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Sunday, July 18, 2010


Once upon a time, Company landed upon the secret to the formula 2+2=5.  Armed with its secret formula, Company trained its employees to turn many 2s and 2s into 5s, and, for this, Company enjoyed exceeding benefits.  Company flew in personal jets, sailed on luxury cruises, ate luscious meals, lounged in deluxe resorts by the sea, and dressed in gold, silk and diamonds.

Then one day Union came to complain.  “While you lounge on resort beaches, your workers are turning your 2s and 2s into 5s, and they can’t pay their bills!”  “Injustice!” cried Union.  “Ah ay!” cried the workers.  “We want job security!  We want strong salaries!  We want health care!  We want vacation pay!  We want sick leave!”  Company was hesitant to pay its workers more, but Union had a trump card: “we’ll announce your secret formula: 2+2=5.”  Under such black mail, Company signed contracts for job security, increased wages, strong health coverage, and solid vacation and sick leave.   The workers were happy, but they wanted more.  Company was happy, but it wanted more.  Many more 2s and 2s were turned into 5s, and both Company and workers increased in wealth. 

But they continued to fight.  Company wanted to release some of its excess employees and it wanted to pay the remaining ones less.  But Union wanted more for its workers.  So Company kept giving as little as possible without losing its secret formula and those who were trained to produce it.

Then one day, the alchemy of Company’s secret formula no longer worked.  Its positive numbers turned negative and it lost a lot of money.  Now Company had to lay off workers and Union could do nothing to stop it.  There was no arguing against Company’s dismal balance sheet.  So Company laid off workers.  Company also increased the workloads, reduced the salaries, and diminished the benefits of the grateful-to-have-a-job employees who remained.  Union knew if it tried to stop this trend, Company would present its balance sheet and ask, “Would you prefer more lay-offs?”

Investors saw the balance sheets and took away much money from Company.  By punishing Company, investors also punished themselves.  Both Company and the investors lost their wealth.

Thankfully, Company was too big to fail, and Government came to the rescue.  In time, with Government’s money, production resumed and the balance sheet turned positive again.  By now, Company had discovered it could produce just as much at a much lower cost.  It had released its excess employees, and it had demanded more for less among those who remained.  In its Annual Report, Company proclaimed “productivity” had “increased” and profits were on the rise.  Stockholders rejoiced and rewarded Company with more money.  Investors added to this reward.  Once again, Company had landed upon the secret to the formula 2+2=5.

Armed once again with its secret formula, Company turned many more 2s and 2s into 5s, and, for this, Company, once again, enjoyed exceeding benefits.  Company flew in personal jets, sailed on luxury cruises, ate luscious meals, lounged in deluxe resorts, and dressed in gold, silk and diamonds.

Then Union wanted to complain.  But Union could do nothing.  Company was one of many, and all had laid off workers.  Workers wanted jobs and were willing to work for small salaries.   Company delighted in this new freedom to profit with ease.  Investors agreed and rewarded Company mightily.  Together, the rich and the powerful regained their wealth.  They returned to their jets, cruises, meals, resorts, and gold, silk, and diamonds.

It is the old story we all know: the rich got richer and poor got poorer.  Even the not-so-bad-off got poorer.  But the powerful knew if it were revealed as the old story, the existing poor and the new poor would get together and revolt.  Meanwhile, the powerful wished to calm the concerns of the rich.  For a time, you see, the rich had lost their wealth.  Could they lose it again?  So instead of revealing it as this old story we all know, the powerful gave the rich a codeword to let them know their wealth would not die.  To calm the anxiety of the rich, they renamed the old story: the “jobless recovery.”

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