Picked Clean

Partisan hacks, ivory tower economists, and sound-bite-seeking journalists maintain that a small number of bad apples is responsible for our current woes. But as I’ve long argued, there is plenty of blame to go around. The problems in the mortgage market, for example, were as much a fault of greedy and naive homeowners as they were of grasping and corrupt lenders (among many others).

That said, one group which seems to have been given a bit of a free pass lately is comprised of those who rule the roost in corporate America. When the financial industry was recklessly exhorting CEOs, COOs, and CFOs to remain focused on cutting costs and quarterly earnings management, it seems few executives stood back and said their businesses would suffer irrevocable harm if they didn’t put a great deal of effort into long-term thinking and planning.

Unfortunately, the short-sightedness of those who run our biggest companies has proved to be just as damaging to our nation’s financial wellbeing as the bubble-blowing escapades of the Federal Reserve. In “Lessons from Weyerhaeuser and the Decline of the U.S. Economy,” Jon Talton of the Seattle Times’ Sound Economy blog provides a vivid example of a company whose (mis)fortunes seem to have mirrored those of America as a whole.

If you want a snapshot into today’s American economy and its inability to create productive jobs, look no further than Weyerhauser. The iconic Northwest company was once one of the largest integrated timber and paper companies in the world. It made things. It was the jobs engine for thousands in small mill towns in the Northwest, as well as at its headquarters in Tacoma, and later, Federal Way.

Now it’s preparing to convert to a Real Estate Investment Trust, where most of its profits will go directly to investors. On Monday, it announced a tripling of its dividend ahead of the conversion. Today’s Weyerhaeuser is essentially a large owner of timberland, most of its productive manufacturing operations shut or sold off.

This transformation may be very profitable for investors. (Maybe not, considering how much of the profit base depends on a housing market that may be sick for many years to come; the REIT idea was hatched during the real-estate bubble). For new jobs, productive activity and exports, not so much. The company employed 37,900 in 2007 — the number of jobs had dropped to 14,900 by 2009. In 2008, Weyerhauser eliminated 1,500 well-paid white-collar jobs, most at its headquarters. The damage reached from scores of small towns to metro Seattle.

A series of management missteps, a messy merger and bad luck put Weyerhaeuser on Wall Street’s bad side. But so did the change in the capital markets and a financialized economy: Demands for quick and unsustainable profits, anti-competitive industry consolidation, hostility to re-investing for the long haul, greed manifested in the housing bubble. Now, with the REIT, big investors will win, at least in the short term, as the wealth it took a century to create is picked clean. But carry the Weyerhauser story across the American economy, and you see how we have a problem.