Capitalism is, if anything, remarkably unstable.
Yesterday, the Dow Jones Industrial Average dropped more than 200 points (a bit more than 1 percent). And, today, it’s already down more than half that amount—and headed lower.
What’s going on?
Well, for one thing, corporate profits are declining.
U.S. corporate profits, weighed down by the energy slump and slowing global growth, are set to decline for the third straight quarter in the longest slide in earnings since the financial crisis.
Weakness was felt across the board, with executives from Apple Inc. to railroad Norfolk Southern Corp. and snack giant Mondelez International Inc. saying the current quarter remains tough. 3M Co., which makes tapes, filters and insulation for consumer electronics, forecast continued weak demand for that industry. Procter & Gamble Co.reported sales declines in its five business categories despite price increases.
And that’s exactly how capitalism works: corporations got exactly what they wanted in the early years of the recovery—with cheap financing, low wages, and foreign sales, which fueled high profits. And now those same conditions are coming back to bite them. And so they’re deciding to engage in less investment, which is further slowing growth and cutting into profits.
As we know, under capitalism, what goes up must come down—even for capitalists and their profits.