On July 28,2015, Thom Hartmann writes on the Thom Hartmann Program:
During a speech at New York University Friday, Hillary Clinton took aim at “quarterly capitalism,” her name for corporate America’s endless – and senseless – pursuit of profits.
Now, Clinton isn’t exactly Elizabeth Warren and sometimes it sounds like she’s reading a script written by an economics professor, but she’s spot-on when it comes to so-called “quarterly capitalism.” That’s because, to paraphrase Shakespeare, something is rotten in the state of American capitalism.
Instead of using their record profits to invest in innovation or pay their workers more, America’s biggest companies are now using those profits just to buy back their own stock.
As Edward Luce pointed out in a recent piece for The Financial Times,
“The level of US investment is at its lowest since 1947. Last year, according to Goldman Sachs, S&P 500 companies spent more than $500bn on share buybacks. This year it is expected to hit $600bn…. For every dollar the top US public companies spend on investment, they are returning eight or nine dollars to shareholders.”
This is the sign of an economy that’s gone insane.
Stock buybacks don’t grow the economy as a whole; they just make giant rich corporations – and their CEOS – even richer. They’re the perfect symbol of a system that puts profits before people, progress, and, well, pretty much everything else.
It’s hard to imagine given the state of American capitalism these days, but things weren’t always this way.
Between the 1930s and the 1980s, corporate America actually behaved – or was made to behave as a result of smart regulations – in ways that benefited everyone, not just their shareholders or CEOs. Back then, the saying “what’s good for GM is good for America and what’s good for America is good for GM” wasn’t just a saying – it was a statement of fact.
But then Reagan came to town and everything changed.
As part of his big push to “reform” the economy, Reagan changed the compensation laws for CEOs so that they could be paid in stock options. Their income now depended on the value of their company’s stock.
Theoretically, this was supposed to give executives an incentive to make good business decisions, but what it actually did was give them an incentive to skim their bit off the top and screw everyone else. Instead of long-term success, the focus was now on boosting stocks as quickly as possible and therefore making as much money as quickly possible.
This is why big corporations are now spending billions and billions of dollars to buy back their own stock — they’re just trying to keep their CEOS rich and happy.
And who do you think suffers as a result of all this? The American worker, of course! Who else?
The money that’s now going towards stock buybacks and CEO compensation packages has to come from somewhere, and it’s coming straight off the backs of everyday working Americans.
Even though workers are now more productive than ever, wages have stagnated since the Reagan era. CEOs are quite literally sucking up the profits that used to be shared more equally between management and workers.
This is the “quarterly capitalism” problem Hillary Clinton has been talking about, and it’s the most glaring example of how the Reagan Revolution fundamentally transformed our country, and transformed it for the worse.
Before Reagan, there was an informal agreement among all Americans that the economy served us, not the other way around, and we had things like tariffs, taxes, and unions to make sure things stayed this way.
But then Reagan flipped the cards. He smashed unions, slashed taxes, and gutted regulations, and, as a result, we now serve the economy and the people who run it.
This isn’t democracy; it’s feudalism, and it’s just the latest example of why need to undo the Reagan Revolution once and for all.
http://www.thomhartmann.com/blog/2015/07/who-does-our-economy-serve
