Desert Exposure May 2014 Editor's Notebook


Going for Gold
From miners' haven to gallery, the Hearst Church in Pinos Altos

Unwelcome Guest
The invasive salt cedar, or tamarisk, hogs our scarce water supplies

Cold Case
Former Sheriff Bill Cavaliere is solving the mysteries of Apacheria

The Catfish's Meow
New Mexico's abundant catfish, fun to catchand delicious to eat

More Sounds of Silver City
Meet more of the people behind the performances

Columns and Departments

Editor's Note
Desert Diary
Southwest Gardener
Henry Lightcap's Journal
100 Hikes
The Starry Dome
Talking Horses
Ramblin' Outdoors
Guides to Go
Continental Divide

Special Sections

40 Days & 40 Nights
The To-Do List

Red or Green

River Ranch Market
Dining Guide
Table Talk

Arts Exposure

Arts Scene
Gallery Guide

Body, Mind
& Spirit

Making Adjustments

About the cover




Greed, Inc.

Corporate profits are at record highs, while wages slump
and unemployment lingers.


As New Mexico goes whoring after Tesla, let's keep this potential jobs bonanza in perspective, understanding the nature of the modern corporation. Sure, Tesla Motors may be different, given its electric-car do-gooderism and "visionary" CEO, Elon Musk, who's also using his PayPal payout to fund SpaceX. But Tesla is still a publicly traded company, listed on NASDAQ, responsible to its shareholders.

We like to put a halo on certain companies, especially technology innovators like Apple or Google and now Tesla. But even Apple, after all, builds its products in what are little better than sweat shops in China; it then buys its own iPhones through an Irish subsidiary and resells them to itself to escape US taxes on $64 billion in revenues. Google dodges even some Irish taxes by routing nearly $11 billion through the Netherlands. While Tesla's jobs would be welcome (though they'd inevitably go to northern New Mexico, bypassing our job-hungry swath of the state), let's not fool ourselves into thinking Tesla is looking out for anybody but itself.


Here's the irony of corporate America in the early 21st century. The US Supreme Court is pondering whether companies such as Hobby Lobby and Conestoga Wood Specialties (both orivately held) can have religious freedoms that trump the rights of their employees. It's already held, in the Citizens United ruling on election spending, that corporations have free speech rights under the First Amendment.

Even as the Court weighs whether corporations in effect have souls, two top automakers have been revealed as utterly soulless. In March, Toyota Motor Corp. agreed to pay a $1.2-billion fine to settle a four-year federal criminal investigation into whether it properly reported safety complaints about the sudden acceleration of its vehicles. "Toyota put sales over safety and profit over principle," said George Venizelos, assistant director of the FBI. "The disregard Toyota had for the safety of the public was outrageous. Not only did Toyota fail to recall cars with problem parts, they continued to manufacture new cars with the same parts they knew were deadly."

Meanwhile, 13 deaths are linked to faulty ignition switches in General Motors vehicles. Though GM has belatedly recalled 2.6 million vehicles, it knew about the problem in 2005 and decided against a fix as too costly — in dollars, that is, as apparently life was cheap for GM executives in those pre-bankruptcy days.

These corporations have rights under the Constitution, it seems, but not responsibilities. We can't send Toyota or GM to jail, and no one is seriously contemplating sentencing their executives to hard time. Under current law, it would be difficult even to "claw back" any of the bonuses or sky-high compensation paid to executives who oversaw these outrages.


We forgive these lapses, however, because corporations are "job creators" — aren't they? Actually, it would be more accurate to think of corporations are "CEO bonus creators." The US economic recovery — from a recession chiefly triggered by the irresponsibility of companies in the financial sector — has lagged in large part due to companies' reluctance to hire. They have increased "productivity" — and hence profits — by squeezing more out of a diminished number of employees, who in turn are too afraid to complain or unionize lest they join their former peers in the unemployment line.

Given the softness of the recovery, it may be surprising to learn that US corporate profits recently reached their highest level in 85 years. Employee compensation, on the other hand, is at its lowest point in 65 years.

The picture for corporations is actually even better than it seems. Their $2.1 trillion in pre-tax profits, representing 12.5% of the total economy, tied the record percentage set in 1942. But the effective corporate tax rate that year was nearly 55%, compared to less than 20% last year — a figure corporations and the politicians in their pockets whine about incessantly. So after-tax profits in 2013 reached 10% of GDP, a whopping $1.7 trillion.

But companies sure haven't been sharing that largesse with their employees. Total wages and salaries, meanwhile, managed to hit just $7.1 trillion, or 42.5% of the total economy. That's the lowest figure, according to the Commerce Department, of any year previously measured.

Comparing 2013 with 2006, the last full year before the recession began, corporate profits are up 28%. Thanks to a 21% decline in the effective corporate tax rate, however, net after-tax profits were up even more compared to pre-recession levels — 36%. Workers haven't fared as well: Total employee compensation, even including benefits such as health insurance, has increased only 5% since 2006 — less than the 7% growth in the working-age population over that span.


Anyone who's worked in a big company, especially with any sort of middle-management responsibility, knows the game that's being played. When I was an editor at a newspaper owned by Knight-Ridder, the nation's second-biggest newspaper chain, we labored under an iron rule limiting "FTEs" — Full-Time Equivalents, as in employees or fractions thereof. But even this tight-fisted reign wasn't Scrooge-like enough for some big investors in the company: After I left, Knight-Ridder self-destructed, taking with it what was nonetheless a deserved reputation for quality journalism.

At Microsoft, my next stop on the corporate merry-go-round, managers had to rank their staff on a bell curve, with those graded worst getting minimal raises and one foot out the door. Never mind that I hadn't hired any clinkers; somebody had to be rated "D" or "F," no matter how good their performance. (It will come as no surprise to Microsoft-haters that it, too, participates in tax-avoidance shenanigans, according to a recent Wired report, routing $6.3 billion through a Puerto Rican subsidiary.)

I'm not talking about small businesses here, who face as uneven a playing field in competing with corporate giants as those companies' employees do in gaining their share of profits. The problem is the "titans of industry" and the influence they wield, through increasingly unshackled campaign contributions, in our political life, not to mention our economy. A new Gilded Age is upon us, presided over by a plutocracy heedless of the concerns of the "FTEs" who provide their labor.

The real irony is that we have let this happen so swiftly after such a painful lesson in the perils of unbridled capitalism. Somehow, rather than crawling out of the debris of the recession clamoring for reform (and perhaps tar-and-feathering a few financial executives), we decided that government is the problem — rather than representing the only check on corporate irresponsibility and greed. We've hailed the "job creators," failing to recognize that multinational corporations are more accurately job destroyers.



David A. Fryxell is editor of Desert Exposure.





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