Home > Uncategorized > Let’s Stop Maximizing Profit And Start Maximizing Value – Business Insider

Let’s Stop Maximizing Profit And Start Maximizing Value – Business Insider

December 10, 2012 Leave a comment Go to comments

One result of the profit obsession, for example, is that big American companies are now paying the lowest wages as a percent of the economy in history. (See chart).

Business Insider, St. Louis Fed

Wages have hit an all time low as a percent of the economy.

This means that a record-low percentage of the vast wealth these companies have is being shared with the people who help earn it.

Another result is that companies are now scrimping on capital investments, which have also dropped sharply as a percent of the economy. (See chart).

Both of these efficiency initiatives help “maximize profit,” at least in the near term.

But they hurt the economy.

And they also hurt our companies’ overall growth rates.

Why?

Because every dime that companies pay out in wages and capital investment becomes revenue for other companies.

Business Insider, St. Louis Fed

Capital investment as a percent of the economy (non-residential) continues to fall.

Rank-and-file employees at American companies–Walmart employees, for example–are also American consumers. They spend nearly everything they earn buying food, clothes, gas, houses, entertainment, and other products and services. This money then becomes profits and wages for companies that provide those products and services. And so on.

via Let’s Stop Maximizing Profit And Start Maximizing Value – Business Insider.

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