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Sunday, April 18, 2010


Capitalism in a nutshell

It's nice when the newspapers do my job for me, even if they don't exactly connect the dots. Front page of today's San Jose Mercury News features one article on the "booming economy." Here's the lead paragraph:
Silicon Valley's top 150 companies snapped back from a grueling recession last year, nearly doubling their profits by slashing costs and laying off workers.
(Yesterday's edition, to complete the picture, featured this on the front-page article: "California's unemployment rate reached a record 12.6 percent in March as the state added relatively few jobs, lagging behind several smaller states in job creation.")

And what will those doubled profits lead to?

Now many of the companies have accumulated large amounts of cash and are in position to hire and acquire other companies, observers say.
Yes, they'll no doubt hire some people. Most of the money, however, will likely be used to buy other companies, and the result of that will be, among other things, laying off more people, probably equal to the number they hired. Nor is that business about acquisitions just a prediction - "Mergers and acquisitions in Silicon Valley shot up in the first quarter of 2010."

And the consequences, aside from unemployment? That's the other article on today's front page, side-by-side with the one about the soaring profits:

Fifty years ago this month, California promised a low-cost, high-quality university education for every qualified high school graduate in the state. But that promise — inflated by growing populations and academic aspirations — expanded beyond the state's willingness to pay for it.

What went wrong? How did the university system that was long the envy of the world suddenly become the focus of angry street protests, overcrowded classrooms, soaring tuition and a monumental debate over whether the state can ever make good again on its groundbreaking mission?
And those lead paragraphs don't even mention reductions in the number of classes, teacher layoffs, reduced admissions, and other manifestations of the "budget crisis," the one that is smaller than last year's combined profits of just the top few Silicon Valley companies, not to mention their cash on hand ("Six large companies — Cisco Systems, Apple, Intel, Hewlett-Packard, Oracle and Google — are sitting on a combined $134 billion in cash or near-cash assets" - a fraction of which could wipe out California's huge deficit).

This is capitalism in a nutshell. Profits before people. Change, anyone? Or, to quote Austin Powers, "Help! I'm in a nutshell!"

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