Too big profits are bad for U.S. business
“Big American companies are maximizing their profits instead of investing in their people and future projects.”
That’s the blunt, provocative first sentence of a recent commentary by Henry Blodget, CEO of Business Insider.
Blodget argues, “this behavior is contributing to record income inequality in the country and starving the primary engine of U.S. economic growth—the vast American middle class—of purchasing power.”
Blodget’s conclusion is that the profit obsession of corporations is, ironically, blocking their ability to grow—and therefore to produce future revenue.
Some sobering facts support his argument. Business profit margins are at an all-time high. As a percentage of the economy, profit has risen from .04 percent in 2000 to 0.11 percent in 2013. Wages have fallen from 0.47 percent in 2000 to 0.42 percent in 2013. The bottom line is that the share of national income that American corporations share with their employees is at an all-time low, from 107.5 percent in 2000 to 96.5 percent in 2013.
Blodgett’s analysis of a shortsighted, destructive version of capitalism seems to be generally on the money, but he’s overlooked the many companies that are aware of this issue and doing something about it. Where there are problems, there are people working on solutions.
Smart business knows that what’s good for its labor force is good business, sustainable business, business with a profitable future.
I’m John Howell for 3BL Media.