Billions for Acquisitions, Nothing for US Workers
Trickle-Down Mythology: Corporations Sitting on Mountains of Cash and Workers be Damned
PBS’ corporate-friendly Nightly Business Report (NBR) airs a story at
the top of its newscast about a major blockage in the corporate
‘trickle-down’ pipe, you know the jig is up.
On August 30th, NBR did just that.
In her setup to this fascinating little segment, NBR host Susie Gharib opened with the words: “Well, American companies are sitting on a pile of cash. But they're not using it for hiring. They are using the money for deal-making.”
The story that followed pretty much confirmed what most Americans have suspected all along: So-called ‘trickle-down’ economics never did work as advertised. And when it comes to spreading the wealth, corporate trickle down is turning out to be a very bad joke -- one that American workers don’t find very funny.
Introducing her story, NBR correspondent Erika Miller announced: “Consumers are not the only ones holding on tightly to their cash these days. Corporations are too … Non-financial companies in the Standard & Poor's 500 have a record $837 billion in cash in their coffers.”
“That’s enough to pay 2.8 million workers -- basically, the entire population of Chicago -- $100,000 a year for three years.”
“But,” added Miller, “one of the few places companies are spending money is on is on mergers and acquisitions. With one day left, August already has the highest value of global M&A deals this year.”
Notably, only days before the NBR story was aired, Thomson Reuters had released a study revealing that a whopping $200 billion worth of corporate deal-making took place in the month of August alone – that’s $200 billion in mergers and acquisitions (known as M&A’s in corporate circles). The study was followed by an August 27th Reuters report sporting the following headline: “August's $200-billion in takeover announcements is unlikely to provide enough of a spark to energize equity markets fretting about another dip in global growth.”
Yet, while Reuters waxed anxious about “energizing equity markets,” their concern with record US unemployment seemed oddly limited -- to the problems those unemployment numbers posed for investors.
“The steady flow of bleak data on the US jobs market and consumer spending on both sides of the Atlantic over the past few weeks has been at the heart of investors' worries, and the prospect of an M&A tide is adding to fears over jobs,” wrote Reuters.
What the news agency didn’t mention was anything about how far the billions spent on M&As might have gone toward “putting America back to work.”
So much for corporate America’s professed commitment to that worthy goal.
Damn the workers, full speed ahead
By now, anyone familiar with 21st century ‘corporatese,’ understands that when corporate news agencies refer to “the economy,” they are actually talking about corporate profits – jobs or no jobs.
So, when NBR’s Erika Miller observes that corporate mergers often lead to layoffs, and hastens to add that Americans “may take some comfort in knowing that a flurry of deal-making is often a positive sign about the outlook for the economy,” we know what she means.
These corporate elites don’t give a damn about unemployment numbers. Well, they care, but only insofar as those numbers impact their bottom line. Which explains why, on August 20th, despite an anticipated loss of another 100,000 jobs in August, Public Radio’s Alisa Roth glibly observed on MarketPlace: “A lot of companies have saved so much money, they can pay cash [for their acquisitions]. And it's cash they don't necessarily know what else to do with.”
“When the stock market's valuation is low,” added MarketPlace guest and equity analyst Brad Hintz, “it's actually cheaper to go out and buy whole companies … than it is to go out and hire workers and invest in new plants and equipment.”
Trickle down was (and still is) DOA – can we please admit it now?
Back in 2001, economist Thomas Sowell wrote in Capitalism Magazine: “There has never been any school of economists who believed in a trickle down theory. No such theory can be found in even the most voluminous and learned books on the history of economics. It is a straw man.”
Sowell’s words were never more true than they are today.
Oh, and by the way, NBR wrapped up its ‘corporate hoarding’ segment with this intriguingly ‘corporatesque’ outro:
Scott Wren (Wells Fargo Equity Strategist): “Right now people are hesitant to hire because they're able to pick up companies, do it quicker, build their business quicker, at least in a strategic sense, without having to hire new people in, without having to train those people, without having all of the up-front costs that it takes to really organically grow the business you're in.”
Erika Miller: “So what will it take to get firms to abandon their cash-hoarding mentality and start hiring again? Experts say businesses need to see a strong recovery in consumer demand.
“And that's not expected as long as the job market remains weak.”