Examples of how bankruptcies, cutbacks and layoffs power economic growth

[Axulus]

Bankruptcies, cutbacks, layoffs, terrible things, right? People lose their jobs, and the lost income of these people means they spend less, therefore harming other businesses and shrinking the economy, true? Not so fast. This is the short term, visible effect. What is not seen is what happens with those resources that are now freed up to be used for other purposes - land, labor and capital that becomes available for some other economic use. This is the "creative destruction" of capitalism.

The Tesla Factory is an automobile manufacturing plant in Fremont, California, US, and the principal production facility of Tesla Motors. The facility was formerly known as New United Motor Manufacturing, Inc. (NUMMI), a joint venture between General Motors and Toyota.[1] The plant is located in the East Industrial area of Fremont between Interstates 880 and 680

https://en.wikipedia.org/wiki/Tesla_Factory

Magic Leap, which has raised half a billion dollars from investors including Google, has been building its technology in secret for years. But it's getting closer to show us its version of mixed-reality computing. "We're actually gearing up to build millions of things," said Rony Abovitz, the company's president and CEO, speaking at the WSJD conference in Laguna Beach, CA. The company is using part of an abandoned Motorola factory in south Florida and is now developing its manufacturing processes, he said.

http://www.theverge.com/2015/10/20/9579167/magic-leap-manufacturing

Buying the assets of a company in liquidation is potentially an attractive and low cost means of expansion for growing businesses.

Only recently CPS Group, a lighting and audio-visual service provider, bought the brand and a large portion of assets of its local competitor Stagecraft Technical Services (STS) out of liquidation (both are located in South West England). The liquidators from Begbies Traynor had failed in their attempt to find a buyer for the whole business, before stepping in to liquidate it.

In another example Aberdeen-based technology firm XL Group recently bought the assets of lift maker Ross and Bonnyman, after its Forfar-based factory was closed down and 30 staff made redundant on the appointment of liquidators from Begbies Traynor.

http://www.business-sale.com/buying-liquidated-assets-an-attractive-option.html

The chart above shows how Netflix has almost driven the video tape/disc rental business, along with companies like Blockbuster, into extinction. (Interestingly, Blockbuster passed up a chance in 2000 to purchase Netflix for $50 million — it’s now worth $54 billion.) By the time the BLS started tracking the number of jobs in the video tape rental business in 1985, there were more than 80,000 employees nationwide, and that number more than doubled to 170,000 by early 1999. Blockbuster was the dominant firm in the industry and employed nearly 60,000 employees at more than 9,000 stores at its peak in 2004. But in the last decade, employment in the video/disk rental industry has collapsed from 153,000 jobs in 2005 to fewer than 11,000 in May of this year – that’s a 93% decrease in a decade! That could arguably be the largest percentage employment decline in any US industry over the last decade — even employment in the newspaper industry hasn’t cratered nearly that fast over the last ten years!

After challenging Blockbuster, which filed for bankruptcy in 2010 and was subsequently acquired by Dish Network at auction in 2011, Netflix (along with other online viewing platforms like Hulu, Amazon and Apple TV) is now challenging cable networks, traditional network TV channels, and pay-TV services. The “Netflix effect” can be seen in the chart above that compares the year-to-date stock returns for Netflix (up by 157%) to Disney, which owns the cable networks ESPN, Disney Channels and ABC Family (+15%), CBS (-6.3%), Time-Warner, which owns CNN, HBO and Cinemax (-21.5%), and FOX (-22.75%).

https://www.aei.org/publication/the-netflix-effect-is-an-excellent-example-of-creative-destruction/

I also give you the example of my own company, that bought liquidated display cases from a local Sears store that was closing down. The savings by buying this instead of brand new or custom display cases allowed me to invest more funds into other aspects of my business.

Those who lose their jobs in these instances are able to be offset by growing industries and companies who buy the assets that become available or jobs can be created in brand new industries. Without the layoffs and the availability of these abandoned assets, growth would be limited. There would be fewer employees available to hire into growing industries and it would be far more expensive to start up a business or expand it when the demand is available.

 

[SimpleDon]

Yes, one of the more dynamic benefits of capitalism is creative destruction. Bankruptcies create opportunities for more efficient concerns to make money.

This is one of the main reasons, for example, that we have little to fear from raising the minimum wage. Any businesses that go bankrupt will have their share of the market taken over by more efficient concerns because the demand for the product still exists at the old pre-minimum wage hike price. In fact, the demand will be slightly higher because of the wage increase.

One of the main problems we have in today's economy standing in the way of creative destruction is the high level of corporate profit earned by businesses. It keeps inefficient business from failing. Capitalism could do with lower profits right now. Just another example of when what is good for individual companies, a high level of profits, is bad for the economy as a whole, a reduced level of creative destruction.

 

[SimpleDon]

You don't even have to have bankruptcies in order to have creative destruction. Twenty years ago a friend of mine here in Atlanta had an engineering business that put natural gas turbines into industrial plants that needed lots of medium quality heat, 600 to 1000 degC, for say drying.

They would use the exhaust gas of the turbine instead of a natural gas air heater to do the drying. The electricity produced was virtually free of costs but would off set their part of their power purchased from the power company. My friends company built and provided the turbine at their cost and split the savings in power costs with the customers.

They bought or leased the turbines from GE. The turbine business was bad at the time so GE thought that this was a good business to get into. Since my friends company had the greatest share of the businesses, since they understood the business and since it is not a good idea to go into a business by competing with your best customer in the business, GE offered to buy my friend's business.

To get to the point, GE overpaid for the business, much more than the business could support. GE expected the business to expand when it was about maxed out. Eventually GE ran the business into the ground by trying to increase the profit margins to justify the price that they paid for the business. They eventually closed the business. My friend, relieved of his non-compete clause, went down the street and opened a new business doing the same thing, once again making money at it.

 

[SimpleDon]

I am proud of you Auxlus. You try to understand these things where most are happy when they find something that they think supports their favorite preconceived ideas.

 

[untermensche]

What about the human misery?

The hunger, the stress, the depression?

The suicides, the broken families, the return to alcoholism?

They all occur when people lose their jobs. Especially in a shitty economy with little opportunity destroyed by the malfeasance of bankers who were rewarded for it.

It is not just a bunch of numbers in a computer.

What you find time and time again from analysis from the right is an analysis completely devoid of the knowledge that we are talking about human lives and evidence of any normal human empathy.

You take the reduction of empathy to it's extreme and of course you end up with the Nazi's and groups like them.

 

[dismal]

What about the human misery?

The hunger, the stress, the depression?

All are reduced versus a world way we froze the jobs that existed at any given time forever.

Redeploying resources to better meet human wants and needs is a wildly indisputable good thing for society.

 

[untermensche]

What about the human misery?

The hunger, the stress, the depression?

All are reduced versus a world way we froze the jobs that existed at any given time forever.

Redeploying resources to better meet human wants and needs is a wildly indisputable good thing for society.

They are not being redeployed. This is capitalism.

They are being thrown away like garbage and cheaper younger more desperate workers replace them.

 

[dismal]

All are reduced versus a world way we froze the jobs that existed at any given time forever.

Redeploying resources to better meet human wants and needs is a wildly indisputable good thing for society.

They are not being redeployed. This is capitalism.

They are being thrown away like garbage and cheaper younger more desperate workers replace them.

Really? No one who ever worked in a video store ever got another job?

So we should have kept video stores open forever?

Exactly what year do you think we should have frozen all the existing jobs in place?

 

[KeepTalking]

What about the human misery?

The hunger, the stress, the depression?

The suicides, the broken families, the return to alcoholism?

They all occur when people lose their jobs. Especially in a shitty economy with little opportunity destroyed by the malfeasance of bankers who were rewarded for it.

It is not just a bunch of numbers in a computer.

What you find time and time again from analysis from the right is an analysis completely devoid of the knowledge that we are talking about human lives and evidence of any normal human empathy.

You take the reduction of empathy to it's extreme and of course you end up with the Nazi's and groups like them.

I was laid off in November 2011, having been informed of the impending layoff one month earlier. I received a pretty good severance package, as I had been with the company for more than 5 years, but it was still something of a blow to my self esteem, not having a job throughout the rest of the year, and having few prospects, given that the tech sector does not typically do much hiring during the period from November through January. Anyway, I landed a new job in February 2012, and it was immediately apparent that the layoff was the best thing that could have possibly happened for my career. I had been paid under market value for my position for years because of a misplaced sense of loyalty to the company, and my new job paid nearly 50% more than I had been making. Less than three years later, I make more than double what I made before the layoff.

 

[Perspicuo]

What about the human misery?

The hunger, the stress, the depression?

The suicides, the broken families, the return to alcoholism?

They all occur when people lose their jobs. Especially in a shitty economy with little opportunity destroyed by the malfeasance of bankers who were rewarded for it.

It is not just a bunch of numbers in a computer.

What you find time and time again from analysis from the right is an analysis completely devoid of the knowledge that we are talking about human lives and evidence of any normal human empathy.

You take the reduction of empathy to it's extreme and of course you end up with the Nazi's and groups like them.

You can't deny the system works for improving the lives of millions if not billions more.

It is not a system incompatible with safety nets for the losers.

People who agree with this system are not devoid of empathy, it's just that it plain works. We are sympathetic towards the people of former East Germany, Poland, etc who had all the safety net and none of the progress or liberty. It just so happens that reality is not a bed of roses. And yet you cannot say we are all not trying to make things better. And things are getting better, as always precariously on the brink of getting worse.

 

[ksen]

Sweet, then all the businesses should go bankrupt and lay everyone off to produce the best possible economic growth.

 

[dismal]

Sweet, then all the businesses should go bankrupt and lay everyone off to produce the best possible economic growth.

Or you could attempt to address arguments being made.

 

[Nice Squirrel]

Examples of how bankruptcies, cutbacks and layoffs power economic growth

Indicating that bankruptcies are the source of economic growth.

Sweet, then all the businesses should go bankrupt and lay everyone off to produce the best possible economic growth.

Snark.

Or you could attempt to address arguments being made.

Outrage and unintentional irony

 

[ksen]

Sweet, then all the businesses should go bankrupt and lay everyone off to produce the best possible economic growth.

Or you could attempt to address arguments being made.

I did.

 

[dismal]

Indicating that bankruptcies are the source of economic growth.

Sweet, then all the businesses should go bankrupt and lay everyone off to produce the best possible economic growth.

Snark.

Or you could attempt to address arguments being made.

Outrage and unintentional irony

Perhaps you need some help to understand what the word "examples" means?

Because I'd hate to see you and ksen beclown yourselves further.

 

[Nice Squirrel]

Indicating that bankruptcies are the source of economic growth.


Snark.

Or you could attempt to address arguments being made.

Outrage and unintentional irony

Perhaps you need some help to understand what the word "examples" means?

Because I'd hate to see you and ksen beclown yourselves further.

If you have trouble understanding my posts you can ask a trusted friend explain them to you. I'll spare the others the chase down the rabbit hole.

 

[ZiprHead]

Sweet, then all the businesses should go bankrupt and lay everyone off to produce the best possible economic growth.

Or you could attempt to address arguments being made.

Really. You wouldn't want ksen dismalising the thread.

 

[Alcoholic Actuary]

Sweet, then all the businesses should go bankrupt and lay everyone off to produce the best possible economic growth.

Or you could attempt to address arguments being made.

Heads up moderators - I think someone reversed the attribution on these quotes.

aa

 

[SimpleDon]

What about the human misery?

The hunger, the stress, the depression?

The suicides, the broken families, the return to alcoholism?

They all occur when people lose their jobs. Especially in a shitty economy with little opportunity destroyed by the malfeasance of bankers who were rewarded for it.

It is not just a bunch of numbers in a computer.

What you find time and time again from analysis from the right is an analysis completely devoid of the knowledge that we are talking about human lives and evidence of any normal human empathy.

You take the reduction of empathy to it's extreme and of course you end up with the Nazi's and groups like them.

Recognizing that unemployment is almost always a condition caused by and to the benefit of the economy instead of a failing of the unemployed is getting more than halfway to the answer for this problem.

Add to this realization an additional one that the main purpose of the economy is not to generate profits but is to pay wages to provide for the vast majority of people in society and you have your answer.

Of course, I should even have to go any further with this thought in more detail but I have been here long enough to realize that there is no conclusion so obvious that some won't stubbornly fail to realize it.

So here it is. Since unemployment is a necessary feature of a capitalistic economy that defeats the entire reason we have a economy there has to be a way to minimize the impact of it. That is unemployment insurance as an externality mandated by the government. And since unemployment can cause a recession to spiral out of control, obviously the unemployment insurance payments should be fairly generous in cyclic recessions, especially those recessions caused by financial crises, and especially those caused stupidly by failing to regulate the financial sector, like we had in 2008.

 

[SimpleDon]

What about the human misery?

The hunger, the stress, the depression?

All are reduced versus a world way (where?) we froze the jobs that existed at any given time forever.

Redeploying resources to better meet human wants and needs is a wildly indisputable good thing for society.

You are correct. As I said in my response to ünter, you are nearly halfway to understanding the problem and the answer. Read my response to him at 11:44, ↑ somewhere up there.