Henry Blodget, a once-disgraced securities analyst, is now a successful and widely read blogger at Business Insider, a company he founded to provide news and insight about business, politics, the economy, technology, pop culture and other trends.
Whether he ever subscribed to the Cult of Capitalism, we don’t know. But if he did, he’s no longer drinking that KoolAid. In a recent post in which he bestows the Scrooge Award on Corporate America, Blodget provides data showing that American companies are now achieving the largest profit margins in history, while paying the lowest wages in history as a percent of the U.S. economy.
“If you happen to be an owner of a big American corporation, these charts could be construed as good news: You’re coining it! If you happen to be a rank-and-file employee, however, – or someone hoping to be such an employee – this is bad news: You’re sharing less than ever before in the success of American industry.”
He points out the problem with this – one that’s been addressed many times before: If the working class that accounts for more than two-thirds of consumer spending is slowly being choked by stagnant incomes and lack of spending money, the economy itself is going to suffer a low, slow and painful suffocation as well.
He emphasizes the point by noting how some of our most successful corporations like Walmart, Starbucks and McDonald’s, have policies specifically designed to keep their employees living at or near poverty in order to maximize profits.
Just yesterday (Dec. 4 2012), for example, the Washington Post reported that the CEO of Darden Restaurants Inc., owner of Red Lobster, Olive Garden and LongHorn Steakhouse, complained in an earnings advisory that profits were down because of … drum roll … Obamacare. Actually, he admitted, it wasn’t the federal Affordable Health Care Act directly. It was all the bad publicity the restaurant chain received after trying to avoid providing health care to its employees by cutting their hours down to part-time.
The company isn’t scheduled to release earnings for another 10 days (Dec. 14, 2012) so it didn’t provide actual earnings numbers. But it is expecting earnings of about 25 cents a share on continuing operations – a fraction of what it earned in 2010, when profits exceeded $400 million, according to Fortune and CNN Money.
The irony is that if Darden had simply put the money into its employees’ hands in the form of the required health coverage, its customers might not be staying away and, perhaps, even its employees might be able to afford to eat the company’s own dog food (that’s a Silicon Valley expression; not a judgment on the company’s food – which does, in our opinion, pretty much suck). Sure, under Obamacare the company’s profits might be down, but its business might be up. Go figure.
Blodget’s crowning point might be this:
“This is a private-sector issue, not a government issue. This is about persuading American companies to share more of their wealth with their employees, so the government doesn’t have to get involved. As many conservatives are fond of observing, the government cannot solve all the problems in this country. The private sector has to do it. So, it’s time the private sector started doing it.”