How the Largest Corporations Have Profited From the Poor Economy

Time has an interesting article that explains how the largest US corporations have been the biggest beneficiaries of the Great Recession:

The big winners of the recent Great Recession have been the largest U.S. corporations. This isn’t simply because they are greedy and rapacious, or because they can steamroller everything in their path. Rather, it reflects the fact that they are in a position to use the recession as a positive opportunity to restructure and become more efficient, while government, small businesses and most American households are forced by circumstances to play defense.

In every economic system, there have to be occasional corrective phases, where inefficient and uncompetitive businesses and services are eliminated, costs are lowered, and ground is cleared for new growth. But not every part of the economy is equally well positioned to do this. Government usually has to worry first about unemployment. It therefore tries to preserve current jobs and existing businesses, rather than focusing on restructuring government services to make them more effective or reforming social programs to lower their long-term costs. Most households and many small businesses give top priority to immediate concerns in a recession, because they have to respond to the short-term pain rather than the potential for long-term gain.

According to the article, the ways corporations have profited are:

  • Reduced labor costs and increased productivity
  • The ability to refinance debt at lower interest rates
  • Continued increase in profits
  • Large cash holdings

So apparently the recession has been a great excuse for large companies to fire people and increase their profit margins, they can borrow money at lower rates than ever while the average small business owner or individual can’t get credit, and their large cash holdings allow them to take advantage of numerous investment opportunities. It’s not easy to see why people are outraged that the government gave bailouts to large companies who are doing great anyways.

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