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Sun Mar 22, 2015, 02:06 PM

Sorry, but it's not a 'law of capitalism' that you pay people as little as possible — it's an excuse

One reason U.S. economic growth is still weak is that average American consumers are still strapped.

Consumers account for ~70% of the spending in our economy, so when they're hurting, we're all hurting.

The reason average consumers are strapped is that, for the past 35 years, we have increasingly told ourselves that the only thing companies are supposed to do is "maximize profit." We have forgotten that great companies can serve other constituencies in addition to shareholders — namely, customers and employees. We have come to treat employees not as dedicated, hard-working teammates who create value, but as "costs" to be minimized.

One result of this "profit maximization" obsession is that our big companies now have the highest profit margins as a percent of our economy in history:

Read more: http://www.businessinsider.com/companies-need-to-pay-people-more-2015-3#ixzz3V8gZ9NSK

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Reply Sorry, but it's not a 'law of capitalism' that you pay people as little as possible — it's an excuse (Original post)
n2doc Mar 2015 OP
daleanime Mar 2015 #1
Sherman A1 Mar 2015 #2
Cleita Mar 2015 #3
enlightenment Mar 2015 #4
steve2470 Mar 2015 #5
hifiguy Mar 2015 #6
MineralMan Mar 2015 #7
rogerashton Mar 2015 #8
HereSince1628 Mar 2015 #10
n2doc Mar 2015 #11
rogerashton Mar 2015 #13
ErikJ Mar 2015 #23
jeff47 Mar 2015 #12
rogerashton Mar 2015 #14
liberal_at_heart Mar 2015 #24
rogerashton Mar 2015 #29
MisterP Mar 2015 #9
Tierra_y_Libertad Mar 2015 #15
Enthusiast Mar 2015 #16
whereisjustice Mar 2015 #17
smirkymonkey Mar 2015 #21
Omaha Steve Mar 2015 #18
ErikJ Mar 2015 #19
HereSince1628 Mar 2015 #20
Adam051188 Mar 2015 #22
paleotn Mar 2015 #25
lovemydog Mar 2015 #26
The Wizard Mar 2015 #27
TBF Mar 2015 #28

Response to n2doc (Original post)

Sun Mar 22, 2015, 02:07 PM

1. K&R.....

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Response to n2doc (Original post)

Sun Mar 22, 2015, 02:09 PM

2. No,

it's just simple greed. Nothing more complicated than that.

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Response to n2doc (Original post)

Sun Mar 22, 2015, 02:16 PM

3. True. Economies are driven by demand and the fuel needed for

that demand is a population with money in their wallets to spend.

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Response to n2doc (Original post)

Sun Mar 22, 2015, 02:19 PM

4. Adam Smith spins in his grave.

He was pro-labor and believed firmly in a fair wage -- “It is but equity, besides, that they who feed, cloath and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, cloathed and lodged

He supported taxing the rich to provide aid to the poor -- “When the toll upon carriages of luxury, . . . is made somewhat higher in proportion to their weight, than upon carriages of necessary use . . . the indolence and vanity of the rich is made to contribute in a very easy manner to the relief of the poor . . .“

Opposed corporations -- “Let the same natural liberty of exercising what species of industry they please, be restored to all his majesty’s subjects . . . that is, break down the exclusive privileges of corporations . . .”

Thought the government should protect human rights -- “That the condition of a slave is better under an arbitrary than under a free government, is, I believe, supported by the history of all ages and nations

- Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations

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Response to n2doc (Original post)

Sun Mar 22, 2015, 02:20 PM

5. When I took a finance class in 1979....

profit maximization for maximum shareholder value WAS the gospel. It was in black and white in my textbook.

Max profits = as little wages and salaries and benefits as legally possible. I agree, it's not mandatory but it was sure as hell out there then. It probably still is.

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Response to n2doc (Original post)

Sun Mar 22, 2015, 02:23 PM

6. This captures the truth in a nutshell

 

Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.

Abraham Lincoln

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Response to n2doc (Original post)

Sun Mar 22, 2015, 02:23 PM

7. I just read the current issue of Fortune magazine.

It's about the Top 100 Companies to Work For. It was very interesting to look at their list of 100 and the reasons for choosing them.

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Response to n2doc (Original post)

Sun Mar 22, 2015, 02:34 PM

8. It IS a law of capitalism to pay as little as possible.

If John pays his employees more than he must, and they spend most of their additional wages at the stores operated by Karl and Larry, Karl and Larry have increased profits, but John has losses, and ceases to be a capitalist -- with luck, after his bankruptcy, John might be able to work for Karl or Larry.

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Response to rogerashton (Reply #8)

Sun Mar 22, 2015, 02:40 PM

10. IMO that is a derivative = the rule of maximum ROI

Maximum is, of course, subject to prevailing regulation, taxation, fines, and penalties.

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Response to rogerashton (Reply #8)

Sun Mar 22, 2015, 02:49 PM

11. But if John pays his employees more, and attracts better employees

who stay around and generate lower training costs, better interactions with customers (who then buy more)…

The problem is stupid capitalists, who think only at one level and never consider the consequences of their actions. .

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Response to n2doc (Reply #11)

Sun Mar 22, 2015, 02:55 PM

13. It is still in his interest

to pay the very least that will attract the better employees. It can pay to have a reputation for generosity, but it pays better if you get it cheaper!

Now, I admit that is a difficult tightrope to walk. But who said it was easy to be a capitalist?

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Response to n2doc (Reply #11)

Sun Mar 22, 2015, 04:23 PM

23. Trader Joes and Costco prove that high pay profits.

 

TJ and Costco pay their employees very well and it seems that they are much friendlier and helpful than other stores. TJ's has the highest sales per square foot in the nation for groceries.

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Response to rogerashton (Reply #8)

Sun Mar 22, 2015, 02:51 PM

12. If that claim were true, we'd see executive salaries also going down.

Paying one employee a million instead of ten million would have the same effect on increasing profits.

Yet somehow executive salaries just keep shooting up.....how odd if it's all just capitalism.

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Response to jeff47 (Reply #12)

Sun Mar 22, 2015, 02:59 PM

14. Well, the executives pretty much set their own wages.

Is that capitalism? Maybe not. One of my students, a devotee of Austrian economics, took the view that corporations could not exist in real capitalism.

Then again, another interpretation (and some economists take this seriously) is that the executives are the real capitalist-owners. The shareholders are just providers of financial services.

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Response to rogerashton (Reply #8)

Sun Mar 22, 2015, 04:25 PM

24. Businesses didn't always operate like this. 70 or 80 years ago business owners treated their

employees with respect and dignity. They paid them enough to feed their families, buy a house, send their kids to college, and they offered pension plans so that employees could retire with dignity. It doesn't have to operate the way it does today.

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Response to liberal_at_heart (Reply #24)

Sun Mar 22, 2015, 08:01 PM

29. I'd like to see the statistics there. eom

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Response to n2doc (Original post)

Sun Mar 22, 2015, 02:38 PM

9. all the capitalists know it except the minarchists

too bad what are basically AnCaps are the ones on all the channels, have the reins of both parties, and their pay-for-play "think" tanks are taking over education to the point of funding university chairs and whole institutes

we can't go back to the old Fordist dispensation of "one job for life, if you're a good cog" and "burning rivers are the price of progress," but calling 40 years of failure "growing pains" and bringing back what appears to be a coolie system

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Response to n2doc (Original post)

Sun Mar 22, 2015, 03:00 PM

15. A consumer society without consumers doesn't work. Unless they can get the robots to buy stuff.

 

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Response to n2doc (Original post)

Sun Mar 22, 2015, 03:27 PM

16. Kicked and recommended a whole bunch!

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Response to n2doc (Original post)

Sun Mar 22, 2015, 03:28 PM

17. It is amazing is that the Democratic Party wants to send even more jobs to Asia with TPP...

From the link... I don't see how Obama's push for more jobs to Asia will fix this trend.

These senior managers and owners, after all, are taking home record profits and earnings while choosing to pay their employees so little in many cases that the employees have to live in poverty.

It is no mystery why America's senior managers and owners describe the decision to pay employees as little as possible as a "law of capitalism." Because this masks the fact that they are making a selfish choice.

But that's exactly what they're doing.

If we want to get our economy humming again, we need to remember that the economy is an ecosystem and that healthy ecosystems are balanced. We need to encourage our companies to maximize value, not profit. And we need to encourage great companies and managers to serve three important constituencies — customers, owners, and employees — instead of just one.


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Response to whereisjustice (Reply #17)

Sun Mar 22, 2015, 04:09 PM

21. Interestining Graph.

We really are getting screwed, aren't we?

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Response to n2doc (Original post)

Sun Mar 22, 2015, 03:54 PM

18. Great post


K&R!

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Response to n2doc (Original post)

Sun Mar 22, 2015, 03:55 PM

19. Symptom of low top tax rate

 

When the top rate was 90% in the mid-century, instead of paying the senior execs and shareholders so much they would plow more of it back into the company and emlpoyees pay.

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Response to ErikJ (Reply #19)

Sun Mar 22, 2015, 04:02 PM

20. Yes, mathematicians using game theory have shown that

tax rates below 50+% turn policy making toward plutocracy.

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Response to n2doc (Original post)

Sun Mar 22, 2015, 04:22 PM

22. the federal government directly encourages plutocracy through several different means.

 

the coupling of our current tax policies with our incomprehensibly outdated notions of what constitutes free market competition in growing fields vs. indispensable infrastructure which is directly managed by government institutions (non profit, high wage jobs).

it all comes back to people not being able to make sense.

if you have low taxes for wealthy people, then they may invest and develop and whatnot....that's not a problem. However if you have low taxes for wealthy people who are in fields that are no longer developing and have become monopolies THEN what you wind up with is concentrated economic power with no direct competition. hmmm..."concentrated economic power with no direct competition"...does that sound like a government to you? or a corporation? or either? or both?....thus you have fascism.

if the u.s. was a real country it would have institutions similar to the post office in many different fields from housing to medicine to maybe agriculture and telecommunications. but the u.s. is not a real country, it is a post-colonial entity dominated by major corporations located both outside and inside it's borders who seek the continuation of their own power through their exploits.

next question?

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Response to n2doc (Original post)

Sun Mar 22, 2015, 05:05 PM

25. No, but it is the trend of nearly unfettered capitalism....

...the increasing accumulation of wealth at the top. That is, without the power of government to impose fairness and equity. Humans will be humans and although there will be a few who will listen to the better angels of our nature, most seem only interested in the money. Government policy curbs this. Without it, you're left with nothing but banana republic capitalism.

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Response to n2doc (Original post)

Sun Mar 22, 2015, 05:33 PM

26. I favor nationalizing health care

nationalizing the big banks, nationalizing insurance, nationalizing the oil industry. I feel this way because all of those industries involve our resources and our futures.

I'm not against for-profit businesses. I do think these industries have demonstrated time and time again that they care more for huge profits than they do for much of the public's interest. I don't feel it should be a for-profit business. I also favor restrictions on profit margins for publicly owned companies. Caps for executive salaries, taxation on corporations and no loopholes.

As Thomas Piketty makes clear in his book Capital in the 21st Century, these restrictions on capital work most effectively when most countries put them in place. The USA lags behind most other industrialized countries in understanding and implementing policies that work for the large majority of workers. Just as trickle-down economics is a fraud and a cruel joke, we must break from those who preach the gospel of unfettered capitalism. Every country has a mixed economy. We should break away from socialism for wall street speculators and provide socialism for working men and women. Our resources, our labor, our interests.

In addition, we've got to place more restrictions on these corporations to prevent them from outsourcing jobs and going offshore. For the ones that have already done this, I wonder how we can make it more attractive for them to return to the US (not in terms of huge tax breaks, but in terms of appealing to them that it's good to do business ethically, and pay a fair wage for an honest hard work).

Thanks for the excellent article n2doc. Lot's of food for thought.

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Response to n2doc (Original post)

Sun Mar 22, 2015, 05:43 PM

27. Like sharks on a feeding frenzy

predatory capitalists will devour one another.

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Response to n2doc (Original post)

Sun Mar 22, 2015, 06:09 PM

28. Yet another symptom of a system in which

profit is the goal at all costs.

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