May 23, 2016

Addressing Income Inequality (v3): Coporate Profits

My #FeeltheBern friends, my #ImWithHer friends, and my less overtly political friends and I have had conversations about the hot topics today. In this edition of my Addressing Income Inequality series, we'll look at corporate profits; the first post was on 'living wages' and the second was on CEO salaries.

Like most of you, I've heard and read that corporate profits are out of control, and they make CEO pay out of control, and the giant profits being shared with people other than the workers who make the profits possible are killing the middle class.

And like some of you, I sort of sit up and take notice when I see articles like this:
According to this article (from October of 2015), the ten most profitable companies in the world include the three above; Apple and Exxon Mobil were numbers one and two, respectively; Berkshire Hathaway came in at number four. Who are the rest of the top ten?

#3 Samsung Electronics (South Korea)
#5 Chevron (US)
#6 Toyota Motor Corp.(Japan)
#7 PetroChina (China)
#8 China Mobile (China)
#9 Walmart (US) and
#10 Johnson and Johnson (US).

That's six American companies, two Chinese, one Japanese, and one South Korean firm in the top ten.

So I have to ask, what was your first reaction seeing the list?

Are you on the "those bastages, look at all that money and why don't employees see any of it?" side of the fence?  Maybe you're on the "Alright, look at our American companies go!" Or, possibly, you just go "Hmm... how on earth do they do that?"

I'll be honest,  frequently find myself in the group that says "I sure hope my 401(k) is invested in companies like these!"

All of those reactions are possible, and none of them are really wrong; it's all about perspective, and all about perception.

Now, regular readers know I'm not an economist, a statistician, an accountant or an auditor. I mention this because, while I'm capable of finding lots of information on lots of topics, I'm not qualified to say whether the information I find is 'more right' or 'more wrong.'

But, after all we've heard from the politicians about evil corporations and huge profits, would you be surprised that (according to this info) corporate profits fell to their lowest level in four years in the last quarter of 2015?

Or that, for all of 2015, profits were down over 5%?




And for one of the most left-reviled industry sectors - petroleum and coal - profits were down $124.3 billion in the fourth quarter alone, and down $40.6 for the full year?

What does all of this mean?  As with our other Income Inequality measures - minimum wage and CEO salaries, the proof may be in the pudding, but the beauty is in the beholding.

Where some might seem happy that profits are down, because everything is so unequal, others lament the fact that the numbers are down, because that can negatively impact so many other things, including investment accounts, pensions and 401(k)s.  Some would say that not everyone has the chance to have a pension, or investments, or a retirement fund -- so too bad, so sad for those people who are rich enough to have them... And so it goes.

Should the government have the right to tell a company that they can't make as big a profit as they're able? Should we be complaining that our American companies are making great profits?  Isn't that what we want them to be doing? I mean, I can't imagine anyone --  an Apple, an ExxonMobil or a mom and pop corner store - going into business to lose money, any more than we all go to work every day to do a crappy job.

Why would anyone bother?