the life and death of great american corporations

ramblings on the economy

“Around one in ten US companies disappears each year. Between 1989 and 1997, to be precise, an average of 611,000 businesses a year vanished out of a total of 5.73 million firms. Ten per cent is the average extinction rate, it should be noted; in some sectors of the economy, it can rise as high as 20 per cent in a bad year. According to the UK Department of Trade and Industry, 30 per cent of tax-registered businesses disappear after three years. Even if they survive the first few years of existence and go on to enjoy great success, most firms fail eventually. Of the world’s 100 largest companies in 1912, 29 were bankrupt by 1995, 48 had disappeared* and only 19 were still in the top 100.”

~ The Ascent of Money: A Financial History of the World by Niall Ferguson

In these hard economic times, I doubt it’s any consolation to know that capitalism has been characterized by innovation and failure at the micro-level and cycles of boom and bust at the macro-level.

But we should still remember that it’s not all bad news.* Many of us still have jobs (and are feeling more thankful for them than we ever have before.) It’s also encouraging to see the nation shifting away from consumerism, but the accompanying layoffs are troubling.

That’s the complicated part about fighting against consumerism-- every purchase links back to a job. (And likewise for sweatshops). We stop buying and companies start hurting, which in it of itself doesn’t bother me, but then the layoffs begin. And while this recession has been hard-hitting for well-educated financial professionals, it is still the most hurtful for the least educated and the most vulnerable in our society. (I can’t seem to find the article, but basically decline in employment has affected high school diploma-less men the most).

Bankruptcies and layoffs in a capitalist economy that champions creative destruction technically shouldn’t be something we fear. Nevertheless, when the destruction doesn’t just affect legal entities and the pocket change of the rich, but begins to leave many without jobs, then we do need more consolation than “It’s just the nature of capitalism. Boom and bust. We just have to wait it out.” (“Collateral damage” for a “cyclical adjustment” perhaps? It will just be a matter of mathematical calculations before the supply and demand curves reshift.)

How many days or years or decades of waiting before you can get back on track with your life?

I hope that as we wait out this recession, we will actively care for those who are most vulnerable. I hope that while we may be cautious with our spending, that we can still be generous with our giving. And I hope that as we are trying to fix the economy, we’re building something more sustainable and just, rather than just patching up something that was never that great to begin with.


* Interestingly enough, the longest-existing institutions in our day have been nonprofit organizations such as universities…
** For instance, Amazon is still doing okay and so is Wal-Mart, which obviously makes me happy since you all know how much I love and adore and worship Wal-Mart.