Pi Attitude Zone: Material Status
Corporations Can Be Unequal Too
Modern revolutions started with a cry for “Liberty, Equality, Fraternity”. The French Revolution was roughly contemporary with the American Revolution, which was nominally fought for similar aims.
Fast forward to contemporary America. Liberty? Check. Americans still seem to want lots of that. Fraternity? Well, up to a point, provided it’s with people who share your race, age-group, religion, morals, affluence level and taste in political pressure groups.
Equality? Um... whoops... not so much.
The economist Joseph E. Stiglitz, writing in the Washington Post, put the problem succinctly: “The United States is in the midst of a vicious cycle of inequality and recession. Inequality prolongs the downturn, and the downturn exacerbates inequality. The seriousness of America’s growing problem of inequality was highlighted by [June 2012] Federal Reserve data showing the recession’s devastating effect on the wealth and income of those at the bottom, and in the middle. The decline in median wealth, down almost 40 percent in just three years, wiped out two decades of wealth accumulation for most Americans”. A literally devastating trend.
America has led the field on socio-economic polarization for over ten years. Inequality is greater there than in any other advanced country. The reasons are legion, and complex. But Pi has tracked down one of them: inequality is also rampant among corporations, not just people. And this in itself is helping to exacerbate inequality throughout the fabric of American society.
Corporations are sitting on huge piles of cash, you see. In 2013, the 50 richest companies account for almost two-thirds (64%) of a one-and-a-half Trillion-dollar cash hoard, up 7 percentage points in as many years. Top hoarder Apple’s cash stockpile was recently logged at just under $150 Billion. Other cash-rich behemoths like Microsoft, Google and Cisco Systems are close behind Apple. Aside from being insanely profitable, these businesses have comparatively low capital and staffing costs. Without much incentive to pay big shareholder dividends or buy back their share capital, they just keep the loot in the bank.
Why have they elected to simply sit on their money? One reason is globalization. Corporate giants make more of their profit overseas these days, and have to pay a big slab of that in tax if they want to repatriate it – for instance to pay for economy-stimulating things like hiring more people or paying dividends to stockholders. Another excuse is “liquidity preservation”, the urge to build up cash reserves in uncertain times. It seems not to have occurred to anyone that keeping all that money out of circulation contributes to the very uncertainty it nominally seeks to avert.
Anyway, the net result is not only inequality in society, but in the business landscape too. There is an increasingly unequal cash-on-hand distribution across the range of American corporations generally. The biggest fists are clenched around by far the biggest rolls of banknotes.Zone: Material Status Country: USA / North America Product – Financial