If it's not jobs and pay, what are profits for?

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I' ve written numerous times here about the economy and job loss out of the country. It is clear, that what helps corporations does not help people. Now Michael Flaherty has the headline Corporate Profits Don't Lead to Hiring (Reuters, 2/08/04). Oh duh, I've been saying that for years. The expectation has been that (if you believe the line of "if you give money to corporations they will create jobs") Bush's give- aways to the corporations and the rich would increase employment. Or that holding down the prime would stimulate economic growth (including job growth). Nope, these are techniques that have died a lingering death under globalization and "free" trade.

As noted in Flaherty's article, "Indeed, even companies with quarterly profits soaring are shy about adding workers -- if they're not laying people off." Indeed, the report goes on - ""We listened to over a hundred quarterly earnings conference calls and we have not heard from anybody who says they are picking up the pace of hiring," said Richard Yamarone, director of economic research at Argus Research. "Not one.""

In another Reuter's article on 2/08/04 (Sluggish Job Growth May Threaten Recovery ) by Andrea Hopkins, she talks with economist Steven Woods who laments:"He worries the sluggish employment growth could eat into consumer confidence just as the economic recovery begins to gather steam -- undermining the shopping strength that helped pull America out of the recession." And consumer spending is a BIG piece of this economy according to Woods - 70%. A consumer nation indeed!

One would assume that if job growth isn't happening under all the "stimulus" here, that it must be happening somewhere else. Well, it may be growing somewhere, but as noted in the Al Jazeera report of 1/25/03 Global unemployment is at a record high.

What!!!?? one might ask, is going on? If you increase profits, how can you not increase employment? Simple, and we've been doing it for the last decade in the US. You decrease costs. One way to decrease costs is to decrease pay. Corporations have done this through "just in time" labor practices (hiring temporary labor), and using part time workers rather than full time. You can decrease costs by decreasing benefits. No need to elaborate on the loss of medical insurance, but it is tied up in both the cost and the labor strategies. You can decrease costs by getting rid of part of your labor force and expecting 2, 3, or 4 times the productivity from your remaining employees. Yep, most of us have experienced that as well. Finally, you can move those jobs to cheaper labor markets (globalization). And, yes we have seen that big time with manufacturing, and now increasingly with white collar service jobs.

But when you have cut all of those "costs" and done all of those strategies, what else can you do? Well, you start the process all over again with your international labor force. By and large, this is a labor force that is already working in exploitative conditions in national economies that have been degraded by various forms of colonialism (both the prototype, and the new globalized economic model). Who would one look to to see this exportaion of the US tried and true employment degradation but the largest retailer on the planet? Yes, you guessed it. Wal-Mart, the cost cutting leader, is cost cutting again - Chinese Workers Pay for Wal-Mart's Low Prices (Wa. Post, 2/08/04). Let me just extract a few of the more notable points of the article (emphases mine):

Most of the 2,100 workers here are poor migrants from the countryside who have come to this industrial hub in southern China for jobs that pay about $120 a month. A sign on the wall reminds them of their expendability in a nation with hundreds of millions of surplus workers: "If you don't work hard today, tomorrow you'll have to try hard to look for a job." ...

More than 80 percent of the 6,000 factories in Wal-Mart's worldwide database of suppliers are in China. Wal-Mart estimates it spent $15 billion on Chinese-made products last year, accounting for nearly one-eighth of all Chinese exports to the United States. If the company that Sam Walton built with his "Made in America" ad campaign were itself a separate nation, it would rank as China's fifth-largest export market, ahead of Germany and Britain.

...

"Wal-Mart pressures the factory to cut its price, and the factory responds with longer hours or lower pay," said a Chinese labor official, who declined to be named for fear of punishment. "And the workers have no options."

...

"In the beginning, we made money," said a manager reached by telephone, who gave his name as Mr. Li.

"But when Wal-Mart started to launch nationwide distribution, they pressured us for a special price at below our cost. Now, we're losing money on every box, while Wal-Mart is making more money."

So there you have it. Except that the largest consumer nation the world has ever had is falling on its behind. Workers with no, or degraded jobs are slowing down consumption. Cheap credit only goes so far before folks get very nervous and stop spending beyond necessities. The stranglehold of corporations like Wal-Mart has on China can also only go so far (we hope). So at least in the short term, profits can go up while the lived economy (the people) suffocates under the weight of an economic foot on our necks.

Posted by rowan at February 8, 2004 10:23 AM | TrackBack | Printable Version | [eMail this article!] |