The Ratchet Effect

“Recession means that people's incomes, at the employer level, are going down, basically, relative to costs, people are getting laid off." —George W. Bush

Corporate America always wins. That’s the bottom line, and that’s their entire focus: the bottom line.

A few days ago, the Senate voted for cloture on a windfall profits tax for the obscene, record levels of profit being raked in by Big Oil. Predictably, it fell to defeat on party lines: Democrats voting for it, Republicans voting against it (http://www.foxnews.com/story/0,2933,364846,00.html)

As the story began “Saved by Senate Republicans, big oil companies dodged an attempt Tuesday to slap them with a windfall profits tax and take away billions of dollars in tax breaks in response” to the record profits on record oil and gasoline prices. What was likely overlooked in the clutter was this little tidbit: Republicans voted against it saying that this would “raise the costs” of oil and gasoline.

Did ya get that? They are raking in the largest quarterly profits ever in American history, and any windfall tax would require them to raise prices in order to make up the loss. Even with eleven-figure quarterly profits (that’s three months … tens of billions).

This is reality. Corporate America has gotten to the record levels of profits they have and they have no plans of giving ground but continuing to strive for ever-higher profits. It’s the corporate way: once the lofty perch has been achieved, that becomes the new base figure from which to negotiate upward.

This is the Ratchet Effect. These aggressive corporations will use every opportunity to jack the price higher, inch-by-inch or foot-by-football field. Losing ground P&L-wise is like a ratchet wrench – it’s never going to catch traction. And by this theory, every new record height also becomes the new floor and also excuse to threaten price hikes to retain this new level. Big Oil feels they are fully in need of a minimum of ten or eleven-figure quarterly profits at minimum.

In laymen’s terms: Big Oil is hooked. They’ve won their money fair and square, and they will continue putting pedal to the metal and rocketing to even higher and faster wealth. Anyone who steps into their superhighway to wealth becomes collateral roadkill, and we are the United States of Collateral Roadkill.

The greed at the stratospheric top levels of society is unbridled and unashamed, running this economic shell game with impunity. Even with the huge profit levels, I work on contract to one of these major oil companies specifically to train folks in India to take over the finance, accounting and payroll functions. You know … as President Bush-baby calls them: “The jobs Americans won’t do.” And the reason isn’t because the profit is down or Big Oil is hurting. The reasoning is “all the competition is doing it.”

Another headline made the news today: Exxon/Mobil is selling off all of its branded gas stations / convenience stores (http://www.cnn.com/2008/US/06/12/exxon.mobil/index.html) As the story reported, they weren’t profitable. Actually, the story left out one word at the end of that sentence … “enough.” They’re profitable, though not to the level to which Exxon, in its hyper-profitable refining capacity, is now accustomed. Why waste time with chicken-feed gas stations when you can corner the market, gouge, and reap insane profit levels just by holding the rest of the gas station operators hostage for their precious product?

Another possible reason for Exxon’s store brand losses: their ham-handed uncaring approach to the environment (remember the Valdez oil spill? I stopped buying Exxon back then), or towards people who are, were or could’ve been potential customers (their purchase of Mobil and ceasing their benefits and hardening their attitudes on diversity with GLBT folks).

Exxon always had the attitude of “who cares if you boycott our gas stations? We’re big, we’ll still make more money than anyone else and who gives a damn about you whiners who don’t like our arrogance!” Now, no more gas stations, no more protests, and they still make profit like cocaine thieves. And they have their conservative buddies in congress watching their backs.

Then finally, away from oil, there’s the story that just came out reporting that Belgian conglomerate InBev wants to buy Anheuser-Busch (http://www.marketwatch.com/news/story/anheuser-busch-inbev-rally-report-merger/story.aspx?guid=%7B5C244FF2-6973-4CC2-BF15-61E8F9416B13%7D). As the US dollar has sunken like the Titanic and the Euro has gained nearly 50% over the past eighteen months, it’s become attractive to buy American – including American corporations.

Hey, beer sells well in America! Especially in down times like this, many people are turning to something relatively cheap to kill the pain … like Budweiser. So now Bud’s on the block being eyed by bidders flush with cash. Nothing unusual, nothing new.

But lo, here comes Missouri Sen. Roy Blunt decrying this possible sale as somehow un-American! House Minority Whip, Roy Blunt (R-MO) and Sen. Kit Bond (R-MO) raised voices about the sale – after all, Bud is based in St. Louis. It’s funny, all this time with jobs flying overseas, and American companies (like competitor Miller Brewing or Chrysler or IBM) being sold to foreign companies, nary a peep from the conservative Missouri crew (who no doubt didn’t want to infringe upon the free market). Now it’s about Missouri, and furthermore, it’s about beer! You can’t mess with Americans’ beer (heaven forbid!), especially in trying times such as this “fundamentally strong” economy where we all need something to help kill the pain: so many people are losing homes and jobs and even ending up homeless.

Bottom line, in Christian Conservative America, you can’t mess with our beer! Doesn’t Rep. Blunt and Sen. Bond understand? You can’t reverse the ratchet effect and you can’t stand in the way of corporations making even more record profit! Just step aside and watch the money flow ….

“If the terriers and bariffs are torn down, this economy will grow.” — George W. Bush