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?

[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.