Yay! People are suffering!
by Michael Maiello
Check out this item from Bloomberg news: "U.S. stocks rose after a report showed the economy added fewer jobs than forecast in July, easing concern faster inflation will prompt the Federal Reserve to raise interest rates this month." Pretty sick, isn't it?
Job growth is one of the prime indicators of a growing economy. But if everyone has jobs, then everyone will presumably have money to spend. That means the people out there selling goods can boost their prices and pad their pockets and that is what causes inflation. The American dollar might be off the gold standard but it still acts like gold -- if there's too much of it, and if too many people have it, it's worth less. To protect against too many people have money, Federal Reserve Board chairman Allan Greenspan has raised interests rates 1.75% in the last year and a half. That makes it more expensive for employers to do business and where's the first place they cut costs? Jobs.
You can blame the stock market for that. A companies stock is valued either by the money it makes, or the money it will make. Higher interest rates make it tougher for companies to turn profits and share prices fall. When the earnings per share of a company falls even by a penny, the stocks are generally severely punished. So, companies have to cut costs to make up for lost earnings and that's when you get situations like the recession in the early 90s, when hordes of Americans were out of work.
It is a brutal, ugly system.
But no one ever discusses changing it, and I doubt you'll hear either George W. Bush or Al Gore address the topic in this year's election.
So, how can we solve this problem which seems endemic to the buying and selling that goes on in capitalism? We have to get rid of our fundamental assumptions.
The Fed raises interest rates in the hopes that it will slow consumer spending. Higher interest on mortgages might make people think twice about buying a new house. Higher interest on credit cards might make people put away their plastic. That bad news trickles up to the companies who make money off those consumers and earnings fall, then jobs are cut. Power in the labor market shifts. Workers have had it easy the last few years -- companies are having a tough time finding qualified people and that means, especially at the high end of the market, that people can demand better pay and perks.
But when companies start laying people off, the worker will lose his bargaining power. They have to keep themselves employed at all costs. That means staying quiet, working harder and taking less in return. Invariably, this will hurt the stock market, as people will have less cash to throw over to Wall Street. That means that stock prices will fall and... Companies will lay off more people, cut more benefits, and demand more gratitude for the workers they keep.
Obviously, we can't go on with this cycle. But we also have to keep inflation under control or, no matter how hard you work, you won't have any earning power (i.e. the power to buy stuff.)
So, we have to stop inflation. How? By regulating prices, especially of basic needs. There's no reason that food, utilities (gas/electricity/phone/water) and other basic necessities of life should become more or less available because of market conditions. Corporations will never say "I'm going to take a hit to my earnings in order to be loyal to my workers." So we have to force them to take that hit.
If a company is found to increase prices of its product while laying people
off, or even if they're caught laying people off to expand or maintain it's
profit level, it should lose its right to exist as a corporation in the
United States. Plain and simple. Only companies a who are losing money or
are in danger of losing money, should be so cold as to give people pink
slips. Anything else is, well, uncivilized.