From Bob Herbert today’s NYTimes, courtesy Andrew Mayer:
The recession officially started in December 2007. From the fourth quarter of 2007 to the fourth quarter of 2009, real aggregate output in the U.S., as measured by the gross domestic product, fell by about 2.5 percent. But employers cut their payrolls by 6 percent.
In many cases, bosses told panicked workers who were still on the job that they had to take pay cuts or cuts in hours, or both. And raises were out of the question. The staggering job losses and stagnant wages are central reasons why any real recovery has been so difficult.
“They threw out far more workers and hours than they lost output,” said Professor Sum. “Here’s what happened: At the end of the fourth quarter in 2008, you see corporate profits begin to really take off, and they grow by the time you get to the first quarter of 2010 by $572 billion. And over that same time period, wage and salary payments go down by $122 billion.”
That kind of disconnect, said Mr. Sum, had never been seen before in all the decades since World War II.
In short, the corporations are making out like bandits. Now they’re sitting on mountains of cash and they still are not interested in hiring to any significant degree, or strengthening workers’ paychecks.
Combine this with the fact that corporate profits over their net worth has been going down for thirty years, and you get an even more nuanced understanding of the problem: not even the corporations will be able to turn a profit for very much longer. They have collected all the money, but don’t know how to make more out of the money they have. All they can do is sell major assets to the Chinese (like Ford selling Volvo today). So even corporate shareholders are losing in this scenario.
It’s all quite simple, even if it took me close to 300 pages to explain how we got here in Life Inc. I was thinking that book came out too late (after the beginning of the economic crash) but now I’m thinking it may have come out too soon! At least there’s the paperback coming early next year, along with resources for people who need to earn a living in the current economic environment.
Or take a look at Alan Greenspan’s latest comments to Meet the Press. When I say something like this, they call me socialist:
“Our problem, basically, is that we have a very distorted economy, in the sense that there has been a significant recovery in a limited area of the economy amongst high-income individuals who have just had $800 billion added to their 401(k)s and are spending it and are carrying what consumption there is.
“Small business, small banks, and a very significant amount of the labor force” — is caught in “tragic unemployment” that is pulling down the country.