Tuesday, August 17, 2010

Why are Corporate profits at record levels?

The housing market is a disaster, unemployment is stuck in double digits, the economy is weaker than we thought it was. How is it that Corporate profits are at record levels?

Perhaps because big corporations are no longer linked to the economy in the US. Globalization means they can send work to where labor is cheapest and sell wherever in the world there is a buyer. Much of the world is now working hard to drag themselves up to the standard of living we enjoy in the west, so global corporations have replaced the market share they lost due to the weak US economy with market share in other parts of the world. They are the winners from the globalization movement of the last 20 years.

The people in the US that are not management in a big corporation appear to the the losers. Maybe someday globalization will bring benefits to us all beyond cheap stuff at Wal Mart, but in the shorter term small business and government will limp along while we pay for the debt fueled excesses of the last decade. Unemployment will probably be stubbornly high, the housing market will limp along. We can expect angry voters and some political instability and people fighting over who is going to pay for big deficits and the loss of services people rely on for years to come.

Sure big corporations will pay some taxes, but only on what they sell in this country. They are bigger than this country these days, and the Supreme Court has given them the right to use their size to insure their responsibilities to the US are as limited as possible.

We made some bad mistakes in the last two decades and now we will be paying for them.

Is our Medical Care System discouraging entrepreneurs?

I have had a number of recent contacts with young highly educated professionals who have expressed resignation that, as much as they would like to start their own business, they remain tethered to their jobs with big government or big corporations because of the medical plans. Despite all the complex efforts to make Insurance portable it isn't really because of the expense, particularly for younger folks with families.

Makes you wonder if the folks that killed a government sponsored health insurance system this last year gave any thought to its impact on entrepreneurial spirit?

Also makes you wonder if that is why, despite our efforts to get small businesses to hire people to start bringing down unemployment, it just isn't happening. Maybe there aren't enough new small businesses being formed because people see the expense or possible loss of Health Insurance as a bigger risk than they want to take on?

Are we undermining our future to protect our Edsel health insurance system? (Don't know what an Edsel is? Goggle it)