Globalization and outsourcing leading to inequality among corporations, too
by David Atkins
Ezra Klein has a fascinating look at the way globalization, worker-free productivity and outsourcing are leading to rampant inequality even among corporations:
We’ve known for a while that Apple has a mind-bogglingly large stockpile of cash: $147 billion, as of the latest count. On Tuesday, we learned that it’s also a huge chunk of the total amount of cash held by U.S.-based companies overall, not including banks: About 10 percent, according to a report from Moody’s.
The more interesting thing, though, is how Apple’s domination reflects an increasingly unequal cash distribution across American corporations generally.
First of all, it’s important to note that cash reserves have been rising steadily over the past five years, as corporations seek to shore up their reserves — a behavior known as “liquidity preservation” — in an uncertain economic environment…
Another factor may be the compounding effects of globalization. Companies are making more and more of their profits overseas, and lose a lot of it to the U.S. Treasury when they bring that cash back home, which they have to do in order to paying dividends and doing share buybacks. So they’ve tended to sit on it instead — and now, 61 percent of the total stockpile is stored outside the U.S.
But the ballooning reserves haven’t been equally distributed. The 50 richest companies accounted for 64 percent of the $1.48 trillion total cash pile as of mid-2013 — up from 61 percent last year, 59 percent in 2011, and 54 percent in 2006…
Lane says rising inequality has a lot to do with the emergence of tech companies that are both extremely profitable and have relatively low staffing costs and capital expenditures (compared to, say, Walmart, which is number one on the Fortune 100 but has only the 28th-largest cash pile). They also tend to pay lower dividends and do fewer buybacks, keeping more of it to themselves.
Ezra’s post is chock full of great must-see charts as well. Head over there and check it out.
I’m beating a dead horse here, but it has to be said again: old answers won’t work to solve new problems. Capitalism as we understand it today worked fairly well with physical products and smaller economies of scale. Everything worth buying needed lots of people to produce it, and those people needed to paid well enough to buy other things. Non-material goods were at a minimum, and mass producing items in one part of the world to be sold in another was limited to mostly to trade goods like tea that could not be supplied at home.
So long as the worst inequalities could be tempered with social safety nets, the most basic universal services provided or subsidized by government, and wages buoyed by labor organizing, the system worked as well as any economic system run by human beings could be expected.
But few people are asking themselves what becomes of human economic organization when the world’s most profitable companies sell intellectual rather than physical property, and employ only a small number of people? What happens when the companies that do sell physical goods automate most of their processes? What happens when the few previously skilled jobs humans can still do become low-skill routine, when booksellers become Amazon warehouse stockers and cab drivers cease to exist entirely in a world of self-driving cars? What happens when local labor unions are helpless to organize against employers because almost any product can be produced almost anywhere in the world in a globally integrated economy?
You get rampant inequality. Countries run by right-wing politicians suffer increasing barriers to entry between classes, social instability and horrific gaps in wealth, while more left-leaning countries protect their middle classes and safety nets at the expense of high cost of living, graying demographics, choking deficits and skyrocketing unemployment.
The symptoms of a global disease are everywhere, and the old cures won’t work anymore. There simply isn’t enough honest work that needs doing at decent wages–perhaps at all, and certainly not within the control of any one nation-state. Technology has allowed capital to become disconnected enough from labor that the foundation of our economic systems needs serious re-examination.
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