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Comment by bugglebeetle | Hacker News Reader

The current market conditions in the US seem more like a Capital strike than “Capital inefficiency”:

https://en.m.wikipedia.org/wiki/Capital_strike

The pandemic created both labor shortages (and thus higher wages) and improved conditions for many workers. Capital owners are now doing everything in their power to claw back those gains, though not without newly-emboldened resistance from organized labor.

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Margins are up across the board from 2021 onward: https://fortune.com/2022/03/31/us-companies-record-profits-2...

There is room for workers wages to go up but right now the higher prices are mostly benefiting investors and owners.

Margins need to be up in order to pay for the increased cost of capital.

If they were paying lots for capital, they'd have lower margins.

Only if it’s debt financed.

You don’t pay costs out of margin. That’s what‘s left after costs.

Own capital costs are exactly the thing that margins pay for.

Adding in that the economy was partially parked up through COVID and the risks of being shut down by the government turn out to be much higher than people realised hitherto. Margins need to go up in that sort of environment to push everything back to how things were pre-pandemic, otherwise nobody will bother. Not many are crazy enough to put lots of money into low-margin businesses that are at high risk of being shut down. Capitalists are greedy but not stupid.

Not quite right.

I'd argue the reason you want higher margins in a higher interest rate environment is the "risk free rate" is now higher.

If the risk free rate is basically 0%, you'll invest in a risky business that makes 5% margin. If the risk free rate is 5%, now you want the risky business investment to have 10% margin to be worth the same investment.

>There is room for workers wages to go up but right now the higher prices are mostly benefiting investors and owners.

Hence we're getting levels of labor action across the board not seen for generations. The system is working, albeit slowly.

This seems like an overly simplistic "capital owners greedy/labor-good-capital-bad" kind of take. I don't know if you've applied for any tech jobs recently but at least outside of super-senior and FAANG positions that I'm familiar with, it's pretty brutal. When I applied for my current role I was basically going against 3-4 other people and we all matched about 80% of the qualifications for the role. My boss is hiring right now and within a day received over 100 applications, and as of last week he has at least dozen who fit 100% of the qualifications for a comparable role to mine.

That’s not really in conflict with anything I wrote? Firms are colluding on layoffs to force these kinds of conditions and drive down wages.

What do you mean by collusion? Do you mean an explicit agreement like the old FAANG no poaching agreement? Or something more subtle?

Return to office is largely layoffs in disguise, all of FAANG is doing it, and have more or less explicitly stated that they have no rationale beyond “we can make you do this, so we are.” As you pointed out, they already conspired in the past with their no poaching agreements, so draw your own conclusions.

Yep. Not too mention the actual layoffs that are going on. If you actually look at the hiring for the companies with these layoffs then you find that they are actually growing their workforce while still announcing layoffs. That seems almost designed to depress wages...

In every case I've seen layoffs-but-expanding-hiring it's always been completely separate teams, maybe even completely different business units - which in a sufficiently large company might as well be different companies.

Have you seen any occurrences of, e.g. layoffs in a team of web developers while simultaneously still hiring web developers?

You left off that the response to the pandemic in the US revived a marker for capital that hadn't existed for 15 years, and made all other risk taking much more expensive

High interest rates are certainly erasing some forms of irrational allocation that can’t be sustained under them (e.g. all the crypto stuff), but the collusion between firms on things like return to office, wage suppression, and price gouging is largely independent of them.

You keep talking about collusion. Do you have any supporting data to back this up?

Every FAANG simultaneously decided they needed to layoff roughly the same percentage of workers, and even more through return to office, with no justification or demonstrated impact on profits, productivity etc, they share large investors, and oh, yes, they all got busted for colluding in the past? It’s all pretty much out there in the open.

Not to mention they're immediately hiring to replace those workers that they laid off. The management is either incompetent or they're trying to depress wages. They openly admit they're trying to achieve "durable savings" which seems like it may be an MBA code word for depressing wages.

What if it’s not a decision made in a smoky back room behind closed doors but rather monkey-see-monkey-do/“hey we can get away with it”?

Definitely is weird to say the least. Even small companies often have HUGE investment firms behind them of course.

This is exactly what you would have said the last time there was proven collusion. It takes a while for the proof to come out, but as the sibling comment says: it's awfully convenient that all the RTO policies and layoff ratios are in alignment.

Collusion is the default human condition. It is absence of collusion that has to be proven.

Or are we assuming governments around the world are effectively preventing collusion of multi-national corporations? Now that would require incredible proof.

Those things don't constitute a capital strike. Businesses don't suppress wages to strongarm the government, they suppress wages because they want higher profits. Likewise with prices.

Return to office might be more organizational pathology than rational self-interest, but it's still not an attempt to influence policy.

> Businesses don't suppress wages to strongarm the government,

They do threaten to relocate operations overseas. And when they do, the wages paid may indeed be "higher" than average in the new regions.

Maybe, but there was also bipartisan legislation to crush the rail strike, simultaneous dismantling of pandemic protections on the state and national levels, the removal of the child tax credit, and so on and so forth.

That crypto part is an assumption. If you want real irrational allocation, check back to office and how and of capital overlords are pushing it for no rational reason.

I would say it’s more rational than crypto as the tech companies investors and commercial real estate investors have a significant degree of overlap. Crypto was little more than digital tulip mania.

you know that's exactly what they said in 2017 about crypto and now Blackrock is pushing an ETF. what a tulip that was pushed by biggest financial org. isn't it. 0 handsight about future

There’s a sucker born every minute.

Here's the problem: "crypto stuff" is just the easy, low hanging fruit. That went away when the Fed began hiking. We're long past that now, with 30 year treasuries at 5%, and venture capital defines itself by extremely long duration speculative investment. That's irrational allocation in a world with high real rates.

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