Nonfiction

The Profit Paradox: How Thriving Firms Threaten the Future of Work

The Profit Paradox: How Thriving Firms Threaten the Future of Work

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  • Create Date：2021-07-27 09:51:15
  • Update Date：2025-09-06
  • Status：finish
  • Author：Jan Eeckhout
  • ISBN：0691214476
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Summary

A pioneering account of the surging global tide of market power--and how it stifles workers around the world



In an era of technological progress and easy communication， it might seem reasonable to assume that the world's working people have never had it so good。 But wages are stagnant and prices are rising， so that everything from a bottle of beer to a prosthetic hip costs more。 Economist Jan Eeckhout shows how this is due to a small number of companies exploiting an unbridled rise in market power--the ability to set prices higher than they could in a properly functioning competitive marketplace。 Drawing on his own groundbreaking research and telling the stories of common workers throughout， he demonstrates how market power has suffocated the world of work， and how， without better mechanisms to ensure competition， it could lead to disastrous market corrections and political turmoil。

The Profit Paradox describes how， over the past forty years， a handful of companies have reaped most of the rewards of technological advancements--acquiring rivals， securing huge profits， and creating brutally unequal outcomes for workers。 Instead of passing on the benefits of better technologies to consumers through lower prices， these "superstar" companies leverage new technologies to charge even higher prices。 The consequences are already immense， from unnecessarily high prices for virtually everything， to fewer startups that can compete， to rising inequality and stagnating wages for most workers， to severely limited social mobility。

A provocative investigation into how market power hurts average working people， The Profit Paradox also offers concrete solutions for fixing the problem and restoring a healthy economy。

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Reviews

André Bequé ，

The Profit Paradox … a milestone Jan Eeckhout’s book is not the first publication about inequality in society but the difference lies in the way it treats the matter that will attract more people to read it。 A book on inequality can be focused on data， theory， or examples。 The three angles of incidence have their importance and are complementary， but they are not charming the same groups in the population。 Multiple examples explaining the different facets of a matter are most helpful for people The Profit Paradox … a milestone Jan Eeckhout’s book is not the first publication about inequality in society but the difference lies in the way it treats the matter that will attract more people to read it。 A book on inequality can be focused on data， theory， or examples。 The three angles of incidence have their importance and are complementary， but they are not charming the same groups in the population。 Multiple examples explaining the different facets of a matter are most helpful for people looking for insight in what they experience every day but cannot put into words to defend their position: that is where The Profit Paradox is very convenient。 The word ‘inequality’ can mean many different things。 To help in focusing on its meaning in the societal reality Jan Eeckhout uses the very suitable imagery of a castle with a moat around it。 The moat symbolizes the difficulty， that can have many forms and dimensions， to dismantle the obstacles between the people inside the castle and round the moat。 The many examples that Eeckhout uses are taken from reality and have the important advantage of recognizability。 Every reader will come across situations he or she knows at close quarters while others will widen her or his vision。 The reader at no moment feels uneasy because the text never gets abstract。 Gradually the social， economic and political aspects of inequality come to light。 Without having to digest masses of data or losing the thread in an abstract theory the reader gets the insight and survey needed to understand the kind of reforms that are required to obtain a better balanced economic system – in favour of those for whom labor is the main source of income – and render the societal system more democratic as needed for the welfare of themselves and their offspring。 André Bequé – Commercial- and Business Engineer 。。。more

Amir ，

We all kind of know that big firms—and in particular monopolists—are a bad thing， but what exactly is the problem， is it getting worse and what can we do about it？ This book answers some of these questions with a focus on the effect bigger firms （market power） has on labour markets。 First， it documents how market power has been increasing over the last 30 years or so。 A striking fact is that there are less start ups now than at any point in the last 30 years。 Second， it documents how wages have We all kind of know that big firms—and in particular monopolists—are a bad thing， but what exactly is the problem， is it getting worse and what can we do about it？ This book answers some of these questions with a focus on the effect bigger firms （market power） has on labour markets。 First， it documents how market power has been increasing over the last 30 years or so。 A striking fact is that there are less start ups now than at any point in the last 30 years。 Second， it documents how wages have stagnated over this period for the majority of workers （i。e。 all but the very highest earners）。 The main part of the book explains how these two facts are linked—how a world with fewer firms that have a greater market share results in lower paid workers。The book is easy and enjoyable to read。 Although the arguments are based on rigorous academic research， the book avoids jargon and is filled with colourful anecdotes and real world examples。 Highly recommend for anyone interested in economics。 。。。more

Armen Shirvanian ，

My interview with Professor Eeckhout about "The Profit Paradox" on The Armen Show Podcast:http://www。armenshirvanian。com/podcas。。。 My interview with Professor Eeckhout about "The Profit Paradox" on The Armen Show Podcast:http://www。armenshirvanian。com/podcas。。。 。。。more

Viola ，

Even if you feel your company is treating you well， the data shows “market power” is bringing down wages for everyone。 Join the tide of unionization to stop the downward spiral ！- @IWW Industrial Workers of the World“ what’s good for companies is not necessarily good for workers。 Eeckhout， a professor at Pompeu Fabra University in Barcelona， calls it the Profit Paradox: technological innovation has made it easier for economic power to be concentrated in fewer hands。 As a result， our economy is d Even if you feel your company is treating you well， the data shows “market power” is bringing down wages for everyone。 Join the tide of unionization to stop the downward spiral ！- @IWW Industrial Workers of the World“ what’s good for companies is not necessarily good for workers。 Eeckhout， a professor at Pompeu Fabra University in Barcelona， calls it the Profit Paradox: technological innovation has made it easier for economic power to be concentrated in fewer hands。 As a result， our economy is dominated by giant， thriving firms able to use their market power to set higher prices and reap record profits， while a majority of workers are suffering the consequences of rampant market power: higher prices， reduced demand for labor， and， ultimately， lower wages。 “Source: https://promarket。org/2021/05/25/prof。。。？Capital， Profits and Wages in 2021By Thomas Klikauer – Catherine Link CounterPunch June 24th 2021。Long before Karl Marx and Jenet Yellen， some might have suspected that there are three elements that define the core of capitalism。 These are， of course， capital。 But capitalism is also a system that is defined by profits – commonly camouflaged as shareholder values – as well as wages。From Smith to Yellen the existence of these three fundamentals was never threatened。 Yet the relationship between the three has altered somewhat in recent years。 This is the argument of Belgian economist Jan Eeckhout。 https://press。princeton。edu/books/har。。。One might begin the journey into capital， profits and wages with a helpdesk worker called Erin。 Erich was， despite having numerous degrees， squeezed into an open-plan office until the Coronavirus pandemic hit her workplace。 Erin works around forty hours a week， thus making $480。- a week， or $23，000 a year。 The U。S。 Census Bureau lists the annual real median personal income at $35，977 in 2019。 https://www。census。gov/library/visual。。。For many workers in many countries wages have stagnated since the 1980s。 With the election of Thatcher （44%） in the UK in 1979 and Ronald Reagan （51%） in the USA， the year 1980 marks the beginning of a sustained colonization of society by neoliberalism。 One of neoliberalism’s key goals is the destruction of trade unions and the weakening of workers leading to widespread wage stagnation。1980 also marks the year when wages and productivity parted company。 Until that year， both rose together。 An analysis by the US Bureau of Labor Statistics distinctly shows that since 1980 there has been a clear break between the evolution of worker productivity and that of wages for most workers。 https://www。bls。gov/lpc/ In other words， workers are getting a smaller share of the pie – just as neoliberalism has set out to do。 As workers’ productivity increased but wages stagnate， they’re walking fast and moving backward。This also means there is an ever-increasing rise in wage inequality。 Top earners have increased their income while workers at the bottom half have not experienced such gains。 Even unhealthier is the fact that the top 1% worker now earn on average twenty times more than the bottom 99% workers in the same firm。 Neoliberalism has vacuumed wealth upwards。 This is camouflage through， for example， the “all boats rise” and the “trickle down” ideology。 https://m。youtube。com/watch？v=0yzeOqV。。。In fact，The labor share， the total expenditure on wages as a share of production in the economy has historically been around two-thirds， or 65%。 The remaining one-third is expenditure on capital and profits。 Today the labor share is below 58%。 A decline of 7% [this] may seem tiny， but that includes the salaries of all those top earners， not just the low-paid workers。While we are daily sold the ideology of competition， in reality there are many sectors of the economy where oligopolies or even monopolies reign:+ online shopping is monopolized by Amazon;+ social online relationships by Facebook;+ online work meetings by Zoom;+ online auctions are run by eBay;+ computer software comes from Microsoft， etc。In short， it is an entrepreneur’s dream to be a monopolist， the only firm active in the market。 Without competition， the monopolist sets a price that maximizes profits。 Correspondingly， when only a small number of firms compete， then the market is an oligopoly。Back at the monopoly， the actual board game of Monopoly was designed in 1903 by Elizabeth Magie as a pedagogical device to illustrate the perils of monopoly。https://www。theguardian。com/lifeandst。。。Of course， there is ample evidence of the market power of monopoly。 There are also extremely outstanding examples like the Mylan company that produces an anti-allergy device that sells for $609。- – the estimated production cost being $35。Of course， the profit is not going to workers。 It goes to shareholders。 This creates the profit paradox: the success of thriving firms is not beneficial for workers。 We can see this in dark-satanic-mill-like working conditions of Amazon warehouses for example。 The entire setup applies even more to wages where Amazon， pays a little above minimum wage while Jeff Bezos’ net worth is at $195。3 billion。When taxation enters the picture， things getting even worse， as Warren Buffett acknowledged openly when saying that he pays less tax than his secretary。https://money。cnn。com/2013/03/04/news。。。Meanwhile， in order to reduce a firm’s tax base， accountants will book many costs （for example， the CEO’s private jet）。 In other words， Jeff Bezos’ private jet is tax deductible while the Amazon warehouse worker pays a goods and service tax even on the bus ticket that gets him to Jeff Bezos’ warehouse。 Capitalism and a pro-business state can hardly get any better。The fattening up of capitalism is observed around the world as the labor share of global wealth has been falling substantially since the 1980s。 Much of this is the result of the rise of power of companies and corporations。 This power comes to them through neoliberal governments。 It is accompanied by a deliberately engineered decline of the power of the worker that came with the destruction of trade unions。What we see is that market power does not simply redistribute funds from the pockets of the workers to those of the owners of the firm。 Market power and the decline in the labor share destroy value in the economy。 The central thesis of much of this is:+ A firm with market power for the goods it sells does take one fundamental step back。 Because it sells at higher prices， it sells less and it produces less。 Therefore， that firm reduces the number of workers it hires。 If market power is widespread in the economy， and there are many dominant firms in all sectors， then the small step back becomes a giant leap backward that drives wages down in the entire economy。+ If one trucking company hires fewer drivers， drivers’ wages are unaffected because they can drive trucks and cars for other companies， they can work in the food industry， in security， in construction， and so on。 But if there is market power in many firms in all industries， then the economy-wide demand for labor falls and， as a result so do wages in all industries。+ If one locust lands and eats at the crop， there is no loss to the farmer’s yield。 If a swarm of locusts lands on the field， the crop disappears entirely。This has dire consequences。 For example， labor now accounts for 59% of GDP and profits account for 12%。 In the 1970s those numbers were 65% and 3%。 In other words， wealth has been vacuumed upward since the advent of neoliberalism in the 1980s。 Critically， wages of the low earners have stagnated in dollar terms and have decreased as a share of GDP。This means that poor are made poorer。 It also means that their wealth is declining in relation to the overall wealth of a society when this is measured against GDP: the value added created through the production of goods and services in a country during a certain period。Even more dismal， since the 1980s the weekly wage of the median worker has barely moved while over the past forty years， GDP has nearly doubled。 The median wage as a share of GDP has nearly halved。 The overall picture of wage stagnation of the low-income earners is therefore much more dire。 As planned by the advocates of neoliberalism， the poorer you are the more you are hit – the richer you are already， the richer you have been made during the last 40 years of neoliberalism。https://www。counterpunch。org/2021/03/。。。We are not moving closer at all。 Instead， we are moving further apart as society are further and further split into rich and poor。 Neoliberalismdamages a convex society in which the middle-class is strong and the bottom （the poor） and the top （the rich） are a few。 https://zcomm。org/znetarticle/the-hid。。。 Instead， neoliberalism creates a concave society with a shrinking middle-class while giving to the already rich and pushing the poor further down。 As a consequence， we produce more wealth every day but get less of it。 We work harder only to get less。Meanwhile at the top end of the income scale， competitive pressure raises the compensation of all CEOs， and no firm is better off for it。 In many cases， CEO pay， perks， golden parachutes， corporate jets， etc。 have next to no link to profitability， value of a corporation， and corporate success – performance related pay exists mostly for those further down the chain。Yet CEO pay is linked to a CEO’s ability to create a monopoly。 Moreover， the rise in CEO compensation goes hand-in-hand with the rise in market power。 Firms with more market power pay their executives more。 This leads us to the conclusion that executive salaries are not only high， but excessive。Many of these excessively overpaid CEOs can’t be found on the front pages of glossy magazines。 Most CEOs shy away from the limelight。 Plenty of well rewarded CEOs tend to be financial managers and owners of private equity firms。In 2004， Eddie Lampert became the first Wall Street manager to make more than $1 billion in one year。 https://www。forbes。com/profile/edward。。。？In real numbers， this is: $1，000，000，000。 The average price for a new car in the USA is $40，000 which means， Mr Lampert’s $1bn could have bought him twenty-five-thousand new cars。Even unhealthier is the fact that， the increase in the average total income of the top 1% between 1980 and 2018 is 217%。 During that same period， wages of the median workers have stagnated。 This too shows that the rich are made richer while the rest stagnate。 And this is even the case when one looks inside companies where wages of workers and rewards of CEOs grows every more disconnected even when the stratospheric money paid to CEOs is a reward for questionable business practices。These are found in the Nestle’s baby formula case， the Ford Pinto， Richardson-Merrell’s Thalidomide， Exxon Valdez， Bhopal， BP’s Gulf of Mexico， Volkswagen’s emissions， Enron – the list is endless。 But corporations don’t need to worry as long as ideologies like corporate social responsibility and business ethics are able to convince the public that all is fine。As it is so often the case， behind every great fortune there is crime， from John D。 Rockefeller’s Ludlow massacre https://www。pbs。org/wgbh/americanexpe。。。to the Sackers billionaires and the estimated 72，000 overdose deaths in 2017 in the United States alone。 See Empire of Pain: The Secret History of the Sackler Dynasty by Patrick Radden Keefe。https://www。panmacmillan。com。au/97815。。。Yet， some of the rich and wealthy seek to buy their way out of their crimes by giving donations and by philanthropy。 https://www。greenleft。org。au/content/。。。They do this undeterred by the fact that the result is that donation fail to target those in society who need it most。 But most importantly， donations are not free; the $1 million donation to Harvard cost the taxpayer $350，000 if the donor pays a 35% marginal tax rate。 The total amount of foregone tax income is in the order of $50 billion per year。In other words， philanthropy comes with a double whammy。 Rich individuals， companies and corporations save truckloads of taxes。 Meanwhile， corporate public relations based on philanthropy makes the rich and their corporations look good。 Meanwhile， taxpayers and society foots the bill – an ingenious setup that systematically engineers inequality。Yet despite the decline in inequality worldwide， income inequality within each of these groups of countries has increased。https://marxandphilosophy。org。uk/revi。。。At the same time， income inequality within Western countries went up as well。 In other words， there is more inequality within our own economies at home and in adjacent neighborhoods， and less inequality between economies far away。 Likewise， income inequality in larger cities has started to rise since 1980 – the year neoliberalism started to make a showing。Inequality shows up in evermore ways。 Since the 1980s， the Dow Jones， adjusted for inflation， has been growing at an average rate of about 6。2% per year。 It wasn’t always like that。 In 1981， the inflation-adjusted index was at the same level as it was after World War II in 1946， or zero-real growth over that thirty-five year period。 This shows that since 1980， big- and not-so big business has thrived while many others did not thrive。Those who did not thrive are workers。 Today， a typical worker is hit twice: her wages are lower due to lower labor demand， and what she consumes is sold at monopolistic prices， further lowering her purchasing power。 And if this is not enough， the worker is hit a third time because she holds no stocks and therefore forgoes the financial gains of market power。These are just three ways in which neoliberalism makes to poor poorer and the rich richer。 Of course， this is accelerated in an economy in which the immediate effect of robots and automation is to make workers poorer and firms richer and not only are made richer firms， their shareholders and CEOs are getting richer too。For the rest， things are made worse and worse。 For example， the skilled miner who becomes an Uber driver or a security guard is likely to earn only a few dollars more than minimum wage。 In the so-called gig economy， most drivers work fewer than ten hours per week and only 19% work full-time。 Many workers report to be willing to accept lower wages in exchange for flexibility。This may well continue until the driverless car appears。 When automation replaces workers and when robots increase productivity with fewer workers， the displaced jobs disappear permanently。 What might also disappear permanently is democracy， as the Slovenian philosopher Žižekargues。In the end one might like to look at US Supreme Court Justice Louis Brandeis who said， Americans might have democracy or wealth concentrated in a few hands， but they could not have both。 For corporate capitalism， democracy is merely an add-on， an unwarranted and disturbing feature at best。 Neither companies and corporations nor corporate capitalism has ever needed democracy。 Within companies and corporations， democracy has been extremely eliminated。 In fact， there is no industrial democracy。In international institutions that govern global trade， commerce and globalized capitalism， democracy has also been eliminated。 Yet in some – and by no means all – countries， companies， corporations and corporate capitalism are forced to deal with democracy。 In those countries， the current institutions ensure that capitalism is pro-business。The prime institution to achieve a suitable level of pro-business democracy are corporate media。 This seems to continue until capitalism has turned our planet into The Uninhabitable Earth。https://www。penguinrandomhouse。com/bo。。。Source:https://www。counterpunch。org/2021/06/。。。 。。。more

Reference

google book https://www.google.com/search?tbm=bks&q=The Profit Paradox: How Thriving Firms Threaten the Future of Work

hathitrust digital library https://babel.hathitrust.org/cgi/ls?q1=The Profit Paradox: How Thriving Firms Threaten the Future of Work&field1=ocr&a=srchls&ft=ft&lmt=ft

The British Library https://bll01.primo.exlibrisgroup.com/discovery/search?query=any,contains,The Profit Paradox: How Thriving Firms Threaten the Future of Work&tab=LibraryCatalog&search_scope=Not_BL_Suppress&vid=44BL_INST:BLL01&lang=en&offset=0