Henry Blodget: "This One Tweet Reveals What's Wrong With American Business Culture And The Economy"

[Hissyspit]

http://www.businessinsider.com/business-and-the-economy-2013-7

This One Tweet Reveals What's Wrong With American Business Culture And The Economy

HENRY BLODGET JUL. 31, 2013, 12:18 PM 25,681 181

- snip -

A sharp drop in government spending this year is, in fact, temporarily hurting economic growth, but that's not the real problem.

The real problem is that American corporations, which are richer and more profitable than they have ever been in history, have become so obsessed with "maximizing short-term profits" that they are no longer investing in their future, their people, and the country.

This short-term corporate greed can be seen in many aspects of corporate behavior, from scrimping on investment to obsessing about quarterly earnings to fretting about daily fluctuations in stock prices. But it is most visible in the general cultural attitude toward average employees.

Employees are human beings. They are people who devote their days to creating value for two other groups of people: customers and shareholders. And, in return, at least in theory, they are people who share in the rewards of the value created by their team.

In theory.

In practice, American business culture has become so obsessed with maximizing short-term profits that employees aren't regarded as people who are members of a team.

- snip -

This view of employees was expressed succinctly yesterday by a Twitter user named Daryl Tremblay, who was appalled by the suggestion that McDonald's should increase the wages of its restaurant workers and pay for this by making a bit less money. (I was arguing that McDonald's employees should not be treated as "costs," but instead as valuable members of a successful team who shouldn't have to work that hard and still live in poverty.)

Here was Daryl's response:

They are costs. Full Stop. They don't have a stake, they hold nothing. They trade their labor for money.

— Daryl Tremblay (@DarylT) July 30, 2013

Now, Daryl is hardly alone in this view. Most senior managers and owners of big American corporations think this way these days. They regard the human beings they work with — the human beings who create the value that pays their salaries — as "costs" to be reduced to create "maximized earnings." Because "maximized earnings," it is now frequently said, is the only thing that any business owner or manager should care about.

Whenever you suggest to folks like Daryl that it doesn't have to be this way, that some companies can and do balance the interests of shareholders with the interests of customers and employees — and, in so doing, create a symbiotic relationship that supports all of these constituencies — folks like Daryl call you a "socialist."

- snip -

It doesn't have to be this way.

There is no capitalist law that says companies have to view employees as "costs" and pay them as little as possible.

- snip -

If American corporations were struggling to earn money these days, we wouldn't be having this conversation.

But they aren't.

MORE[p]

[Waiting For Everyman]

1. Oh, but the exec compensation is "costs".

Those "costs" don't diminish the shareholders' returns. The sky's the limit for those "costs".

We never hear about those "costs", do we? Wonder why?

[TomClash]

2. K&R nt

[daleanime]

3. K&R....

[Bernardo de La Paz]

4. The hypocrites call their employees "associates" to their faces and "costs" behind their backs. nt

[HughBeaumont]

5. You look up "useful idiot" and Daryl's picture is there

https://twitter.com/DarylT

Unrepentant in his stupidity. Also an avid CNBC/Fox Business/Fox News/Rand fan. Speaks volumes.

[HiPointDem]

6. +1 A small business owner carrying water for those he imagines to be his peers, who would

just as soon spit on him as talk to him.

http://cdrtech.net/

but the person who wrote the article confounds this pissant little guy with the leaders of international corporations; also stupid.

[JHB]

18. Unsurprising blogroll on his blog...

http://illiquidassets.net/

Blogroll
Ann Coulter (Townhall)
Big Government
Breitbart
Climate Depot
CNBC
Drudge Report
Five Feet of Fury
Michelle Malkin
My Futures Network – Eli Radke
Small Dead Animals
The Climate Heretic
Watts Up With That

And his http://cdrtech.net/ site doesn't appear to have been updated since 2010, the company's Facebook page is blank. Does this company actually do anything?

At least he doesn't have to worry about health insurance: he seems to be living in Canada.

[Fumesucker]

7. Don't ever stumble, Daryl, don't ever get sick, don't ever lose control, don't ever falter

Because the herd that's treading fast on your heels will run over you just like you'll run over anyone in front of you who stumbles or falters.

[JHB]

19. Oh, he can get sick. Seems he's living in Canada... n/t

[cate94]

8. Great article.

Nails it.

[Locrian]

9. hey Daryl...

*You* create NOTHING. Full stop. THEY are the WEALTH CREATORS. You and the people who make money off them are PARASITES.

[JoeyT]

10. And then the same people that think this way

will whine endlessly about employees not being loyal to the company.

ETA: Same people being Daryl, not the author of the article.

[Bearheim]

11. Uhm, hey Daryl

They are PEOPLE. Full Stop. Without them, there is nothing. FULL STOP. Without them, a corporation is a piece of paper. FULL STOP. Their 'stake' keeps capitalism functioning. FULL STOP.

[hobbit709]

12. The modern day equivalent of the Bourbons should remember what happened to the original Bourbons.

[bl968]

13. Economics

It's a closed system and where our modern capitalism fails when all the money is at the top, those at the bottom will not be able to buy the products made by the companies owned those at the top, and the system will fall. When people are unable to provide for themselves and their families revolutions happen.

[zipplewrath]

21. Wealth creators

I tend to agree with you. There is a belief within certain economic circles that people and corporations "create wealth". I've asked several times over the years if anyone has "proven" that in any scientific or logical sense. Because it isn't obvious to me that there is much "wealth creation" going on in a global sense. The vast majority of what individuals claim is "wealth creation" appears to me to be merely "grabbing market share". They are either producing a similar product or service as someone else, and therefore taking business and income away. Or, alternately, they create a new product or service which renders a former product or service obsolete. Either way, the same number of jobs, the same amount of money, and generally the same global "GDP" is maintained, no new "wealth" is really created.

The guy that makes a chair, just competes with all the other chair makers. The guy that makes a cheap chair just ensures that folks can buy more chairs with the same amount of money, but the chair maker is now making the same money while making 2 chairs. Additionally, he has "devalued" the market for simple "sittin' rocks".

These are absurdly simple examples, but the larger point is that there are a finite number of people in the world and there is some upper limit on the goods and services they can purchase. The only real "wealth creators" are either mothers/parents that create more customers (population growth) or people who actually increase the TOTAL buying power of this population. In this case we are probably talking as much about teachers, as well as health professionals who keep us alive longer, buying more products and using more services.

So in the end, yes labor is techically a "cost", but those costs are in turn, "customers" or "markets". Henry Ford was supposedly claimed to have said something along this line about wanting his employees to be able to buy his cars. So in the end, if a captian of industry wants to create wealth, about the only thing he can do is to figure out how to let his employees, ALL of his employees, make more money. Preferably, not buy getting other employees of other companies laid off.

[JHB]

28. Yes. Much more "routing" than "creation"

Being able to route more money into one's own accounts is not the same thing as wealth creation.

[tclambert]

14. They forget workers are also customers.

If all the workers in their community make less money, then their customers have less money to spend.

They focus too much on their own company's quarterly statement and forget to look up at the larger world they are a part of. Yeah, cutting the wages of their company's workers decreases their costs. And their own workers don't buy that much from their stores. But if every company in their economic microverse cuts costs by depressing wages, then every worker (= every customer) has less purchasing power, and business in the entire community declines.

This is why increasing the minimum wage ends up stimulating the economy. Every business has to raise the bottom wage and all those customers now have more income to dispose of. The volume of business increases. Businesses may end up needing to hire more workers, contrary to their usual arguments against raising the minimum wage.

Business people don't like to hear this, though, because like the OP says they tend to take the short, narrow view of employees as nothing more than a cost. And they learn on the first day of business school that cutting costs is good. If they stop paying attention then, they won't learn any macroeconomics that may teach them when increasing costs is a good thing for society as a whole. But then they may think the whole subject of macroeconomics is socialism because it deals with groups, with societies and communities. Those sound suspiciously like socialism and communism.

[DonCoquixote]

33. they do not forget it

They just prefer the Chinese now.

[rainy]

15. At X amount of profit the rest should

be taxed at a very high rate like in Yesteryear forcing companies to invest that money back into the business in the form of better wages. I got this from Thom Hartmann. This wound solve the wage problem instantly but we are never going to see higher rates on top profits in this lifetime.

[Sherman A1]

16. K&R

[Freddie]

17. Some words of advice, Daryl:

If your small business is a restaurant, don't eat there. Might be some mystery ingredients in the food.

[Orrex]

20. I posted something on this in early 2012

[hr]The sales force of a given company will generally declare itself "an asset" while the service portion is considered "a liability." That is, the sales team paints itself as a pure good and a source of uncompromised revenue, while the service team doesn't directly bring in new business, so it's considered a net drain on the company.

CEOs are held to be the ultimate sales force, generating limitless cash for these corporations, while the lower-tier workers are held to be a hindrance to the bottom line.

In a previous incarnation, my department was tasked with calculating and delivering commission payments to brokers who sold my company's mutual funds. At least once each week--and I'm not exaggerating--the department head would muse aloud that we were the company's biggest expense, in a tone that unmistakably implied that the company would get rid of us as soon as it figured out how to do it.

But no one ever suggested that the fund managers should scale back their annual seven-figure bonuses or anything like that. We were the peons, while the managers were the royalty.

This sentiment runs through the entire job market. Low-end workers need to justify every nickel they earn, while top-end earners are above reproach; in fact, it's outrageous even to suggest that they don't deserve every wad of $100 bills that they rake in. [hr]


It may be distressing to see the sentiment expressed so plainly as in that tweet, but the attitude has been in place for a long time.

[HughBeaumont]

22. I don't really take anyone seriously who speaks in Cold War terms.

Especially not wing nuts who live in Canada and cry SOSHULISM!

[xchrom]

23. du rec.

[socialist_n_TN]

24. Two things from Marx about this....

The commodification of labor and the RATE of profit, NOT gross profits. Both apply to this one tweet.

Marx and Engels were right all along. Sometimes it just takes a while for the system to overcome minor "reforms" that benefit the working class, but the system ALWAYS overcomes those "reforms". That's the way it's set up.

[Hydra]

30. "Capital cannot abide by a limit"

No matter what restrictions are in place, they will be overcome or worked around. That's why I make the case that "well regulated capitalism" is like saying you're going to put a leash on a tiger. The tiger is going to eat you in the end...you just have the illusion of safety in the mean time.

[socialist_n_TN]

31. The tiger must be a popular metaphoric animal. MY line about "regulated" capitalism.........

is that regulating capitalism is like riding a tiger. It's VERY difficult to do and you're always in danger of being eaten.

[treestar]

25. He thinks of them as slaves

Who have to be "maintained."

[MrNJ]

26. k&r

[KoKo]

27. Recommend.

[WinkyDink]

29. "American corporations" aren't "obsessed"; it's the GREEDY MEN WHO RUN THEM.

YES, I wrote "men."

[Hissyspit]

32. late-night kick nt