afghanistan “only after the Taliban refused to turn over [Osama] bin Laden.” In 2001, the Taliban tried three times to hand over bin Laden for trial, reported Pakistans military regime, and were ignored. Even Obama’s mystification of 9/11 as justification for his war is FALSE. More than two months before the Twin Towers were attacked, the Pakistani foreign minister, Niaz Naik, was told by the Bush administration that an American military assault would take place by mid-October. The Taliban regime in Kabul, which the Clinton administration had secretly supported, was no longer regarded as “stable” enough to ensure Americas control over oil and gas pipelines to the Caspian Sea. It had to go.
Obama’s most audacious lie is that Afghanistan today is a “safe haven” for al-Qaedas attacks on the West. His own national security adviser, General James Jones, said in October that there were “fewer than 100” al-Qaeda in Afghanistan. According to US intelligence, 90 per cent of the Taliban are hardly Taliban at all, but “a tribal localised insurgency [who] see themselves as opposing the US because it is an occupying power.”The war is a fraud. Only the terminally gormless remain true to the Obama brand of “world peace.”
BENEATH THE SURFACE, however, there is serious purpose. Under the disturbing General Stanley McCrystal, who gained distinction for his assassination squads in Iraq, the occupation of one of the most impoverished countries is a model for those “disorderly regions” of the world still beyond Oceania’s reach. This is a known as COIN, or counter-insurgency network, which draws together the military, aid organisations, psychologists, anthropologists, the media and public relations hirelings. Covered in jargon about WINNING HEARTS AND MINDS, its aim is to pit one ethnic group against another and incite civil war: Tajiks and Uzbecks against Pashtuns.
The Americans did this in Iraq and destroyed a multi-ethnic society. They bribed and built walls between communities who had once inter-married, ethnically cleansing the Sunni and driving millions out of the country. The embedded media reported this as “peace,” and American academics bought by Washington and “security experts” briefed by the Pentagon appeared on the BBC to spread the good news. As in Nineteen Eighty-Four, the opposite was true.
Something similar is planned for Afghanistan. People are to be forced into “target areas” controlled by warlords bankrolled by the Americans and the opium trade. That these warlords are infamous for their barbarism is irrelevant. “We can live with that,” a Clinton-era diplomat said of the persecution of women in a “stable” Taliban-run Afghanistan. Favoured western relief agencies, engineers and agricultural specialists will attend to the “humanitarian crisis” and so “secure” the subjugated tribal lands.
That is the theory. IT WORKED after a fashion in Yugoslavia where the ethnic-sectarian partition wiped out a once peaceful society, but it failed in VIETNAM where the CIAs “strategic hamlet program” was designed to corral and divide the southern population and so defeat the Viet Cong—the Americans catch-all term for the resistance, similar to “Taliban”
Behind much of this are the Israelis, who have long advised the Americans in both the Iraq and Afghanistan adventures. Ethnic-cleansing, wall-building, checkpoints, collective punishment and constant surveillance these are claimed as Israeli innovations that have succeeded in stealing most of Palestine from its native people. And yet for all their suffering, the Palestinians have not been divided irrevocably and they endure as a nation against all odds.
The most telling forerunners of the Obama Plan, which the Nobel Peace Prize winner and his strange general and his PR men prefer we forget, are those that failed in Afghanistan itself. The British in the 19th century and the Soviets in the 20th century attempted to conquer that wild country by ethnic cleansing and were seen off, though after terrible bloodshed. Imperial cemeteries are their memorials. People power, sometimes baffling, often heroic, remains the seed beneath the snow, and invaders fear it.
“It was curious,” wrote Orwell in Nineteen Eighty-Four, ”TO THINK THAT THE SKY WAS THE SAME FOR EVERYBODY, IN EURASIA OR EASTASIA AS WELL AS HERE. And the people under the sky were also very much the same, everywhere, all over the world people IGNORANT OF ONE ANOTHER’S EXISTENCE, held apart by walls of hatred and lies, and yet almost exactly THE SAME PEOPLE who were storing up in their hearts and bellies and muscles the power that would one day overturn the world.”
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Tuesday, December 22, 2009
Equity Extraction
Many Highly Profitable Companies Cut Jobs in 2009
By Andrea Orr
EPI
December 23, 2009
EARLY IN 2009, Microsoft Corp. announced its FIRST mass LAYOFF ever, cutting 1,250 jobs as part of a plan to eliminate 5,000 positions over the next 18 months. Like just about every company doing business during the recession, Microsoft was facing a challenging business climate and an uncertain outlook. But Microsoft was at the time - and remains today - highly profitable. It earned a net profit of $14.6 billion in fiscal 2009 and was ranked one of the 10 most profitable companies in the United States.
Microsoft was one of many profitable companies that cut a large number of jobs in 2009. While companies typically defend such moves as necessary to prepare for more challenging business conditions in the future, the layoffs they carry out often serve to grow profits for shareholders. Today, the economy is showing signs of growing again but layoffs continue to mount, and this extreme attention on the part of companies to saving money is arguably to blame. President Obama noted this disparity between rising gross domestic product and a lack of hiring early this month at the White House Jobs Summit.
He said:
Cost-cutting has become embedded in their operations and their culture
Clearly, business is highly competitive, and the news of the past year is full of companies that went out of business or had to scale back their operations dramatically to stay alive. But there were also many very healthy companies that cut.
Some examples:
--Wal-Mart. The retail giant, another one of the countrys most profitable companies, did not have massive layoffs in 2009, but it did trim its staff on multiple occasions, including 650 workers from an Ohio facility that it shut, and 800 at its corporate headquarters. In its fiscal year 2009, which ended last January, the company earned a $13.4 billion profit and grew its revenues a healthy 7% to $405.6 billion.
--IBM. The software maker cut close to 10,000 jobs this year, despite being one of the standout high-tech companies that managed to grow its business during the recession. Its profits last year grew 18% to $12.3 billion, and although the companyҒs sales slumped in 2009, its profits continued to grow, thanks in part to the cost-cutting. IBM CEO Samuel Palmisano earned a total of $22.2 million last year, including base salary, bonus, and stock options, and shareholders have also profited from the companys aggressive cost-cutting. IBMҒs stock price is up almost 50% from the start of the year
--Aetna. The health insurance provider recently cut 1,240 positions in anticipation of falling enrollment. It earned a $1.38 billion profit last year and its revenues have steadily risen in recent years.
--Danaher Corp. The medical device maker laid off 3,300 workers as it moved to integrate two other companies it acquired. Its profits last year totaled more than $1.3 billion. The companys stock is up about 30% for the year.
--Verizon Communications. The telecommunications giant slashed 8,000 jobs deemed ғredundant after its purchase of rival carrier Alltel. The companyԒs net profits jumped 14% to $6.4 billion in 2008, and it continued to expand its business through the most challenging times of 2009. Its most recent financial report in October shows quarterly earnings growing by 25%. Even through the worst of the recession, we have continued to raise our dividend and add new customers, expand markets, and grow revenues,Ӕ the companys CEO recently told shareholders.
--Monsanto. The maker of agricultural products more than doubled its net profit in two short years, to more than $2.1 billion in fiscal 2009. In response to a slowdown in business toward the end of this year, however, it announced a corporate restructuring and cut 900 jobs. In addition to a $2.46 million base pay, CEO Hugh Grant earned bonuses and options bringing his total compensation to $17.4 million.
--Phillip Morris. The maker of cigarettes and other tobacco products saw minimal impact on sales during the Great Recession. But in April it announced 1,100 job cuts, partly a result of plant consolidation. Both revenues and net income are up for the year, and the companyҒs chief financial officer recently boasted to investors that its strong financial performance confirms our companyӒs ability to grow even in these difficult times.
---
Provide A Public Service With Small Profits, Or Destroy It With Large Ones?
The Agonist
December 11, 2009
Call me a contrarian on this one. But I don’t buy all the hype that the internet is even the primary culprit of the DEMISE OF JOURNALISM. The PRIMARY CULPRIT is the same as it is all over the country, in every industry and in government: equity extraction.
Let me explain, in short: when EXECUTIVES expect unrealistic profits of 20% and higher per annum on businesses something has got to give. It’s an unnatural and unsustainable growth rate. For the first ten or so years of a small to medium size company’s life? Sure. But when you are 3M, or GE? Unrealistic and ultimately impossible.
So, when such rates cannot be achieved by organic growth in the business, executives start shaving off perceived fat and before they know it they’re cutting off the muscle and then shaving off bone chips. And when they’ve gotten to the bone chips they borrow other people’s money to buy new companies, load up those companies with debt and extract equity form them and then because it looks like the parent is still growing award themselves huge bonuses. It’s a shell game.
That is what has happened to the news industry in America. The excessive obsession with unnaturally high profits has led to a vicious circle of cutting budgets, providing less services, which is then followed by even more drastic cuts. The local San Antonio paper is a great example of this. Twenty years ago there were two large dailies in my hometown. Both competed with each other for real scoops. Both had book reviews by local writers, providing local jobs. Both covered the local arts and sports scene. Both covered local politics in depth and local and state news in depth. Both had vigorous investigative teams. Both had bureaus in Mexico and both had offices and reporters on the ground in DC.
And then corner offices of Gannet and Harte-Hanks were populated with Kinsey-esque managers and the rout was on. Gone are the bureaus in Mexico. Today book reviews are now outsourced !for free! to bloggers via syndication. (And while it is well and good to have one’s name in print, I’d submit most would like some earnings off their intellectual property, as well.) Local arts? The office in DC? Well, that’s the AP, now. So, today, San Antonio has one daily that is as flimsy and tiny as the local alternative. The only real strength left with the local daily is the City Hall coverage. Everything else has been outsourced to the wire services or people writing for free. It’s hardly more than thirty pages. That’s a lot of wealth destruction and job loss in twenty years. And 80% of this happened before Al Gore even invented the internet. All in the name of higher industry profits--not some overwhelming fear of the world wide inter-tubes. So, who’s profiting? Certainly not the intellectual vigor of the locals? And certainly not the writers who are all now ‘journalism entreprenuers.’ The only people who profited are the executives who obsessed over profits, to lard up their own bonus pool.
And while I agree with the overall thrust of Massig’s argument HERE, mostly because I think we are too far gone to get back to where we started, I think the overly obsessive focus on large profits, or the free market in general, when it comes to journalism is wrong.
The question that journalists inevitably ask Google, Schmidt went on, is, okay then, why don’t you just writeus a large check? The problem, he said,
is that just transferring money from an area where we’re making a lot of money to an area where were making little money does not solve the problem for the long term. YouԒre fundamentally better off building the new product that is profitable and growing - again with the news, with magazines and so forth. Its better for everyone. Because ultimately a subsidy model is a temporary solution. It’s not a long-term solution.
On that point, I think Schmidt is right.
No, Schmidt is wrong. It’s not about subsidies. It’s about money. And it’s about profits. And it is all about collecting obscene profit margins. When you run a public service it’s reasonable to expect reasonable rates of return. But not obscene ones. Same with the banks. Same with the cable news programs. Same with network news and newspapers. Reasonable profits are sustainable. The Google model is not.
You can provide a public service with small profits for a long, long time, but if you demand large ones you will destroy it. Just ask the big banks.
Section Revelations • Section Dying America •
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