Wednesday, September 03, 2014

Wednesday Morning Links

Miscellaneous material for your mid-week reading.

- Eve-Lyne Couturier discusses the rot in the state of Canadian labour negotiations, as workers outside of the 1% are being systematically denied any of the benefit of economic growth.

- Meanwhile, Dean Baker points out that it's only by choice that the vast majority of jobs have been outsourced around the world for the sake of slashing wages, while executive and high-skilled positions have largely stayed put (with far more generous pay). And Margaret Simms highlights the effects of precarious work on workers and their families.

- Nick Carnes writes that the extremely wealthy have thus far won the U.S.' class war in terms of both representation and policy clout. And Harold Meyerson writes that burgeoning equality can be traced largely to corporations' decisions to enrich shareholders in the short term rather than investing in workers and economic development:
Lazonick looked at the 449 companies listed every year on the S&P 500 from 2003 to 2012. He found that they devoted 54 percent of their net earnings to buying back their stock on the open market — thereby reducing the number of outstanding shares, whose values rose accordingly. They devoted another 37 percent of those earnings to dividends. That’s a total of 91 percent of their profits that America’s leading corporations targeted to their shareholders, leaving a scant 9 percent for investments, research and development, expansions, cash reserves or, God forbid, raises.

As late as 1981, corporations directed a little less than half their profits to shareholders, but the shareholders’ share began rising in 1982, when Ronald Reagan’s Securities and Exchange Commission removed any limits on corporations’ ability to repurchase their own stock and when employers — emboldened by Reagan’s destruction of the federal air traffic controllers’ union — began large-scale union-busting. Buybacks really came into their own during the 1990s, when the pay of corporations’ chief executives became linked to the rise in the value of their company’s shares. From 2003 through 2012, the chief executives of the 10 companies that repurchased the most stock (totaling $859 billion in aggregate) received 58 percent of their pay in stock options or stock awards. For a CEO, getting your company to use its earnings to buy back its shares might reduce its capacity to research or expand, but it’s a sure-fire way to boost your own pay. 
What Lazonick has uncovered is the present-day American validation of Piketty’s central thesis that the rate of return on investment generally exceeds the rate of economic growth. Indeed, Lazonick has documented that wealth in the United States today comes chiefly from retarding businesses’ ability to invest in growth-engendering activity. The purpose of the modern U.S. corporation is to reward large investors and top executives with income that once was spent on expansion, research, training and employees. To restore a more socially beneficial purpose, Lazonick proposes scrapping the SEC rule that permitted rampant stock repurchases and requiring corporations to have employee and public representatives on their boards.

Lazonick’s article does nothing less than decode the Rosetta Stone of America’s economic decline. The reason only luxury and dollar stores are thriving, the reason German companies outcompete ours, the redistribution of income from workers to investors – it’s all here, in Lazonick’s numbers.

The lesson for Labor Day 2014 couldn’t be plainer: Unless we compel changes such as those Lazonick suggests to our model of capitalism, ours will remain a country for investors only, where work is a sucker’s game.
- Trish Hennessy looks at the numbers behind the Lac-Mégantic rail explosion. And Jenny Uechl reports that the public will likely be left with much of the bill for the Mount Polley spill.

- Finally, Duncan Cameron reminds us that a combination of core support and low voter turnout might well leave some opportunity for the Cons to cling to power after 2015. But in noting that possibility, it's also worth highlighting the need to counter the former, work on improving the latter, and demand change to the system which allows for false majorities, rather than merely accepting whatever seems like the easiest alternative to put a new face in the PMO.

1 comment:

  1. So re Lazonick - it's just an investment capital bubble then.