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Corporate profits don't translate

Robert Reich

Tess Vigeland: So there are signs of economic trouble -- namely in the job market. But corporate stocks had their best performance of the year in April. Profits are soaring.

So why hasn't that translated into more hiring? That's the question commentator Robert Reich's says we should be asking.


Robert Reich: First-quarter corporate profits are way up, as is the stock market. But the U.S. economy has slowed to a crawl -- a measly 1.8 percent annualized growth -- down from over 3 percent last quarter. Real wages are also down. And despite more jobs, the percent of working-age Americans actually working remains as low as it was in the depths of the recession.

How can big American corporations be doing so well and the economy so badly? Because their sales are booming -- abroad. And they're adding new jobs where their sales are.

Caterpillar, for example, is going gangbusters outside the U.S. -- and over the last year has added 12,000 workers abroad. But its domestic workforce remains below pre-recession levels.

Or look at GE, the bellwether of American corporations -- 60 percent of its business is now coming from outside the U.S. And that's where 54 percent of its employees are.

Almost half the sales of the S&P 500 are now overseas. The Commerce Department reports that in the past decade American multinationals have eliminated almost 3 million jobs in the U.S. while adding more than 2 million abroad.

So we've got big American corporations in a vigorous recovery that's raising stock prices -- while the U.S. economy languishes. Which raises some basic questions.

What is the American economy, and how is its success supposed to be measured?

And why should big U.S. corporations whose sales and employees and even investors are becoming more and more global, be called "American" companies, anyway?

And finally, why should the Supreme Court give these big global companies First Amendment right to spend unlimited amounts of money on our elections?

You see, we're relying on our elected officials for policies that help create jobs with good wages here in America, which isn't exactly the objective of these global enterprises.


Vigeland: Robert Reich served as secretary of labor under President Clinton. His most recent book is called Next week, David Frum. Send us your comments -- click on the contact link.

About the author

Robert Reich is chancellor's professor of public policy at the University of California, Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton.
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The political cry of “we are broke” is one big crocodile tear. Corporations are awash with money and so is Wall Street. The large medical sector exists only because government along with agriculture, energy, and many other sectors subsidizes it. With out that subsidy and support the economy would not function. The principal error in most economic punditry is that we have never ever had a pure capitalist system but always existed in a mixed economy. There are no “broke corporations” only those enjoying profits at the expense of the places where they operate.

The current problem is that the mixed economy is controlled by corporate enterprise beyond the reach of national governance. These corporations serve their own purposes and not those of the countries where the do business. Contrary to popular belief that they raise standards in these places while providing cheap goods for American consumption they harmfully disrupt the places where they do “business” and contribute to a ever widening cycle of destitution.

The greatest thing that America has to offer is Innovation, fair practices and Capatilizm. I think that Robert Reich has provided a great insight into our globle trade. Also by big American companies developing other poorer nations they are creating markets for us to sell our goods. As far as Americans are concerned we need to push ourself harder go for higher education, innovate. We should feel fortunate that the rest of the world wants to emulate us. We are creating strong capalistic, Democaratic goverments. Sure China is a communist nation, but that will change as people's standrad of leaving increases. And we need nations like this in todays' world of Religious extremisum. My philosophy is if life gets tough tough get going. People in USA have had it easy for far too long. Now it is time to become more mature and stronger in terms of terrisom, scams, financial insecurity...

Robert, maybe we should temporarily resort to the Oliver Cromwell method of legislative attention getting, by disbanding Congress for awhile until politicians want to do more than just stay in office.

Of course Obama’s job title would have to change to President Protector until politicians are dedicated once again to serving We The People, like creating jobs with good wages here in America instead being indentured servants to special interests that export jobs, manufacturing, technology and the Wealth of America to Asia.

Having converted America and it's closest nations into being dependent on the corporation jobs and living a lifestyle of unhealthy foods and a desire for things they don't need. The corporations are now abandoning these people in favor of bigger opportunities.
While our countrysuffers the fallout of housing, jobs, suffering economy and declining health from the foods we consume and lifestyle we live, corporations are building huge plants in places like China and other large population bases. Their goal is to have these countries people brain washed into desiring and living the "American Dream" and spending vast amounts of money to do it.
Since this market will last quite awhile, the attitude is to uses those resources and profit as much and as quickly as possible.
Simply put, the profit potential in other countries is far too great to stay home.
Never mind the future and what the end effect will be.
This sounds like the same plan around all the worlds resources.
Forget the future and the children. It's all about me and now.

These data points raise two far more basic questions than any of those Reich posed: Why are the costs of running a business in this country, compared to other countries, so much higher than they were before the recession---and why do leftists like Robert Reich want to make those costs even *higher*?

Interesting submission by Pro. Reich. The truth is corporate America controls the economy, and whatever the condition, will find means of returning high profits. However, my principal concern is the low-quality goods flooding the US market, principally from China on which big corporations are deriving huge returns, exploiting principally lower-level shoppers.

The comments above from Barry Miller are dead on. Prof Reich raises a set of completely irrelevant questions. Can you image how much capital (and jobs) would flow back to the USA if we lowered our Corp. tax rate to just the average of the developed counties? The questions one should ask are centered on our economic policies. In addition to our ridiculous corp tax policies one should ask why the current administration wishes to tax individual achievement? It is real simple, the more the government takes, the less capital available to create jobs

Thanks again, Dr. Reich. Well said.
And to the trolls: If things are so bad for big corporations and the rich here, why are they the only ones prospering?

If corporations can't have First Amendment rights, shall we also allow the government to seize their business records without a warrant. You know, that pesky Fourth Amendment thing?

So what happens to the United States when the big international corporations start moving their headquarters and operations to other countries? In 2002 Stanley Tool Works tried to reincorporate in the Bahamas to avoid US taxes, but they relented after protests and remain a US corporation.

How long will Coca-cola or Caterpillar or _(fill in the blank)_ stay in the US when most of their markets are in China or India or South America?

Corporations have to realize we have an implicit social contract: we purchase their goods and services and they need to provide jobs and opportunities.

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