Happy days are here again? The New York Times‘ photo for its article on mergers. (photo: Brendan McDermid/Reuters)
“Five years after the end of the financial crisis that reshaped the economy, it appears that big companies are finally willing to make big bets again,” the New York Times (1/17/14) proclaimed, certainly sounding as though the news was cause for celebration.
Though the claim is ubiquitous in business reporting, many readers still probably marvel that the financial crisis is long over, given that their own crisis is not–stagnant wages and reduced benefits being some of the ways the economy has been “reshaped.”
But it’s easy to feel that the Times‘ David Gelles thinks a rise in “mega-mergers” means just what his most prominent source, Mark Zandi from Moody’s, says it does: “It reflects the economy, and it also portends better times ahead. Deals don’t get done unless people feel pretty good about the future.”
Ah, but which people, exactly? Does the fact that “CEOs are feeling pretty good about things” mean that the majority of US households–which rely on paychecks–should feel good too?
Not at all. And the paper knows it, though it’s several graphs along before an intimation emerges about “some dark corners in the dazzling successes of Wall Street’s deal makers.” Because while they’re spending on acquisitions, “wage growth remains sluggish and hiring is growing only modestly.”
As economist Richard Wolff noted recently, “From 2007–the last year before the current recession hit–until now, the median income of Americans has dropped by nearly 10 percent with no recovery evident.” That’s not a “dark corner”; it’s most of the room.
Next we learn that we might not even be talking about the ever-elusive “trickle down” effect from those “dazzling successes”: Mergers’ positive impact on the economy at large “remains a subject of debate.” A professor says economists are “pretty divided as to whether they’re a good thing or a bad thing.”
But that idea, which ought to fundamentally affect the presentation of the phenomenon the article trumpets, just gets lined up alongside “regulatory hurdles” as a sort of potential smudge on the smiley face. So…mergers don’t necessarily help and might actually harm workers and the economy…and they might not even happen!
It’s a confusing takeaway–but not unusual for corporate media that, despite everything, remain overwhelmingly invested in the notion that what’s good for Wall Street is good for us all.
So…mergers don’t necessarily help and might actually harm workers and the economy…and they might not even happen!
In fact, I have yet to see any merger on a larger that ever did anything but cut services, and workers, and products while allowing the Corporate Lords and Masters to steal everything from the company before cutting it’s throat and selling off the parts like a butchered hog. The likes of Carly Fiorina, Meg Whitman, Mit Romney, and et al. have done more damage to the american people and the american dream than any 100 legions of ISIS.
@ Padremellyrn: You left out Jack Welch, who as CEO of General Electric from 1980 until 2001 became known as Neutron Jack for eliminating thousands of employees while keeping the buildings intact. Under Welch, GE acquired RCA, sold off its properties other than NBC and laid still more people off. The more Welch cut jobs the more the media adored him, and he often declared on air that claims of excessive executive pay were “outrageous.” He opposed SEC regulations affecting executive compensation, including backdated stock options, golden parachutes for nonperformance, and extravagant retirement packages. In 2008 he declared on NBC’s Morning Joe that global warming was a Marxist plot, and his Business Week column, supposedly about management, opposed the Sarbanes-Oxley Act of 2002, opposed government-sponsored health care, praised President Reagan’s union busting, and supported Dick Cheney’s right to water-board.
Here’s the easiest and most objective and persuasive way of explaining the current economic malaise: Simply chart the inflation- adjusted value of one dollar of labor and compare it to the value of capital as measured by the growth in the DOW 30. Start with 1979, the year the Carter administration adopted its mild version of Reaganomics.
So, from that point, blue collar wages have, in real terms, declined about 23 %, while the value of capital has increased, in real terms, by 800%, if the average dividend yield is reinvested.
All the fancy 1300 page books that elaborate ad infinitum about wealth redistribution can be distilled to this essential fact. And notice, I’ve said nothing about the paradox of wages falling so drastically during a period in which worker per hour productivity increased four fold. Of course, new capital enhanced the output of labor and thus reduced labor’s value, since people who are replaced by technology sit close enough on the sidelines to keep down the price of existing labor.
You could chart the same as to just about any class of white collar labor and get the same astounding result, or you could floor yourself if you charted the growth of capital value relative to the increase in any social welfare benefit.
Nutshell: DJIA, the prime index of capital’s value, has increased from 800 in 1979 to 17,800 at today’s close. In other words, $4 invested then would bring $100 now, most of it untaxed accumulation. At best, the same $4 of labor would yield about $16 now, which means that the . growth of capital’s value has been 6 times that of labor, at a minimum, since capital can determine the timing and rate of its taxation and labor cannot.