U.S. Corporations made record profits in 2011 while regular people went without jobs. A new study from the International Labor Organization shows Corporate Profits are doing fine and back to pre-recession levels. Yet this is at the expense of American workers and investment in America.
The ILO covers labor internationally. From their report, the world of work, there are some dire predictions. Austerity is one thing killing economies. The authors also found no recovery in sight for labor markets. They also realize as do many, except for those who could actually do something, if policies were enacted that were geared towards labor, we would not be in this mess and finally, the high unemployment and never ending income inequality is brewing up a nasty mix of social unrest.
More than half of 106 countries surveyed by the ILO face a growing risk of social unrest and discontent.
Add to that a new report from the Census, in part sponsored by the ,Kauffman Foundation, shows start-up companies are at record lows, 8%, in the United States.
The nation's business startup rate fell below 8 percent for the first time in 2010, marking the lowest point on record for new firm births. New firms as a percentage of all firms continued a steady downward trend in 2010 – going from a high of 13 percent (as a percentage of all firms) in the 1980s to just under 11 percent in 2006 before making a steep decline to the 8 percent in 2010 – the most current year of data available.
In Where Have All the Young Firms Gone (pdf), we have some god awful statistics on businesses starting up.
In the 1980's start-ups were 12-13% of all firms. Now they make up 7-8% of businesses and also individually employ less people. Below is a graph from the report showing the declining employment percentage startups contribute.
In the 1980's young firms created over 40% of new jobs and in 2010 start-up job creation was 30% of new jobs. Overall startups used to employ about 20% of the workforce, in 2010 startup employment was down to 12%.
The report does point to some cyclical affects of the great recession, but one cannot blame the overall decline on this. Something else is wrong and we have a consistent pattern of declining new businesses. Startups are vital to economic growth. In fact startups still lessened the blow on job losses during the recession. From the report:
The new BDS data release shows that, in 2010, 394,000 startups created 2.3 million jobs (these were not simply establishment openings but new firms whose establishments also were new to the economy). This reflects substantial job creation in a time of anemic overall economic activity. Over the same period from March 2009 to March 2010, the net job creation from all U.S. private sector firms was -1.8 million jobs. Without the contribution of business startups, the net employment loss would have been substantially greater.
So, we have GDP growth that is not enough to push job creation, we have employment that shows people are dropping out of the labor force entirely. We have jobs barely keeping up with population growth while policy makers promote dumb and dumber corporate driven politics. Can we even imagine politicians these days enacting policy simply because it was common sense, based on real economic theory and is the right thing to do? No, instead we have pundits du jour babbling on, enabled by cable news, trying to turn down into up and left into right.
These reports, taken together, make it abundantly clear we need strong, U.S. citizen labor focused, policies which force corporations to invest, hire and take risks with their venture capital divisions on America. We also clearly need to really reform Wall Street and grow the production economy. Will we get anything close? Of course not.
Corporations sitting on record amounts of cash
To see just how much corporations are hording cash see our overview on the latest flow of funds report. We tally it up for you.
It's true, corporations are not putting investment, hires into the real, or production economy. It's a lot of tax games, finance, derivatives, commodities trading and so forth.
Who Killed Economic
Who Killed Economic Growth?
Richard Heinberg propose a startling diagnosis: humanity has reached a fundamental turning point in its economic history. The expansionary trajectory of industrial civilization is colliding with non-negotiable natural limits.
"...force corporations to invest"
Been following your blog for a bit and enjoy the counter points and perspective you provide. Thank you.
I get confused when I read about one's desire for government to intervene in private business. You make regulatory suggestions focused on corporations; how do you define a corporation or big business for that matter? Size, number of employees, profit margin, legality? It does seem once you draw a line, companies will do what they can to stay away from it (http://www.businessweek.com/articles/2012-05-03/why-france-has-so-many-4...). You use the word "force" when describing your policy suggestion. Arguments can be made about the products which are produced, but how can regulating a company's business model be for the "greater good"? How far away from nationization is it when the government dictates not only the products produced but also the staffing levels as well as where to invest their profits?
Thank you for your time,
philosophy vs. practicality
Myself, the current political climate jabber is something to just confuse the people. There is nothing wrong with government regulation and legislation to give massive incentives for domestic investment, domestic hiring, based on citizenship (i.e. hire Americans), corporate tax policy that puts rewards for hiring, retaining and training labor.
"Force" doesn't mean at gunpoint, it means enact legislation, policies to the point corporations, in order to be profitable, must invest their cash into the United States, instead of globe hopping for the cheapest labor markets and production.
i.e. instead of allowing corporations to park profits offshore, tie 0% corporate tax rates to hiring Americans and investing, building within the United States. So, this isn't "at gunpoint", it's a major reshaping of the corporate tax code.
A private businesses' model remains the same, but there is an additional, much needed element beyond "make profits for our shareholders" and that is a responsibility to the nation and to their prospective work forces.
This isn't "take over the corporation", at all, not even close to what the Chinese do with state owned enterprises.
Right now we have corporate lobbyist written tax codes, labor laws, trade treaties that give strong incentives to fire U.S. workers, move production offshore and increase financialization.
It's currently corporate socialism, corporate welfare if one wants to speak in those red herring political philosophy terms.
Me, I'm practical, what works, what increases profits, business activity but also increases individual wealth, on average, increases work life in America, keeps the nation out of massive debt and so on. Many of these ideas which are thwarted again by corporate lobbyists, have already been proved to work in the past.
What works is my motto.
The issue is never what works but what works and for whom does it work. That is why conflict never ends. And the issue of whether fairness can work well enough to prevent upheavals. Up until now Amerca's contrived form of Democracy has had only one catastrophe breakdown...The Civil War. Which means our approach to turning the Middle Class into a wet blanket of revolution has a good but not totally reliable track record. Crushing the numbers in the Middle Class could very well be a warning of what's to become of all us.
China's biggest corporation is their military. Have you noticed? They look underfed. And the products that we import from them are sometimes dangerous. Is it because they have no pride in what they produce? Do they have scienctists developing products, or do they steal our ideas and try to recreate them cheaper with cheap labor. Be careful what you force our corporations to do.