corporate profit buyback chattel employee

Numbing Numbers Explain US Frog Revolution
american dream average income middle class

Some Corporate Balance Sheets Are Bloated

Trillion seems to be the new billion for the 1%. It’s a lot to share fairly when we do some day. We trim, blend, and append three 2012 articles from: (1) Business Insider, Mar 25, on excess cash by J. Weisenthal; (2) Consortiumnews, Mar 21, on chattel by M. Ames; and (3) a frequent contributor, J.S. Hirschhorn, Apr 6, on stats.

by Joe Weisenthal, and by Mark Ames, and by Joel S. Hirschhorn

JPM's Tom Lee while on Bloomberg TV talked about the profit being held by U.S. corporations:

"It's a record level of cash: $3.60 trillion, $670 billion dollars higher than 2007 when the market was at its prior peak. Companies are generating a lot of profits but not distributing the cash. They're sitting on it."

"The cash when it gets used is not going to help bonds. It's going to help equity holders. Year to date, dividends are up $20 billion."

"Buybacks are going to take a step up this year. It's a reason why the stock market is still going up despite resale inflows being negative and hedge funds not buying stocks and pension funds not owning equities. It's because corporates over the last 20 years have accounted for 87% of all inflows in the stock market."

"The banks are sitting on tons of excess cash. It's something we hear a lot; banks aren't lending, they have a lot of excess capital. But non-banks have a lot of cash, too. It's in technology, it's in industrials, and healthcare. It's mostly a cyclical opportunity."

To read more

JJS: Trillions are a lot of money that help the rich get richer.

In “Capitalists Without Capital” (late 1980s) Richard Sutch and Robert Ransom showed slavery produced huge profits for southerners for plantation owners -- to the detriment of all other portfolio investments, as the price of slaves soared in the mid-19th century. By that time, by far the largest cotton-growing states’ asset was in slaves, not in real estate or other investments.

The slave trade was outlawed in 1808; but the slave population quadrupled from 1 million in 1800 to 4 million in 1860 -- encouraged by slave owners who “bred” their human stock.

A few years ago the McKinsey consulting group put out “The New Metrics of Corporate Performance: Profit Per Employee” as a better indicator than the more traditional “return on investment”. McKinsey looked at the world’s 30 largest companies between 1995 and 2005 and found that their return on human capital more than doubled, from an average of $35,000 profit per employee to $83,000.

“The hallmark of financial performance in today’s digital age is an expanded ability to earn ‘rents’ from intangibles. Profit per employee is one measure of those rents. If a company boosts its profit per employee without increasing its capital intensity, management will increase its rents.”

As with slave stock in a Southern investor’s portfolio, the McKinsey report argues that as a corporation learns to successfully extract rent from its employees, the more employees it extracts rent from, the greater its aggregate profits. The mindset of “the 1%” is consistent. They view the rest of us not as human beings with rights, but as livestock whose meat is “rent” to be extracted.

To read more

JJS: However the elite view the rest, the rest are not paying sufficient attention.

Believing in the classic American Dream that hard work will deliver prosperity is like believing that buying super lottery tickets is a smart way to become wealthy.

In 2010, the bottom 99% received an $80 increase in pay per person after adjusting for inflation. The top 1%, whose average income was $1,019,089, saw an 11.6% increase in income.

Within the top 1% are the super rich. In 2010, 37% of these additional earnings went to the top 0.01%, about 15,000 households with average incomes of $23.8 million. They saw their incomes rise by 21.5%.

In a Pew poll, 19% of Americans agreed with the statement that “success in life is pretty much determined by forces outside of our control,” the highest number since 1994. Plus, 40% of Americans -- also the highest number since 1994 -- agreed with the statement that “hard work and determination are no guarantee of success for most people.”

Still more numbing numbers: In the Clinton era expansion, 45% of the total income gains went to the top 1%; in the Bush recovery, it was 65%; now it is 93%. Intergenerational mobility in the United States has fallen far below the levels in Germany, Finland, Denmark, and other more social democratic nations of Northern Europe.

Recall the parable of the frog in water that stays in it as the temperature is raised, ultimately to the boiling point, killing the frog. In the frog revolution, the rise in economic inequality and the loss of upward economic mobility are the killing the middle class. The majority of Americans, the 99% of frogs, ignore it.

Frog-citizens believe that voting for one party or the other will somehow make things better. Yet both major parties are part of the top-down frog revolution.

To confront our rulers, in the Constitution, Article V, the states have the power to call a convention to propose amendments. Both the Tea Party and Occupy movements and any candidate coming through the Americans Elect nomination process on the Internet should support using the convention option.

Harold Meyerson got it right: “If belief and participation in democracy are sustained by people’s conviction that democracy produces good economic outcomes, then the growing concentration of wealth and income in the United States is a long-term threat to everything we profess to stand for.”

To read more

JJS: While political solutions may be necessary, they are not sufficient. What’s also vital is economic justice. That is, each of us is entitled to a share of society’s common wealth.

Such values are not our individual earnings, our wages and other incomes from contributing useful production. Common wealth is society’s spending for the nature it uses, the purchasing and leasing of land and resources. While we do deserve a share of that spending stream, we can’t fairly claim another’s earnings -- that’d be slavery -- so we should de-tax paychecks.

Those spending streams for nature never reward labor (nobody labored to produce Earth). People need to become aware of these values and demand a fair share. Once we do that, then trillions won’t puddle up on Wall Street and the American Dream will regain its validity.


Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

Also see:

The Global Economy's Corporate Crime Wave

China, Inflation & Gold -- and Trade

Winning the Future, Losing the Present

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