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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

December 14, 2010 at 9:50 AM

Lessons from Weyerhaeuser and the decline of the U.S. economy

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.

Today’s Econ Haiku:

The Fed is meeting

At the front desk a photo

Ron Paul, keep him out

Comments | More in Jobs/Unemployment, Natural resources, Sustainability, Trade, Weyerhaeuser

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