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This is an archive article published on April 23, 2007

A weekly round-up of leading journals

Something quite historic happened in 2006, says Shawn Tully, editor-at-large of FORTUNE in the cover story for the magazine’s...

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Something quite historic happened in 2006, says Shawn

Tully, editor-at-large of FORTUNE in the cover story for the magazine’s April 30 issue: ‘‘A massive swath of the established economy — also known as the Fortune 500 — collectively generated unprecedented earnings. The grand total: $785 billion, a 29% increase over 2005. Those returns obliterated the previous cyclical peak, $444 billion, achieved in 2000 at the height of the tech explosion. Put simply, American companies are enjoying the most sumptuously profitable period in the 500’s 53-year history. Last year post-tax profit margins hit

7.9%. That’s 27% higher than the 6.2% posted in 2000.’’

The remarkable thing about this past year for American companies, Tully explains, is that their earnings increased at a much faster rate than revenues. This is mostly accounted for by the fact that companies were able to keep down labour costs — ‘‘the Fortune 500 was able to raise revenues more than one percentage point faster (5.5% vs 4.3%), year after year, than its biggest charge, wages’’. Add to this, improvement in productivity. But: ‘‘The historic rise won’t continue. In fact, we’re at a turning point. Wages are now increasing faster than revenues, and productivity growth is whisker-thin. Profit margins are beginning to shrink, and companies will probably ramp up their dormant capital spending. They need an infusion of plants and equipment for two reasons. First, only by adding to their depleted stock of tech equipment can they raise productivity and keep margins healthy. Second, they need to invest in new plants — something they’ve been neglecting — to drive growth. As their cash hoards decline, they’ll need to borrow heavily again.

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Indeed, corporate borrowing and bond issuance are already rising steeply.’’

BUSINESS WEEK’s cover story for the April 30 issue tracks ‘Wal-Mart’s Midlife Crisis: declining growth, increasing competition, and not an easy fix in sight.’’

Newsmagazines are exploring the various dimensions of the Blacksburg shooting. THE ECONOMIST (‘America’s tragedy’, April 21-27) noted in its cover leader that psychopaths exist in every society. But: ‘‘The difference, as everyone knows but no one in authority was saying this week, is that in America such individuals have easy access to weapons of terrible destructive power.’’ The Glock 9mm semi-automatic pistol used by the Virginia Tech student is available in most other countries only to the police. What’s disappointing about the silence by government on the need for gun control, it said, is that it’s shared by leading Democrats, who till the time of Bill Clinton tended to be for gun control. But states in the south — like Arkansas, West Virginia and Tennessee — which the Democrats hope to capture to secure the presidency have strong public support for gun rights. Nevertheless, the magazine places most blame by President Bush for allowing the assault-weapons law to lapse in 2004. In America guns rights is termed a ‘‘freedom’’, but THE ECONOMIST asks, is this a liberal connect?

TIME (‘Trying to make sense of the massacre’, April 30) tries to get into the mind of a mass murderer. In ‘Why they kill’, Jeffrey Kluger revisits the old hypothesis that such criminals cannot imagine themselves in the situation of their victims. Usually alienated and carriers of perceived slights, they are also usually keen to gain the spotlight, and want to have the last word. But: ‘‘Unfortunately, what he (the murderer) says when he at last has that chance to be heard is: ‘I surrender.’ ’’

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Meanwhile, THE NEW STATESMAN (April 23) has a cover story, ‘Climate change: why we don’t believe it’, exploring the gulf between campaigners/politicians and public opinion. THE NEW YORKER (April 23) has letters from Europe (‘The French presidential showdown’) and Beijing (‘Remember the democracy movement’). And THE SCIENTIFIC AMERICAN (May 2007) asks: ‘‘Could the methane in the atmospheres of Mars and Titan be caused by unusual geologic activity — or life?’’ Mini Kapoor

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