Unfortunately, this model doesn't go in reverse
If a corporation could make what it sells at zero cost, that would be the ideal corporate scenario. Zero overhead. Buy for free and sell at a profit. Since public (and private) corporations are not human beings, they have only one overriding goal which is to maximize profits. Actually, for public companies, the goal is to maximize share price, by any means possible - special dividends, leveraged stock buybacks, outsourcing etc. Whatever it takes. According to Agency Management Theory, management is incentivized to meet these corporate goals by any means possible. In other words, management compensation is literally and figuratively a call option. These management call options only have value if the share price moves higher. Maintaining a given share price at record historical earnings levels, is meaningless. It means no management payout. Paying dividends at record high payout levels. Meaningless. Profit growth is what matters, not level of earnings.
Agency management means that the directors and executives of the company are incentivized to be single minded in their pursuit of profit. Other 'stakeholders' in this equation such as employees, vendors, the host nation, the host economy are all 'stakeholders' in marketing name only. They matter to the PR department but nowhere else.
Our Finite Planet and the Myth of Infinite Growth...
If a company is growing, it will hire more people as long as the marginal productivity of the new employee is higher than their compensation. Ok, Econ 101. However, once growth inevitably stalls, any 'excess' must be shed immediately, since the only way to increase profits in a zero-growth world, is to reduce costs. That's what every corporation has been doing for six years straight - cutting costs. Worse yet, while slowing growth is inevitable in any cycle, it's the corporate cost cutting that ironically has caused top line growth to stall.
Corporations in aggregate cannibalized their own end markets.
This is neither fraud nor gimmick, this is the systematic shifting of income from labour to capital via labour substitution. No fraud necessary.
Sadly, this false narrative that these profits are based upon 'accounting gimmicks' is equally bogus. Corporations merely responded to their inherent incentives to maximize earnings per share by any means possible. And, in a near-zero growth environment, they went about it by the only means possible - cost cutting, outsourcing, financial leverage, stock buybacks etc. Essentially, they shifted income from labour to capital. No fraud necessary.
The doubling in U.S. debt since 2007, went straight to corporate profits
Profits, Wages, and GDP indexed to '100' in 1969. Guess which is which:
Self-cannibalization was baked into corporate DNA
This problem of corporate incentives to maximize profit growth by all means possible - culminating in cannibalization of the economy, was always waiting to happen. It was masked by the relatively strong(er) productivity and economic growth of past decades. Only when the entire model stopped working aka. in 2008, did the cannibalization mode go into full overdrive. Previously it was just in second gear, working away in the background and obscured by real economic growth.
Remember the axiom above, job growth occurs when marginal productivity > wages? Well, in reality of course that equation defines the MAXIMUM wage that will be paid, certainly not the minimum wage. The minimum point for wages at any skill level is dictated by the labour market and the ability of employers to swap out workers like widgets, in exchange for Third World slaves or 0% -financed automation. In a world consisting of unlimited supplies of cheap labour and capital, the floor for wages is the limit approaching $0, or should I say $2.50 per day, which is what half of the world's population lives on (Marginal Wage = Marginal Cost).
And therefore of course, Central Banks via 0% interest rates, financed the automation of untold thousands of jobs. They provided the "free" capital for corporate job elimination.
As I was saying, the productivity of labour is the maximum wage, by no means the minimum:
Aggregate wages versus productivity:
And a gold standard would not have prevented Third World convergence. All it would have done is forced wages lower sooner, in order to mitigate gold outflow i.e. forced trade competitiveness. Only barriers to trade with Mercantilist nations will prevent Third World convergence. No sane country should attempt to compete with $.80 per hour and zero pollution control.
