So let me take a minute to share with you a cold, hard reality about the financial markets, namely the way in which they wildly reward the outsourcing and elimination of jobs.

Winn-Dixie, one of North America's largest supermarket chains, announced today that it is eliminating 10,000+ jobs and closing 156 stores. In the response that is common to such news on Wall Street, the stock was immediately trading as much as 5-7% higher. Similarly, Gateway rose from the dead after closing all 135 of its retail locations (2500+ jobs lost, 1500 more in April) in March. Kraft Foods and Sun Microsystems experienced similar boosts in reaction to job cuts in early 2004. In fact, it's such a well-accepted tenent of the financial markets that pointing out individual examples is almost unnecessary.

This is approximately equal to society gathering on the front lawn of a neighbor and applauding him for evicting his children. "Good job, John, we were waiting to see more fiscally responsible behavior from your household. You've been taking a loss on the costs of your infants for the past 2 years. It was time for you to downsize a little. Here, have a medal. We are glad you see that the more cost-effective solution to parenting is to send your 70 cents per day to a Third World child, where food and benefits cost less."

Far be it from me to lapse into theology, but if there is a hell, it is populated mostly by economists and traders who roast over fires kindled with Klansmen.

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  1. mike Says:

    Those gains in stock prices are a illusion though – for instance Sun traded a $4/share prior to their layoffs; the layoffs brought it up 25% to $5 – three weeks later it's back down to $4/share. It's a nice system created to benefit insider traders for one week.

    I think (hope?) investors are smart enough to realize that bringing a balance sheet out of the red by laying off workers is the same thing as those Indian reservations that post record profits by selling off their land to toxic dumping, or the pacific rim nations that are gettin 9% GDP growth by strip-mining their resources. It's a one-time benefit;
    and you better be saving your money man, because that aint going to last forever.

    It only brings down your costs, and in no way can increase your revenue. And chances are, if you are losing the revenue battle in the short run, you'll continue to lose it in the long run no matter how many people you employ.

  2. Amy Says:

    Don't worry, Ed. I'm sure all those people will find a great job at their closest Wal-Mart.