What's the Source of the Astounding 50% Boost in Corporate Profits?

One of the most extraordinary economic marvels of the past decade is the astounding 50% leap in corporate profits , from $2.4 trillion (pre-tax) pre-pandemic lockdown to $3.6 trillion (pre-tax) in the years since the lockdown ended.

As shockingly heretical as it sounds, the interests of corporate America often diverge from the interests of the citizenry, overall economy and the nation. For example, the wholesale gutting of the US industrial base in the mad rush to lower costs and quality by shipping entire supply chains to China.

As I’ve often pointed out, the meagre savings that trickled down to the consumer were more than offset by the collapse of quality and durability in the globalized goods that now line the shelves of every retailer in the US.

The reduction of the quality of goods and services, a.k.a. crapification, is a key source of soaring corporate profits. As the unhappy buyer of three replacement appliances this year alone, all replacements for failed name-brand appliances that lasted 7 years or less–I can attest that crapification / planned obsolescence is a core source of higher profits.

Design the product to fail, or default to the lowest cost components, i.e. failure by default, and consumers are forced to replace appliances every few years that once routinely lasted decades.This conveyor belt of products to the Landfill is highly profitable.

Lastly, there’s the immiseration of services, making standard service so miserable that consumers are forced to either endure wretched, incompetent, unreliable service, or pay extra for a “premium” service which is actually of poorer quality than the old standard of service.

Also those increased profits are a result of concentration of business sectors into fewer and fewer companies.

Business concentration and profit margins have increased across most industries in the United States over the past 20 years.

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His math skills need more development.

50% over last year does not equate to the last 20 years of growth. Remember 2008?

The rest on China and factories is outdated. Which explains the 50% when he can’t explain.

there’s the immiseration of services …

concentration of business sectors into fewer and fewer companies …

I’ve seen this story before. Oh, yeah. In a movie theater.

Once again, I’m off to Disney - entertainment for kids, food for thought for adults - and my son’s favorite movie of his pre-teen years. So much so that it had to be the theme for his 8th or 9th birthday party - which really became a watch party for the movie on DVD.

Business fully consolidated into a single company. The earth covered in trash from obsolete junk. AI and robots handling pretty much everything.

Wall-e

Our little ones might laugh at the antics of this anthropomorphic robot, but what are the lessons to be learned by adults? Is that future really just the imagination of a few very free thinkers, or is it among the actual possibilities for us?

Wall-e is GREAT and important, and so good on your youngster for picking a jewel to love.

I found the whaleblubber bodies conveyed everywhere on recliner beds while constantly sipping glop a stunningly powerful warning vision. Interestingly, so do children.

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That youngster is now a full grown man. And his love was a passing fad, although I suspect some of the lessons of the movie have managed to weasel their way into his thinking. And it did trigger a bit of interest in Barbra’s version of Hello, Dolly. So it got a bit of cultural history into him. (My late wife enjoyed Wall-e as well, but mainly for those Hello, Dolly flashbacks.)

But what do you think? Is that vision of our future simply a fantasy, or is it something that is actually possible as an end result of putting corporate profits ahead of everything else?

–Peter

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I think Wall-E is a superb fable, and nothing close to a possible human future.

Once (if ever, but I think we get there) we figure out small scale brilliantly contained fusion power, a whole lot becomes possible, but I doubt humans ever fall in love with outer space as a place to live.

Earth is our home, at least for a long time of cultural and possibly biological and cyborgian evolution.

The most wonderful aspect of Wall-E was not the dystopia nor the sci-fi, nor even the moral, but rather Wall-E’s basic primordial joy in life as when he endlessly watched the scene from Hello Dolly or flew in an amorous space dance with Eva.

david fb

The Association of Home Appliance Manufacturers, a trade group, was a bit more optimistic when it estimated the average useful life span of various appliances in 2019, according to Chris Doscher, director of communications, via email. Those estimates include:

Gas range: 14.2 years.

Electric range: 11.6 years.

Top-freezer refrigerator: 14 years.

Side-by-side refrigerator: 11.1 years.

Dryer: 13.4 years.

Top-load washer: 11.2 years.

Front-load washer: 9.1 years.

Dishwasher: 12 years.

My acquaintances experiences with appliance is similar to above.
The lifespan of appliances during my parents era was much better. 25 years for a refrigerator and 20 years for a washing machine.
Auto manufacturers have been cheapening their engine for the past 20 years utilizing plaster rather than metal parts. Plastic parts are subjected to hot coolants running thru them and of course exposed to constant stress of the heat from the engine &some parts from stress from vacuum. Plastic is not as durable as metal. And plastic will eventually become brittle from the constant exposure to heat.In many cars the intake manifold is plastic. And timing belts were used in many vehicles rather than a timing chain because it cost less than a timing chain but is not as durable as a timing chain.

So why use plastic? duh, it’s much cheaper to make. Hey it just has to last the warranty period. Then it is the consumer’s problem

And not mentioned by the author but my experience with over complicated design in current autos.
My 2 pet peeves are the 1) electric windows. I have never had a problem with a crank windows but have had window regulators go out. The first time 20 years I had a dealer fix it. $500. Then I learn how to take door panels off and replace the regulator motor myself saving $400.
2) the vent controller in a car. In olden days there was a stiff steel cable that controlled the vent. Usually any problem with the old style could be remedied by lubricating the cable. Now electronic actuators control the vents. And when it goes out it makes a periodic slapping noise in the dashboard driving the owner nuts. Luckily for me the part only cost $75 and I could go thru the glove compartment to replace it. It is my understanding that if one owns a certain vintage of GMC Yukon or Chevrolet Suburban the dashboard has to be torn apart to access the actuator costing $2 grand. ouch!

I think we have to recognize that computers–especially software offer unique growth potential.

If you decide to build a new automobile, you might spend years getting the equipment together to begin production.

If you have a good idea for new software, programmers can probably have a working prototype in a few months. Much faster. Much less investment. Easy to test preliminary versions and improve them.

This is very very different from manufacturing.

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Asking appliance manufacturers when to replace your appliances is about like asking a realtor “is now a good time to buy a house?”

My electric range is original to the condo, 1982. Replaced the bake element myself, maybe twenty years ago. But then, I hardly ever use it.

My fridge is about 17 years old. Replaced the 1982 model because it was making unhealthy noises.

Front load washer is also about 17. Does two loads per week. Replaced the pump motor myself a couple years ago.

Gas dryer, also does two loads per week, 27 years old. Never needed a repair.

Dishwasher, runs once a week, replaced the original 1982 machine in 2020.

Steve

What’s the Source of the Astounding 50% Boost in Corporate Profits?

Increasing returns!

When you sell physical products you have to manufacture them individually. When you sell software, you just make an additional copy. Wait, that’s old school! You just let the buyer download it over the air at no extra cost to you. That increases returns because it improves productivity much faster than you can with physical products.

There is data to prove it. The NASDAQ is often referred to as “tech heavy” which usually has lots of software. Compare NASDAQ vs. the S&P 500, no contest!

The Captain

o o o o o o o o

Note the date: July–August 1996

Our understanding of how markets and businesses operate was passed down to us more than a century ago by a handful of European economists—Alfred Marshall in England and a few of his contemporaries on the continent. It is an understanding based squarely upon the assumption of diminishing returns: products or companies that get ahead in a market eventually run into limitations, so that a predictable equilibrium of prices and market shares is reached. The theory was roughly valid for the bulk-processing, smokestack economy of Marshall’s day. And it still thrives in today’s economics textbooks. But steadily and continuously in this century, Western economies have undergone a transformation from bulk-material manufacturing to design and use of technology—from processing of resources to processing of information, from application of raw energy to application of ideas. As this shift has occurred, the underlying mechanisms that determine economic behavior have shifted from ones of diminishing to ones of increasing returns.

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And where does that leave Shiny-land, with it’s underfunding of education?

Steve

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Steve, the US is doing okay – certainly better than Europe or China. Don’t let your pessimism grow too large.

DB2

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Just think where the US could be, with it’s blessings of size, population, and resources, if policy was to improve everyone’s station in life, rather than only making the rich richer, and waiting for magic to improve anyone else’s life.

A few days ago, I posted an article about an investigation of higher education in the House that smacks of the thought police, and is aiming at education funding as it’s lever. Seems this has been a work in progress for some time. Funding for higher education has already been cut significantly over the last 40 years. I posted some data about how many college students use guaranteed student loans, and wondered, if they were priced out, and college was made the privilege of the spawn of the rich and connected, only. Imagine Shiny-land run by the likes of Bertie Wooster.

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My (recent experience)

Gas range: [14] 25+ years and counting
Electric range: [11] 25+ years and counting (oven only)
Side-by-side refrigerator: [11] 16 years, #2: 8 years, #3: 3+ so far
Dryer[13]: 24 years (didn’t actually fail, replaced with washer), 2 so far
Top-load washer[11]: 24 years, 2 so far
Dishwasher: [12] 4 years to fail, #2: 21+ years and counting
Not in list
Microwave: 25+ years so far
Gas furnace: 25+ years so far

6 of 8 lasted 24 years or more!

Never heard of plaster in engines :slight_smile:

Mike

Boy, they followed the crapification strategy to the MAX at Boeing.

intercst

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BIL MIT his few takes

We will never live in outer space with too much radiation
Fusion is an engineering problem but it can not be small scale it is too much energy.
The flip side of that we need so much energy from it small scale would make less sense. The engineering will be expensive.

As far as Wall-E goes children get to think of themselves as Wall-E cleaning up the world. Just like I thought of building the world with Lincoln Logs. Wall-E is an inspiration. The name is purposely close to “wallet”.

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In a video posted to the TikTok account RastaBuilds (@rastamanbuilds), a car technician, presumably the Rastaman himself, had a lot of fun pointing out all the problems with the plastic parts in a “fancy-schmancy” Dodge Charger.

Rastaman has built an impressive following across social media platforms with his honest and entertaining takes on all things automotive.

While a Dodge Charger was the unfortunate focus of the video, Rastaman made sure to mention that a lot of European brands use similar plastic components that cause high-pressure fuel leaks on a regular basis.

He pointed out that the fuel reel and fuel reel line are plastic, as are the intake manifold and the valve covers, which have a habit of splitting.

At this point, Rastaman gets on his self-proclaimed soapbox and gives his opinion on why all these parts are made of plastic.

“This is not designed for the long haul. This is not designed for problem-free or low ownership cost. It’s not designed for that,” Rastaman says in the video. “This is designed for low cost in manufacturing to maximize the profit margin.”

But, given that he makes a living fixing cars, he jokingly says at the end of the video, “This is the gift that keeps on giving.”

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Ayup. I used to have a Ford with a V6. On that engine, the water pump was located in the valley, between the cylinder banks, and it was driven by the timing chain. Nice, clean, compact, installation. Two problems with it:

1:when the pump fails, it costs a fortune to replace, because half the engine needs to be taken apart to get at it.

2: when the pump leaks, instead of leaving a puddle on the garage floor, telling you it’s leaking, the leaking coolant runs down the timing chain and dilutes the oil. If the leak isn’t caught in time, by noticing the falling level in the coolant reservoir, or the contaminated oil at an oil change, the oil dilution results in engine damage, so, instead of a $3,000 bill to replace the pump, you have a bill for about three times as much, for a new engine.

But the design makes for a clean, compact, installation for Ford’s benefit.

Steve

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Nothing new!

The Captain

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Being “plastic” doesn’t automatically make for an inferior part. There are many many types and qualities of plastics and some have amazing properties that make them superior to other materials
Lots of non-plastic parts in a car have a scheduled maintenance cycle that requires inspection and/or replacement at certain intervals.
One problem with plastics is that they tend to be difficult to inspect.

Mike

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