Milking Honey During the Pandemic
There are so many ways to profit during a seemingly never-ending natural disaster, one that keeps folks glued to their residences and out of factories, offices and retail spaces. There are two most basic strategies as to how to make money with an existing company: One: “increase revenues, decrease costs.” Two: “buy low, sell high.” Add a global pandemic to the mix with savvy business leaders, and those who can do. Not so easy if you own movie theaters or concert/sports venues. Easier if you cater to those for whom a massive movement of people into a semipermanent or long-term basis back home represents an opportunity… or if you are a vulture capitalist.
If your factories are down, but you still have reams of cash left over from that huge corporate 2017 tax reduction or simply have managed cash flow well, and if you’ve been wondering how to install new automation and get rid of the people that automation is designed to replace… Cut staffs and workers… permanently. Done! Those costs are gone, the automated capital equipment (much of now powered with artificial intelligence) will be depreciated, and if revenues continue or can be grown, so much more sticks to the bottom line. And if you have had underperforming divisions or subsidiaries, what a good time simply to shut them down. For those few businesses where unions still have a stronghold on the private sector (under 7%), the pandemic can still enable layoffs. Hmmm, no wonder the stock market soared.
With office workers, those not replaced with more sophisticated computer systems and interactive analytics, as they learn to operate from home, you need less office space, your salaried employees have more time to work (no commute!), and health and safety risks plunge.
And if you increase automation, particularly in warehouses, even if you hire more people to effect elements like final mile delivery (smile if you believe in the gig economy), think of how online shopping might just appeal to people unable to leave their homes. Amazon’s Jeff Bezos knows.
For bored rich people, not tethered to 9 to 5 jobs, the range of upscale shopping moves from luxury goods, from chichi electric cars and new homes to add to the stable, to picking up distressed assets when their values hit bottom.
Oxfam (a non-governmental organization) investigated these wealth-driving anomalies in a report entitled The Inequality Virus, reported on the January 25th BBC.com: “The combined wealth of 10 men [noted in the above chart] increased during the coronavirus pandemic by $540bn (£400bn), Oxfam has found…This amount would be enough to prevent everyone in the world from falling into poverty because of the virus, and pay for a vaccine for all, the NGO said… Its report found the total wealth of billionaires was equivalent to the entire spending by all G20 governments on recovering from the virus…
“Unprecedented support from governments for their economies saw the stock market boom, driving up billionaire wealth while the real economy faces the deepest recession in a century, it says… Worldwide, billionaires' wealth increased by $3.9tn (trillion) between 18 March and 31 December 2020 and now stands at $11.95tn - which is equivalent to what G20 governments have spent in response to the pandemic, the report adds.”
Most of the names gathered above by the Oxfam/BBC are Americans, seven to be exact. The other above listed billionaires are, respectively, Russian, Chinese and Indian. Some buy and sell companies, but most of the others have built homegrown entrepreneurial dreams into corporate behemoths. These are the richest individuals on earth. Combined these 10 richest people saw their fortunes rise by $540 billion since March 2020. While we cannot forget that between March and June, these exceptionally wealthy individuals have committed a total over $7 billion to fight this horrific virus, their wealth exploded by a vast multiple of that number.
Jeff Bezos’ contribution was listed at $125 million as of June, a handsome sum, but… “The report said that Mr Bezos had earned so much by September 2020 that he could have given all 876,000 Amazon employees a $105,000 bonus and still been as wealthy as he was before the pandemic… This compares with the world's poorest, for whom recovery could take more than a decade. Oxfam estimates that between 200 million and 500 million more people were living in poverty in 2020, reversing the decline in global poverty seen over the last two decades.” BBC.com. Bezo’s ex-wife donated $4.5 billion.
This ability to accumulate wealth at this level begins to be questionable. It is morally impossible to justify. We are increasingly finding ourselves relying on the charitable largesse of the mega-wealthy to do what governments used to do in the past. Look at the scenario: governments move to stimulate job growth by reducing taxes (“supply side” or “trickle down” economics) under a misplaced assumption that those receiving the massive tax benefits will simply hire more people. Just because they got more money? Never happens. Never! You hire more workers when there is a believable business plan that will make more money. Not because of a windfall. The 2017 tax cut is a classic example. Lots of mergers and acquisitions. Dividends. Stock buybacks. Very few new jobs. And a huge multi-trillion dollar increase to the federal deficit.
But having reduced its tax revenues, the relevant governmental body that gave rich folks that tax cut now has less money to implement safety nets, emergency relief, social programs and other rather relevant uniquely governmental functions and disbursements. Fiscal conservatives call for governments to cut taxes and reduce social programs. The mega-rich, supported in the United States by Supreme Court rulings like Citizens United vs Federal Election Commission, also continue to be able to exert massive pressure on governmental policies to insure they continue to get favorable treatment, with an occasional “give” to make the optics look better.
So, when a huge disaster strikes, society is forced to rely on the voluntary generosity (read: whim) of a highly concentrated few, some of whom are generous… and some of whom are not. The result is egregious wealth, often above the entire GPD of nations, accelerated income inequality and truly unnecessary suffering by hundreds of millions, if not billions of people mired in inescapable poverty. If there has ever been an argument for massive increases in wealth and estate taxes, the net economic impact of 2019-20 and the coronavirus pandemic would seem to be incontrovertible proof in support of that premise.
I’m Peter Dekom, and if the rich get richer, and the poor get poorer, there seems to be a rather obvious boost in why so many believe in populist alternatives… the system no longer cares about most of us.
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