NY Times: Industries Find Surging Profits in Deeper Cuts

Last week, Harley reported a $71 million profit in the second quarter, more than triple what it earned a year ago.

This seeming contradiction — falling sales and rising profits — is one reason the mood on Wall Street is so much more buoyant than in households, where pessimism runs deep and joblessness shows few signs of easing.

Many companies are focusing on cost-cutting to keep profits growing, but the benefits are mostly going to shareholders instead of the broader economy, as management conserves cash rather than bolstering hiring and production.

Here. The situation seems contradictory in the static world in which world the author lives. He doesn’t understand how dynamic business is and how innovative businesspeople are. He also insists of pitting one group, shareholders, against another, workers.  A Marxist through and through.  The author’s misunderstanding in the next paragraph is that of separating benefits to shareholders as opposed to benefits to the broader economy.   

Businesspeople will hire employees when the revenues they hope to generate exceeds the total cost of employing those workers.  Businesspeople need to manage resources to the best of their ability.  They need to offer an attractive value proposition to the marketplace to entice potential customers. 

The savings corporations build up contributes to the stock of capital that can be invested, and right now the investment opportunities are limited.  Hence the increase in cash.


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