back to business indeed
dont take away investment capital. Profits = investment capital
Investment capital is certainly a good thing. Investment capital is one part of the complex system that results in economic growth.
Two problems with this theory though (of profits = investment capital = prosperity/growth)
1. Let us assume that infinite investment capital is infinitely good, especially if it is in the hands of those who do not need to ‘consume’ it on silly needs like food or healthcare, but instead are able to AFFORD to reinvest it.
Can you tell me that Profits will always be re-invested? What if a majority of the profits end up as executive bonuses? Will we then assume that such executives will freely angel invest back into a company of some sort?
This model of profits = reinvestment has worked in the past for a number of reasons. We weren’t getting ready to hit a wall in the ‘limits of growth’ http://www.amazon.com/Limits-Growth-The-30-Year-Update/dp/193149858X ,* and there were social and religious incentives to not accumulate wealth. In today’s culture, there is nothing taboo about amassing wealth without reinvesting it or providing jobs … it is simply “your” money to do with as you please, even if it depletes the rest of the economy. (If I hear correctly, Frogboy is an exception to this rule, perfectly willing to invest extra capital of his own into his company.)
2. Now, however, not only is accumulation of wealth no longer taboo, but our current economy is in a state of OVER INVESTMENT and TOO LITTLE DEMAND. Why is there no demand? Part of it may be due to uncertainty, but a large part of it is because of the working class wage freezes in effect since the 80s. 30 years of a shrinking middle class will see a steady decline of consumers. Or, well, it would, but thanks to our policies in the 90s, this was largely hidden thanks to the real estate bubble. We finally see the results of our actions in 2007/2008 when economic productivity we thought was there due to lies we told ourselves simply ceased to exist. But it never really existed to begin with, so it just ceased pretending to exist. Instead of seeing a steady decline in consumer power we see a sharp drop in both purchasing power and jobs, after the temporary fixes finally wore off.
Reaganomics only even theoretically works during periods of low investment and high demand. Today not only do we have the opposite, but we keep throwing money at executives, and the super-rich, thinking that they will continue to reinvest EVEN WHEN THERE IS NO MARKET FOR IT.
There is a name for the people that provide money and jobs when the economy is doing poorly in order to increase growth and prosperity for the private sector, by allowing consumers to have more purchasing power. They are called the FEDERAL GOVERNMENT. Ever heard of public works projects? The Hoover Dam perhaps? FDR’s the NEW DEAL? Today in Germany, if a company can’t afford to pay say more than 30 hours a week for all of its employees, guess what happens? Do they lay off a few people? No. Do they shorten the hours? No, the workers still work 40+ hour weeks. Here is what happens … the workers come in and do their 40 hours, the company pays them 30 hours’ worth and the government pays them 10 hours worth. During times of prosperity the company sees higher taxes on net profits to account for the bad times when the government will need to bail out the WORKERS. Executives have trust funds and large bank accounts. They do not need to be bailed out. They do not increase the productivity of a nation. They do not ‘consume’ the products and services of companies … at least not to a significant enough degree to matter in most cases. Instead, during hard times the government pays what the companies cannot, so that the working class can STAY SKILLED at their jobs, STAY EMPLOYED, and KEEP PURCHASING power.
I bet their workers get national pay raises at or just above inflation too, to keep that economic prosperity going.
*The limits of growth is an interesting discussion, and in some ways completely separate/parallel to the discussion of workers vs. Executives (taxes, bailouts, and overall business decisions).
While not particularly important when considering specific economic litigation, the overall limits on growth can be important in seeing the big picture. Essentially, what the findings show is that unless growth becomes more regulated/steady state, and not just regulated but regulated WELL (we all know how bad poor regulation can be), we will see some severe economic crashes starting around 2030. Like over a billion people dying of starvation over the period of a decade bad.