"Why Corporations Might Not Mind Moderate Depression" by Paul Krugman

[applegrove]

Why Corporations Might Not Mind Moderate Depression

by Paul Krugman at the NY Times

http://krugman.blogs.nytimes.com/2013/12/25/why-corporations-might-not-mind-moderate-depression/?_r=1&

"SNIP..................................



I pointed out, following on a suggestion by Mike Konczal, that the continuing dire state of the labor market enhances the bargaining position of employers, increasing their power. But can this effect actually mean that employers are better off in a somewhat depressed economy than they would be in a boom?

......
Suppose (as I am, in fact, supposing) that we have in mind some kind of efficiency wage story, in which the effort employers can extract from their employees depends in part on the state of the labor market. So we can think of each individual employer as having a profit function F(N,U, …) where N is the firm’s own number of employees, U is the overall unemployment rate, and there’s a bunch of other stuff that would bulk this out into a full-size model. Other things equal, firms will choose the level of N that maximizes their profits.

But in so doing, they will be ignoring the effect of their collective hiring decisions on the unemployment rate. Indeed, any individual firm has a negligible effect on U. But collectively they in effect determine U — and a high level of U, we’ve been arguing, increases their power over workers and hence their profits. Again, other things equal.

So a slack economy could in effect serve as a coordinating device for firms; one way to think about it is that it keeps firms from competing too hard for workers, enabling them to exert more monopsony power. This effect would have to be weighed against the direct adverse effect of slack demand on profitability, but there’s no rule saying that firms have to do worse in a depressed economy; they could actually do better. (I’m going to try some formal modeling on all this, but if anyone else wants to jump in, be my guest.)





..................................SNIP"

[GoneFishin]

1. Corporate bottom lines have been enhanced by lax regulation, tax giveaways, and "free" trade.

Keeping peoples mind on where their next meal comes from (metaphorically and/or literally) drains energy from them which might otherwise be directed toward engaging in the democratic system.
Making it easy for corporations to buy more politicians and perpetuate the cycle.

I am under the impression that corporate profits are through the roof, and at the same time the middle class is being plundered. If that is their formula then it seems to be working just fine for the sociopathic bastards.

[WinkyDink]

2. Corporations would like an all-profit, zero-employees scenario. No wages. no pensions, no.......YGTP

[adirondacker]

3. Paul would do well to read DU for the last 8 years as many of us have pointed this out ad nauseam.

[Brigid]

4. Corporate America's wet dream:

Desperate workers fighting like starving rats over a few shitjobs.

[sendero]

5. And a dream...

.... pretty much realized.

[riderinthestorm]

6. Sad but true K&R nt

[Egalitarian Thug]

7. Not to mention the trillions in cash they are sitting on gives then incredible power to

snap up massive assets for a fraction of their real worth.

[The2ndWheel]

10. Right, they don't need you

They have all the money, so they don't need you to buy anything in order to get the money. It doesn't matter if people buy whatever it is that they're selling, because they have all the money, so they don't need you to make anything in order to get the money. Plus they don't need anyone in particular to make anything in any particular location, because the world is open. You're also not only competing against other humans around the world, but also machines.

If you're needed, for whatever, you'll get paid, and probably quite well. If you're not needed, then you'll either not be paid all that much money, or you'll find yourself without a job. More and more people aren't needed, no matter what they do.

[woo me with science]

8. K&R Corporate strategy is driven by profit, not people.

We are "human resources" to be exploited and discarded.... not human beings.

[xchrom]

9. du rec.