Capitalism in Action

[Imploding Turtle]

TL;DR: American Airlines gave their employees a pay rise so Wall Streat threw their toys out of the pram and tanked their stock price because apparently it's unfair that labour gets a pay rise when that money could go to shareholders instead.

http://www.latimes.com/business/la-fi-a ... story.html" onclick="window.open(this.href);return false;

[OffTheBar]

You write that as though the stock dropping is some kind of vindictive play, not the rational reaction to a surprise downside shock to future potential profitability/dividends.

[Burnley Ace]

Do you mean investors sold their shares because they can get a better return elsewhere? What difference does the share price make to customer service or how much profit the company makes? It could be a good PR move as customers like yourself will obviously chose to fly with AA because they pay well irrespective of the actual quality of service

[Imploding Turtle]

I did. Throwing their toys out of the pram is the rational reaction, and that's what i'm mocking.

[South West Claret.]

Know what your saying IT but that's just how the stock market works and share prices move up or down on news.

[Corky]

Can't be that much of a surprise. Haven't they been negotiating for 2 years.

[Burnley Ace]

Do you throw your toys out when you change energy supplier because you can get a better deal elsewhere?

[Burnley Ace]

I did. Throwing their toys out of the pram is the rational reaction, and that's what i'm mocking.

What is the rational reaction when you find out you can get a better return on your money elsewhere?

[Imploding Turtle]

What is the rational reaction when you find out you can get a better return on your money elsewhere?

That's my point. This is how capitalism keeps wages down. Thanks to capitalism the rational reaction of the capital owners to news that companies they're invested in is increasing wages to employees instead fo giving it to the investors is to flip out, sell shares, and invest in companies that won't treat their employees quite as well.

[Damo]

Idiot

[Burnley Ace]

What difference does it make to the employees if the share price goes up or down? Perhaps rather than go for a pay rise the Union should have negotiated a stock option or a performance related package.

[Imploding Turtle]

What difference does it make to the employees if the share price goes up or down? Perhaps rather than go for a pay rise the Union should have negotiated a stock option or a performance related package.

Depends on why the price is going up or down. If the share price is going up because the directors have decided to pay shareholders instead of giving employees a pay rise then i'd think there's a pretty big difference to the employees than if the share prce went down because they got a pay rise.

[Paul Waine]

That's my point. This is how capitalism keeps wages down. Thanks to capitalism the rational reaction of the capital owners to news that companies they're invested in is increasing wages to employees instead fo giving it to the investors is to flip out, sell shares, and invest in companies that won't treat their employees quite as well.

Hi IT, sorry, you are just demonstrating that you don't understand.

All investors want a "happy and productive" workforce. They don't want labour disputes or anything else that damages the prospects of the companies they have invested in. They leave it to Board of Directors to run the company successfully. It appears - based on LA Times report - that AA's workforce have been given a payrise outside the agreed contract period. There's no reason why the investors would have any reservations/objections to this. But, like all unforeseen cost increases increases in payroll costs impacts on the company's profitability - and expectations of future profitability ("free cash flow" if you understand the financial sector) is what sets share prices.

It may be that AA can demonstrate that increased labour costs does result in "happier and more productive" workforce and so this increases profits and the share price rises again.

[Vino blanco]

Are you a bit of a leftie, Turtle?

[Imploding Turtle]

Hi IT, sorry, you are just demonstrating that you don't understand.

All investors want a "happy and productive" workforce. They don't want labour disputes or anything else that damages the prospects of the companies they have invested in. They leave it to Board of Directors to run the company successfully. It appears - based on LA Times report - that AA's workforce have been given a payrise outside the agreed contract period. There's no reason why the investors would have any reservations/objections to this. But, like all unforeseen cost increases increases in payroll costs impacts on the company's profitability - and expectations of future profitability ("free cash flow" if you understand the financial sector) is what sets share prices.

It may be that AA can demonstrate that increased labour costs does result in "happier and more productive" workforce and so this increases profits and the share price rises again.

No they don't Investors, generally speaking, are only interested in a return. And companies are primarily interested in keeping shareholders happy. Sometimes that primary concern means throwing employees a bone that keeps them sweet, but it's only the bare minimum they dare give them.

AA stepped out of line as far as their investors are concerned when they gave their employees this pay rise. If that wasn't true then it wouldn't have had a negative effect on the price of its stock. If investors thought this was a good thing and that it avoided an imminent labour dispute, and all the consequences of that, then it would have had a prositive effect on stock prices.

Of course all investors want a happy and productive workforce, but that's nto their primary concern. If it was then they wouldn't have kicked off when AA gave the workforce more reason to be happy and productive. I understand more than you think, thanks.

[Imploding Turtle]

Are you a bit of a leftie, Turtle?

No. I'm far-right. Why do you have a foreign sounding username? Are you not proud of your own country's language? Traitor! Wait, are you not even from here? What gives you the right to post on a British forum?

[BigChaCha]

That's my point. This is how capitalism keeps wages down

Can you please explain then why the worlds most capitalist countries have the highest paid work forces on the planet then?

[Paul Waine]

Can you please explain then why the worlds most capitalist countries have the highest paid work forces on the planet then?

Great question - and true. (Though in some ways, when you get to know it, USA is not always the bastion of "unfettered" capitalism).

IT, have you thought of this one?

[Imploding Turtle]

Can you please explain then why the worlds most capitalist countries have the highest paid work forces on the planet then?

By exploiting the countries with the lowest.

[LoveCurryPies]

If Communism works, why such poverty, corruption and abuse of power in China, Russia, North Korea etc?

[Imploding Turtle]

If Communism works, why such poverty, corruption and abuse of power in China, Russia, North Korea etc?

Who says Communism works?

[ClaretMoffitt]

No they don't Investors, generally speaking, are only interested in a return. And companies are primarily interested in keeping shareholders happy. Sometimes that primary concern means throwing employees a bone that keeps them sweet, but it's only the bare minimum they dare give them.

AA stepped out of line as far as their investors are concerned when they gave their employees this pay rise. If that wasn't true then it wouldn't have had a negative effect on the price of its stock. If investors thought this was a good thing and that it avoided an imminent labour dispute, and all the consequences of that, then it would have had a prositive effect on stock prices.

Of course all investors want a happy and productive workforce, but that's nto their primary concern. If it was then they wouldn't have kicked off when AA gave the workforce more reason to be happy and productive. I understand more than you think, thanks.

I'm with IT on this one. The idea that (most) investors give two shoots of a hoot about morale is naive at best. They are interested in return, that's all. The investors will have saw the workers in question as lower priority to their return. They would not have been bothered if those workers went on being low morale if they had been paid a large divided in place of those worker raises one bit.

It definitely encourages companies to keep wages down in order to maximise return for shareholders. Though that isn't to suggest this isn't the norm simply because it is highlighted; most companies will put the interests of their investors above their labour force. It's just the way it is, one investor pulling their shares does more damage than dozens of staff leaving (relative to company size).

[Caernarfon_Claret]

Capitalism still owes it's success to The Slave Trade and as far as I know full reperations have not been paid.
The institutions that are the cornerstone of Capitalism were established off the back of and would not have survived without the slave trade. Insurance industry, banking and other financial and commercial sectors all profitted from the free labour and that allowed shareholders to reinvest.

Communism only ever worked in a book.
Capitalism works fine as long as you don't have a conscience and are happy with injustice and exploitation.

[bluelabrador16]

Worth a watch:

Meet Goldman Sachs, the Vampire Squid

"We all know Goldman Sachs is the very embodiment of evil…or do we? What is Goldman Sachs? What does it do? Where did it come from and where is it going, and is there anything that can be done to stop it? Buckle in for this edition of The Corbett Report where James dares to take on the vampire squid itself."

https://www.corbettreport.com/episode-3 ... ire-squid/" onclick="window.open(this.href);return false;

or

https://www.youtube.com/watch?v=FHNAZMIcFNg" onclick="window.open(this.href);return false;

Enjoy!

[Sidney1st]

I didn't realise Capitalism was a trigger word for bluelab.

[Burnley Ace]

They might have also sold their shares because profits have fallen by 67%

[If it be your will]

.

[Paul Waine]

I'm with IT on this one. The idea that (most) investors give two shoots of a hoot about morale is naive at best. They are interested in return, that's all. The investors will have saw the workers in question as lower priority to their return. They would not have been bothered if those workers went on being low morale if they had been paid a large divided in place of those worker raises one bit.

It definitely encourages companies to keep wages down in order to maximise return for shareholders. Though that isn't to suggest this isn't the norm simply because it is highlighted; most companies will put the interests of their investors above their labour force. It's just the way it is, one investor pulling their shares does more damage than dozens of staff leaving (relative to company size).

Hi ClaretMoffit, what do you know about CalPERS, California Public Employees Retirement System? Or Ontario Teachers Pension Plan. The first has investments of over US$ 300bn. The other has around C$175 bn (or possibly US$). These are two very big investors - and not just in USA/Canada.

Are you saying that these investors want the companies they invest in to keep wages down?

And, what do you think about Goldman Sachs (yes, I see another poster has named them) and other investment banks, do they try to keep down the wages of their staff?

Philip Green certainly but the interests of himself and his wife (the shareholders) before the interests of BHS workforce and pensioners. But, it's not the rule that business always aim to pay the least they can get away with to their workforce and it's not the rule that the shareholders (and investment company) want to invest in companies where the workforce suffers from low morale. A happy workforce will always be more productive. A happy workforce will always perform better and the firms products will always be higher quality. Think about the performance of Jaguar when it was part of British Leyland? And think about the performance of Jaguar (and Land Rover) as part of Tata.

[yTib]

love damo's contribution to this thread.

basically, click on a thread that is so far above one's head it might as well be in polish, then feel so embarrassed that you don't understand the content that you insult then leave.

haha.

as far as i'm concerned the capital model failed in 2008 when the banks had to be propped up.

the capitalist ideal always depended on survival of the fittest. then it ran out of breath.

i say smaller, local banks for a society not dependent on massive, fallible institutions.

[Paul Waine]

You are aware that Sweden, Denmark and Norway are all in the top 5 countries in the world for median income?
https://en.wikipedia.org/wiki/Median_income" onclick="window.open(this.href);return false;

And they're hardly hotbeds of capitalism, they also have the highest rates of tax and redistribution:
https://en.wikipedia.org/wiki/List_of_c ... _tax_rates" onclick="window.open(this.href);return false;

It's weird how people seem to believe things that simply aren't the case.

Hi if it be your will, great point. Yes, Sweden, Denmark and Norway achieve high living standards and politics is, generally, "left of centre." Their populations are small - and there is a "togetherness" and "spirit of co-operation" across the greater part of each of these nations. Netherlands also has a lot of these strengths, though more recently immigration pressures have resulted in some divisions.

But, it would be wrong to think that Sweden, Denmark and Norway don't compete in the "capitalist world." Norway's Sovereign Wealth Fund is reported to be the largest in the world at around US$ 1 trillion. Funds, of course, were built on Norway's oil wealth - the which is the foundation of most major SWFs, all held by countries with relatively small populations.

[ClaretMoffitt]

Hi ClaretMoffit, what do you know about CalPERS, California Public Employees Retirement System? Or Ontario Teachers Pension Plan. The first has investments of over US$ 300bn. The other has around C$175 bn (or possibly US$). These are two very big investors - and not just in USA/Canada.

Are you saying that these investors want the companies they invest in to keep wages down?

And, what do you think about Goldman Sachs (yes, I see another poster has named them) and other investment banks, do they try to keep down the wages of their staff?

Philip Green certainly but the interests of himself and his wife (the shareholders) before the interests of BHS workforce and pensioners. But, it's not the rule that business always aim to pay the least they can get away with to their workforce and it's not the rule that the shareholders (and investment company) want to invest in companies where the workforce suffers from low morale. A happy workforce will always be more productive. A happy workforce will always perform better and the firms products will always be higher quality. Think about the performance of Jaguar when it was part of British Leyland? And think about the performance of Jaguar (and Land Rover) as part of Tata.

I certainly don't deny what you say, long term a business will be more productive if they pay competitively. Staff retention goes up, morale goes up, inefficiency goes down and progression and commitment generally raises too as people aren't constantly thinking about an exit.

But the truth is most investors get blood thirsty with their money and aren't interested in slower long term growth if it will cost them money they would otherwise had today. They will simply take their money and put it elsewhere, until that business starts to tank, then take their money and move it again. They are vampires really.

[If it be your will]

.

[ClaretMoffitt]

You are right. I'm just here to qualify PaulWaine's claim that falling stock markets are bad for our pension funds suggesting, therefore, we should all celebrate buoyant stock markets.

https://www.ons.gov.uk/economy/investme ... 2015-09-02" onclick="window.open(this.href);return false;

Can't speak for foreign stock markets, but only 3% of shares of UK quoted companies are owned by pension funds. (How much do you think your personal, private pension fund contributes to that 3%, claretmoffit?)

Dont know I don't have one, don't earn enough. I live month to month really haha.

[bluelabrador16]

Paul Waine

"...And, what do you think about Goldman Sachs .... and other investment banks, do they try to keep down the wages of their staff? ..."

Not for this lady:

"....The banker who stitched it together, Oxford-educated Antigone Loudiadis, was reportedly paid up to $12m in the year of the deal.
Goldman Sachs is said to have made as much as $500m from the transactions known as “swaps”. It denies that figure but declines to say what the correct one is.

Greece’s membership of the euro gave it access to billions of easy credit which it was then incapable of paying back, leading to its current crisis. Lenders took its euro membership as a stamp of creditworthiness, but the true state of its economy was far less healthy.

Under Ms Loudiadis’s guidance, Goldman swapped debt issued by Greece in dollars and yen for euros which were priced at a historical exchange rate that made the debt look smaller than it actually was. The swaps reportedly made about 2 per cent of Greece’s debt disappear from its national accounts....."

Greek debt crisis: Goldman Sachs could be sued for helping hide debts when it joined euro

http://www.independent.co.uk/news/world ... 81926.html" onclick="window.open(this.href);return false;

Aside, this didn't help matters:

"..In November 1999, President Bill Clinton publicly declared "the Glass–Steagall law is no longer appropriate".

[Hipper]

But the truth is most investors get blood thirsty with their money and aren't interested in slower long term growth if it will cost them money they would otherwise had today. They will simply take their money and put it elsewhere, until that business starts to tank, then take their money and move it again. They are vampires really.

Is that really true? I'm sure applies to 'some' investors but 'most'? I would have thought most investors want a steady long term income.

[Paul Waine]

Not for this lady:

Aside, this didn't help matters:

"..In November 1999, President Bill Clinton publicly declared "the Glass–Steagall law is no longer appropriate".

Interesting to mention Goldman Sach's Greek "euro swap" an egregious deal if ever there was one. Wrong for GS to enter into such a deal for the purposes, wrong for Greece to enter into such a deal and wrong for the EU to allow Greece to enter into such a deal so that they (i.e. EU) could fool someone that the Euro was the way forward for the EU and that Greece was a great candidate member of the Eurozone. Should we place most of the blame with GS or does most lie with the politicians? I wonder what the Greek people think of the deal?

Glass-Steagall had no relevance for GS. At that time GS was (only) an investment bank. Glass-Steagall was the 1930s law that stopped commercial banks also undertaking investment banking activities. Yes, dropping that law might have been (a small) contributor to the sub-prime mortgage crisis.

[dsr]

Is Aeroflot a better model of a non-capitalist airline?

[Lancasterclaret]

Whatever the faults of capitalism (and there are many), its currently the best system out there when allied to governments who have an interest in making sure the generated wealth gets shared around as much as possible.

[RMutt]

Which governments are they at the moment Lancasterclaret?

[Imploding Turtle]

Whatever the faults of capitalism (and there are many), its currently the best system out there when allied to governments who have an interest in making sure the generated wealth gets shared around as much as possible.

Depends on your perspective. From our point of view certainly, it's pretty good compared to some others. But from the point of view of someone from a country which we exploit, either through plundering their resources or paying them pennies to make our clothes of electronics capitalism is a system through which the west oppresses them. Not to mention the nations disproportionately affected by climate change, which is almost entirely a by-product of western capitalism. I wonder what they think of it.

And capitalism here in the UK isn't exactly rosey. We still have companies exploiting the proles. The government had to rebrand the minimum wage as the Living Wage™ because they didn't have the poliitcal will to increase the minimum wage to meet the living wage. We still have people in full time employment that can't afford to feed their families without government assistance which is effectively the government subsidising poorly paying companies. And god forbid should we increase tax on these corporations to pay for these subsidies.

Capitalism needs socialism otherwise it becomes just as bad as Communism, but instead of the government being the oppressors it's the corporations that's keeping us under the thumb. The people need just as much protection from the corporations as we do from government, otherwise we become something like America, or China, where if you **** with a corporation's profitability you're essentially ******* with the state because one controls the other.

[Rowls]

Capitalism in action:

[Rowls]

Here's an example of an alternative system in action.

This is an imagine from China's "Great Leap Forward" under Communism.



This giant "leap" forward killed around 55 million people from starvation from the resulting famines.

[Rowls]

Here's another image from China. But this time it's a contemporary image and shows Capitalism in Action.

This is Hangzhou. Many of you won't have heard of Hangzhou but it's a city of more than 8 million people.



Looks nice doesn't it?

[If it be your will]

.

[Damo]

I prefer the socialist republic of imploding Charlie if I'm honest

[Rowls]

So, nearly 200 years of development and learning, under various economic systems, and still we have over half the world's population living in poverty. None of the systems come out of this with much credit, do they? What a depressing graph this is.
We must do better.

You're mis-reading it.

Capitalism only became the overriding system of governance in the 1990s. Since then we've seen massive reductions in poverty. Literally billions of people being lifted from poverty - all because of capitalism.

The graph does not show "over half the world's population living in poverty".

It shows that we are on course to come close to completely eradicating global poverty in another 20-30 years. Personally I believe that poverty in Africa will prove more trenchant as the continent in ingrained with Marxism.

But the graph remains one of the most positive things imaginable in the modern world. It is a beacon of hope and a testament to the power of Capitalism.

You need to take another look at it.

[Hipper]

Capitalism in action:

Compare to population increase: about 1 billion in 1800, and 7 billion now.

This illustrates that how you look at things can affect judgements. For example it is likely that 'more people now live in poverty then in 1800', but 'the percentage of population living in poverty is less'.

Of course the definition of poverty needs to be examined too. In the UK it seems to be a relative definition - 'a household is in relative poverty (also called relative low income) if its income is below 60% of the median household income'. Clearly that doesn't necessarily mean they are starving. The other way to define poverty, which seems more intuitive, is to state what is required to live a basic life (absolute poverty) - e.g. food, clothing, shelter.

This is an interesting graph (go about four fifths down the page) on our environmental impact of population increase AND industrialisation:

http://www.paulchefurka.ca/TF.html" onclick="window.open(this.href);return false;

[Imploding Turtle]

You're mis-reading it.

Capitalism only became the overriding system of governance in the 1990s. Since then we've seen massive reductions in poverty. Literally billions of people being lifted from poverty - all because of capitalism.

I think when you lie this brazenly we can all just ignore you. Your graph shows nothing of the sort since the 90s. It ends in the ******* 90s.

[Imploding Turtle]

Compare to population increase: about 1 billion in 1800, and 7 billion now.

This illustrates that how you look at things can affect judgements. For example it is likely that 'more people now live in poverty then in 1800', but 'the percentage of population living in poverty is less'.

Of course the definition of poverty needs to be examined too. In the UK it seems to be a relative definition - 'a household is in relative poverty (also called relative low income) if its income is below 60% of the median household income'. Clearly that doesn't necessarily mean they are starving. The other way to define poverty, which seems more intuitive, is to state what is required to live a basic life (absolute poverty) - e.g. food, clothing, shelter.

This is an interesting graph (go about four fifths down the page) on our environmental impact of population increase AND industrialisation:

http://www.paulchefurka.ca/TF.html" onclick="window.open(this.href);return false;

The graph is specifically about absolute poverty. (y-axis)

[If it be your will]

.