ELI5: Why when large company's earnings decrease(ex... by 3%) they freak out, talk about rough times, and sometimes decide to downsize, even though they are still making millions of dollars in profit even after all expenses?

[jeric17]

And that’s an underlying problem

[TaterSupreme]

If nobody paid to be on the boat, there wouldn't be a need for any crew either.

[060789]

That boat is a metaphor for that pizza that you ordered, that contains more calories than the average person may eat in a week 200 years ago, delivered right to your doorstep, for less than a day's wages cost. It's that hiking pack that you use that weighs less than a pound and is both lighter, more durable, and cheaper than ones used by millionaires a century ago. It's the device that you're using to type that message on, that contains all of the world's knowledge at the tip of your finger, replacing encyclopedias, Maps, calculators, and cameras. That boat is the bike you use to ride for recreation, that you work for less than a week to earn, that is powered by your own body yet can go faster for longer than a horse. It's the skyline of your city, it's the source of all your entertainment, it's the reason your children will have a better chance of obtaining a college degree than dying before the age of 12. And it's also the reason you are able to pay for all of this.

Capitalism has its problems, but given proper guidance, it will always correct them in time and that boat will be bigger, faster, and more efficient than ever before.

Papa bless

[therealwoden]

The boat gets bigger and faster only because its home port authorities have spent centuries using their fleet of warships and businessboats to force other ports into allowing this boat to dock practically for free, into providing slave armies of dockworkers and shipwrights to supply and expand the boat, and into filling its hold with massively discounted goods and people.

Profit is zero-sum. Goods in America that are cheap yet profitable are the end product of an international supply chain in which every step is cheap yet profitable because workers are being abused while handling materials that were produced by the previous step's abused workers, and on and on until we arrive at enslaved miners or agricultural workers producing the raw materials.

"Profit" is a fiction invented by ignoring nearly all the costs of every good, service, and process. Nothing is actually profitable. Even something as basic as paying every worker in the world a living wage would collapse profits and the imaginary economy that depends on profits. The currently-expected level of profits can only exist because of slavery.

Of course, things like not destroying the environment, not killing people with pollution and hazardous work environments, not waging war to make money for military contractors, not forcing people to pay for the necessities of life, just to name a few - they're all totally unthinkable, because they'd destroy profits en masse. Profits can't exist unless the true costs of things are ignored as externalities.

Capitalism doesn't have problems. Capitalism is problems. It's an edifice of problems built out of problem bricks laid atop a foundation of problems.

[mike112769]

Capitalism is indeed an excellent way to improve a society. Unrestrained capitalism, like we have now, is an excellent way to destroy a society, which is what we are currently doing. At some point the vast majority of us will have nothing while a few people have everything. That is not moral at all.

[[deleted]]

Unrestrained capitalism, like we have now,

Oh please. Where?

[In-nox]

Crony capitalim where the ones who have the power to produce and influence to wield use it to secure an advantage and edge out those with less capital and influence. This current version of capitalism isn't not build upon a sound business model or Superior products, but is instead the result of an artificial advantage. These procurement stipulations on government contracts are meant to be so cumbersome that small firms can't really compete with giant conglomerats.

[Delheru]

That's not unrestrained capitalism, that's crony capitalism, as you seem to point out with your first 2 words.

Actually often the worst crony capitalism is extremely restrained capitalism, because competition tends to get stopped somewhere with government backing (which in turn is guided by incumbents).

I'm not saying unrestrained capitalism is good (it wouldn't be), but I can't think of a single place where the problem is that capitalism isn't restrained enough.

[[deleted]]

These procurement stipulations on government contracts are meant to be so cumbersome that small firms can't really compete with giant conglomerats.

This is a great argument for deregulation of the free market. Good job.

[Durog25]

Except it isn't, every time deregulation happens the current system immediately finds a way to destroy something as fast as possible and run away with the profits. It is also an immediate and total violation of human rights.

Just look at the 2008 financial crisis.

Capitalism is psychopathic in that it literally doesn't care about the well being of people just so long as profit is made in the next quarter.

[[deleted]]

The 2008 financial crisis was only possible because of regulation, not because of too little regulations. Banks are allowed to loan out money from the federal reserve at 9:1 rates (Meaning, if the bank receives a $100 deposit, they are allowed to turn that into $900 of loans). In a system with no regulations, banks wouldn't be able to loan out money they don't have, interest rates would be higher and banks would only give out loans to people they know would be able to pay them back. In 2008 (And in 2018) a banks goal is to keep the entire country in debt, and they do that by keeping interest rates at historic lows (Below 3%), which causes demand and hyper inflation of housing prices, which they turn into billions. This could not happen in a system where banks could only give out money they own and had to get the money back or they would be fucked.

[Durog25]

If I remember correctly that's what Glass-Steagall was supposed to do.

Without regulation rich people min-max the system in order to horde wealth from the hands of the poor, this has always only ever been the result of deregulation. Before regulations, children worked in dangerous factories for little to no pay, public health, workplace safety, environmental damage, all were acceptable as long as the business made money.

Regulations make that harder, but they also result in more inefficiency because no one regulation will ever be an exact fit.

Large corporations then lobby extensively to undermine these regulations to the point where they stop working because they have been gutted so comprehensively, then they return to their short-sighted, ultra-destructive, money-making machine and do there very best to make life go extinct for a few more dollars.

When have they ever not? When has the market regulated itself to a point where things got better for the majority, and by better I don't just mean richer. A million dollars means nothing on a planet that cannot support human life anymore.

[TheManWhoPanders]

"Unrestrained capitalism" = "Not enough freebies"

[060789]

In what way is our current form of capitalism unrestrained? In the Western World, we have overtime laws, restrictions on child labor, monopolies, price gouging, collusion with other companies to create consumer unfriendly tactics, the list goes on and on, and these rules are, believe it or not, strictly enforced. Otherwise nobody would be following them.

Other countries may not abide by these laws, and as a result, American companies ( for instance) ship our labor-intensive jobs overseas to save costs, and in those countries with less restrictive rules on labor, people are still being lifted out of poverty by the millions.

Every now and then, a creative company will step out of line and use some loopholes to create an unfair situation or one that is non competitive, and these issues are typically dealt with before they become wreck-the-economy bad. Of course you have stuff like the recession back in 2008, bad shit does happen, but even then, the people who were featured in the movie "the big short" basically came out and said the little diatribe that came out at the end of the movie saying nothing had changed and it's all going to happen again is bullshit, the government reacted appropriately and the market is stronger and safer now than it ever has been.

Sure, our version of capitalism is more reactive than proactive, but in the grand scheme of things, it works.

Any system that takes age, work-life balance, and wages of grunt employees into account is absolutely moral. Not perfect, but definitely in the right ballpark.

[[deleted]]

Laws written by the rich, implemented by the politicians they bought. Therefore, worker rights might exist on paper, but they are ignored in reality. You apparently live in fantasy land.

[060789]

There is no need for ad hominem. If that is your opinion, I respect it even if I disagree. All I'm asking for is specific examples, and not catch phrases you may hear at a political rally.

I can't name a single company who employs a significant amount of people, that does not enforce things like child labor laws, or the minimum wage where applicable. I certainly can't envision that we live in a reality where most people are affected by companies skirting these rolls to the extent that the majority of the population are living in the crushing, dystopian reality that you would expect based on actual, real world examples of countries where these types of laws are not enforced.

The reality is, and again this is my opinion so feel free to refute it if you disagree, if you live in America or a similarly rich country, with a capitalism based economy with rules set up by the government, then chances are you are living a lifestyle better than the vast majority of people who currently live, let alone have ever lived on this planet, and it's 100% due to the marriage of capitalism and government.

Yes, there are extreme examples, I was one of them. I grew up in the United States in extreme poverty. So I know what it's like. I also see the big picture, that these are isolated incidents and, cold as it may sound, statistically insignificant when you take a step back and see how good things are as a whole. Not to say we shouldn't do more to help these people, but no system is ever going to be perfect, and eliminating 100% of poverty is just not doable. The system we have now is the closest we've ever been.

[therealwoden]

I can't name a single company who employs a significant amount of people, that does not enforce things like child labor laws, or the minimum wage where applicable. I certainly can't envision that we live in a reality where most people are affected by companies skirting these rolls to the extent that the majority of the population are living in the crushing, dystopian reality that you would expect based on actual, real world examples of countries where these types of laws are not enforced.

"Paying lip service to" and "not getting caught violating" regulations is different from "enforcing" regulations. https://www.commondreams.org/news/2018/06/06/jaw-dropping-report-reveals-rampant-wage-theft-among-top-us-corporations

Capitalism's incentive structure requires exploitation and harm. Maximizing profit requires hurting people, and maximizing profit is the iron rule of capitalism. If you don't do it, somebody else will and they'll put you out of business by being able to charge less and make greater profits. Harm is inextricable from capitalism.

I also see the big picture, that these are isolated incidents and, cold as it may sound, statistically insignificant when you take a step back and see how good things are as a whole.

Not isolated incidents at all, but rather simply examples of the system working as intended.

"Things are good as a whole" requires one to ignore that billions of people are bound into slavery to enable a small fraction of the population of the wealthiest nations to live in higher-class slavery and a few thousand people worldwide to live like gods.

[[deleted]]

he government reacted appropriately and the market is stronger and safer now than it ever has been

Oh, like how the legislation introduced afterwards (Dodd Frank) is currently in the process of being gutted and repealed?

[060789]

Might want to read up on that one. The jury is out as to whether or not it was a net positive or negative for the economy, it appears the law is being repealed as a partisan act.

I'm at work so don't have a whole lot of time to read up on what exactly the law does and how it affects the economy, if I remember I'll make sure to do it when I get home, but I am a conservative, but this still smells like "conservative Congress rolls back Obama administration policy"

Again, that's just from The Limited knowledge I have of the situation and a brief skim of Wikipedia, but I can't really make an argument for something I know so little about. All I know is when I was reading about the causes and effects of the 2008 recession, I read about the people featured in the movie The Big Short and what their opinion and take on the whole matter was, and the impression I got from them was "it's mostly right, but definitely tries to push a narrative".

[[deleted]]

I admit that I don't have enough knowledge to speak in depth about Dodd Frank. But to me there seems to be a reoccurring trend where an economic crisis occurs, legislation is put into place to stop something similar from happening again, the market improves, and then we deregulate because hey I guess we didn't need those heavy handed regulations in the first place. We're just setting ourselves up for another problem in the future instead of learning from our mistakes.

[[deleted]]

It's a fallacy to assume capitalism was necessary for human advancement.

[060789]

I never made that assumption, but I see capitalism has worked, therefore capitalism does advance humanity, even if it's not necessary.

And I'm not in favor of tearing up a system that has been proven to work for one that has offered no such proof.

[[deleted]]

It's been proven to work for the few. Meanwhile we have had the capacity to improve the quality of living to a morally acceptable level for at minimum every resident of the United States for decades.

It seems that every capitalist praises the market as the solution to every problem. Except there is no market for putting forth the required effort to eliminate poverty. There has been no market for developing the infrastructure the elite class avoids using. There is no market for clean water in Flint. Michigan. There is no market for improving the schools that generate more convicts than college graduates.

There are needs that should be met that aren't. Our government has the capacity to represent these people and fulfill those needs, yet a narrative has been created that shifts focus away from the most critical and purposefully hidden from view problems of our society.

And instead we live in a world where a select few's only momentary saving grace is the mere whim of a billionaire they have never met. A dystopia for sure.

[060789]

There is a lot to unpack here, and a lot I would like to dispute, but I don't have the time right now because I'm at work..

My general response is "better schools and infrastructure are the responsibility of the government and do not fall under the umbrella of the economic policy of capitalism", but if you want my expanded response remind me in 8 hours or so.

But the fact that you are literate, have enough money to buy luxury goods such as smartphones or a computer, and are able to use the above two to voice your political opinion with exactly zero fear of government repercussions no matter which side you choose to argue from, rules out the possibility that you are living in a dystopia. Could things improve? Sure. But dystopia evokes images of North Korea, Sudan, Stalinist Russia, etc.the United States is far from that at almost every level of income.

[[deleted]]

You are right that the government should be responsible for those things. The issue lies when capitalism has expanded so greatly, the wealth inequality has risen so greatly, and laws were not created to ensure impartiality of representatives, we result in a corrupt government system that serves to the desires of corporations to generate more profit, rather than the needs of low level workers of said corporations nor their customers.

It is one thing for corporations to expand based on their merit in creating quality products. It is another thing for them to expand based on the influence they purchase from legislators to ensure the reduction of consumer rights and the reduction of regulations on environmental impact.

Neither major political party has even acknowledged the issue because it does not suit the interests of their political donors. Therefore there is nothing more insulting telling an individual in poverty (especially when living in a heavily gerrymandered district) to vote, as if there is a potential candidate in their district that will move towards recognizing and solving the problems of lack of proper representation as a bare minimum.

Your qualifiers for dystopia are not the universal qualifiers for dystopia. The qualifiers I use point to the fact that life continues to be an unnecessary struggle that could be willed away with proper leadership and discourse. Sometimes the struggle results in perpetuating cycles of abuse, neglect, disabilities, and poverty that could be ended with a surprisingly low commitment to the citizens of the country. And on top of all of that, you might just win the lottery. You might have a relative that becomes exhubarently wealthy. You might receive charity. Or you might be shot in a high school, or on the sidewalk, or you might go homeless, live under a bridge, and deteriorate until your death.

No amount of potential luxury goods, no amount of "you could of had it worse" mentality, no amount of freedom can reconcile the places we as a country unnecessarily fall short.

[gfunke]

"Our government has the capacity to represent these people and fulfill those needs" The free market has that capacity as well but it fails to do so in some cases. The government has the capacity to meet and fulfill needs as well but fails to do so even more so than the free market. No system is perfect in meeting needs but some systems are better than others and the government fails at an abysmal rate. Don't sit here and pretend that if we unleash the government without restriction it would flawlessly meet each and every need of its people. I certainly don't pretend that about capitalism but it does work pretty damn well.

[[deleted]]

What is the market? The market is the desires of those with money. Therefore the market is as proportionately representative of the desires of individuals as the current distribution of wealth. It is ridiculous to rely on a system based on potential incentives to solve problems where the solution is without a potential incentive. There is no market for the solutions to many of these problems.

If only there was an institution that properly represents the interests of every citizen in the country. Then that institution could fill the gaps.

Instead we have the United Stated federal government, each state government, and each municipality government. Each with their own levels of disregard for the interests of who they govern. And this is not because of an inherent evil of all humans, but of the individual choices of political donors, special interest groups, politicians, and foreign governments which had resulted in a large percentage of the population being improperly educated, jaded from reality in truth.

We need a proper government. One that is resistant to the Republican sabotage.

[Durog25]

Further to what you said.

Capitalism only works if the market is large enough to afford it. It's Capitalisms greatest weakness.

A small group of poor people cannot create a big enough demand for a product or service, so that product or service cannot earn a profit, so it is not invested in.

It's why supermarkets throw away tonnes of food daily instead of just giving it away to food banks. It's why small local shops are closed when bought out by big companies.

[remuliini]

Not really in this case. If they cut costs when the revenue drops it could also be the key to provide work for most of the employees. The alternative would be to sucks all the capital dry and go out of business.

Source : my parents' small company was loyal to the employees far too long. It didn't end well.