The Wall Street worldview, part 2

Having given more thought to my previous post describing Wall Street’s ambivalence toward Costco, I have a few more things to say.

As you may recall, Costco is a successful, growing business with a healthy stock price. But the New York Times reports that many Wall Street analysts ding the company for being too generous to its workers and customers, thus dragging down the profits that are the rightful property of the One Percent.

Here’s what Wall Street sees as too generous.

Costco’s average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam’s Club.

Hmm, $17 an hour. Assuming full-time status, that’s $680 per week. Times 52, that’s $35,360 per year.

Wall Street thinks that $35,000 is too damn much money to pay a worker. That’s the outrage that prompted Deutsche Bank analyst Bill Dreher to complain that “it’s better to be an employee… than a shareholder.”

Yeah, Bill, you just call up your millionaire clients and tell ’em they’d be better off with $35K. Jeebus.

As commenter “bmike” noted,

At some point, there will be no one left that has discretionary income to buy crap from other places that these ‘investors’ invest in.

Then what happens?

See, this is the whole problem with “supply-side economics” and the “job creator” myth so proudly promoted by financial geniuses like Bruce Lisman. We don’t have a “supply economy” — we have a “supply and demand economy.” The two sides need to balance out. If there’s no demand, it doesn’t matter how richly you reward the suppliers and “job creators” — economic activity will not increase. The corporations and wealthy people will simply hoard their wealth.

Which is precisely what has happened in recent years. Rich people own a historically high percentage of our total wealth and American corporations are sitting on huge quantities of cash, and yet our economy remains sluggish. That’s because, no matter how many breaks we give them, they won’t increase production until people are willing to buy more stuff.

And how much stuff can people buy if a salary of $35k/year is too generous?

In conservative ideology, “job creators” are viewed as wizards, or Gods. They must be appeased and richly rewarded. We must make sacrifices to earn their favor. But that’s not true: “job creators” are people, with human motivations. It doesn’t matter if the capital gains tax rate is 15% or 20% or even 50%; if businesspeople can make a profit in a growing economy full of prosperous consumers, they will create more jobs.

I don’t know why this concept is so difficult for the supposed wise men of Wall Street. Probably because their worldview is so radically confined by the parameters of their own lives.

A couple months ago, the nonpartisan Congressional Research Service published a detailed study that found no evidence to support the notion that cutting taxes on the wealthy stimulates economic growth. Indeed, the CRS concluded, the only outcome of tax cuts for the rich is that the rich get richer.

The report was withdrawn, apparently after the CRS was pressured by Congressional Republicans. They can’t handle the truth, any more than Wall Street “experts” can. Concentration of wealth at the top is not only inhumane, it’s also bad economics. Our economy is stronger when a lot of people can buy in. The success of Costco is just one small example of this self-evident truth.  

One thought on “The Wall Street worldview, part 2

  1. until people are ABLE to buy more stuff.


    If there’s no demand, economic activity will not increase. The corporations and wealthy people will simply hoard their wealth.

    Capitalism goes like this: When the rich people have control over every penny and 99.9999% of the world’s population is starving to death, then therich people win! Yay!

Leave a Reply

Your email address will not be published. Required fields are marked *