Who Does Our Economy Serve?

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.

Comments

chuckle8's picture
chuckle8 8 years 47 weeks ago
#1

I wish Thom understood how options work. If he did, his head would explode even more. I barely understand how it works, but enough to know that something is even more rotten than Thom thinks it is. The CEOs are paid in options. When companies buy back their stock, the stock may go up 10, 20, 30% or a little more. However, the options may go up 200, 300% or more. I witnessed this on SanDisk (SNDK) when I was selling some options on stock that I owned. I yelled at my broker that San Disk should invest in more research. He said they had control of the market and didn't have to. Since then the stock has dropped 40%. Of course, the CEOs have made there millions off off their options and care not that the stock dropped. They may actually like the stock dropping because they can play the game again.

mathboy's picture
mathboy 8 years 47 weeks ago
#2

We need to know what happened to Sandra Bland's cell phone, but we also need to see the dash cam footage from the second police car. At one point Bland was saying, "Thank you for recording." Who was she talking to? Was it the black female cop? Has any journalist interviewed her?

agelbert's picture
agelbert 8 years 47 weeks ago
#3

Thom said, "This isn’t democracy; it’s feudalism,"

Of course. And that modern version of feudalism extends to the voting machines...

Tell us what we can do about those voting machines and their software. Please WRITE articles on that that, Thom. That is a BIG issue. That is a PIVOTAL issue. If it is not addressed so the powers that be don't set up a contrived horse race complete with contrived polls and contrived "voting" results, NOTHING is going to change, Thom!

Right now Hillary is promising the MOON in Renewable energy when we know it's 100% bolld faced campaign promise mendacity. We KNOW her track record. We KNOW she backs dirty energy and corporate oligarchy all the way!

We KNOW Senator Sanders is the one who actually wants Renewable Energy because he is the one who actually has proposed, more than once, to eliminate the fossil fuel (and nuclear power) subsidy theft that keeps Renewable Energy from competing on a level energy playing field.

PLEASE, Thom, take Hillary's slick video on Renewable Energy apart piece by piece. SHOW AMERICANS the nuts and bolts of the mens rea modus operandi of Hillary. POINT OUT that Hillary says many truths about Renewable Energy in her video in order to undermine Senator Sanders, NOT because she has any intention of increasing Renewable Energy market share.

EXPOSE Hillary for the lackey of the fossil fuel corporations that she has ALWAYS been.

It's a great video. Too bad she does not believe a word of what she is saying, and never will. She is bought and paid for. Senator Sanders is our only choice.

Aliceinwonderland's picture
Aliceinwonderland 8 years 47 weeks ago
#4

agelbert, I appreciate you pointing that out.

Mathboy, I know it's off-topic but thank you for bringing that up. Sandra Bland has been very much on my mind, and I sure would appreciate watching another video of that incident.

2950-10K's picture
2950-10K 8 years 47 weeks ago
#5

This is why we need socialism once and for all........"an economic system characterised by social ownership of the means of production....a cooperative management of the economy....a system organized to directly satisfy economic demands and human needs....instead of for private profit which is driven by the accumulation of capital."

Unrelated: I'm more than willing to bet that the cop who pulled Sandra Bland over is an obsessive Fox News watching right wing SOB!.....just like the recent movie theater killer, but that won't be mentioned by the corpse media.

Kend's picture
Kend 8 years 47 weeks ago
#6

I miss you guys. You remind me how lucky I am. The fact that you even suggest that you should be entitled to make decisions for a private company reminds me how lucky I am to be a conservative. It is none of anyone's business what a private company does. That's like me coming to your house and telling you that you smoke too much weed.

RLTOWNSLEY's picture
RLTOWNSLEY 8 years 47 weeks ago
#7

Hillary's speech is actually one of the more compelling talks that she has given and I'm not one of her fans. Short term profit has been a significant problem that was steadily building through the seventies and went into overdrive in the Reagan era. The most glaring effect of this questionable policy was the reduction in product life cycles that were typically five years, back when our economy was in far better shape, and that time was rapidly reduced to twelve months or less, an insufficient amount of time for manufacturing processes to be fully implemented as well as distribution and marketing campaigns fully established. Often new products would hit the store shelves about the same time the product was discontinued in favor of a newer version. Likely the effect of the indoctrination fed to a new generation of PhD. managers graduating from new age business schools popping up on university campuses all over the country. A business philosophy that came straight out of Wall Street and the corporate board rooms that totally disregarded the realities of the operational side of the business.

DAnneMarc's picture
DAnneMarc 8 years 47 weeks ago
#8
Quote Kend:I miss you guys. You remind me how lucky I am. The fact that you even suggest that you should be entitled to make decisions for a private company reminds me how lucky I am to be a conservative. It is none of anyone's business what a private company does. That's like me coming to your house and telling you that you smoke too much weed.

Kend ~ You of all people should know that it is our business what private companies can do. You should take a walk through an American company. Somewhere, in plain view, all companies in this country are mandated by law to display all their licenses, permits, and federal regulations that pertain to business operations and employees. Without public approval and regulation, no business is allowed to exist in this country. The idea that what a business does is none of our business is both naive and absurd.

DAnneMarc's picture
DAnneMarc 8 years 46 weeks ago
#9

Agelbert ~ I'm with you 100%. I intend to vote by record. Hillary's record - and that of her husband - has been dismal at best concerning foreign affairs, fossil fuels, Constitutional and human rights, and trade. She had a chance to come out and condemn the TPP. Instead she spouted some nonsense about wanting a "better deal." A better deal means she supports the TPP.

My apologies to Thom and any other progressives out there who feel that Hillary is an acceptable option in this race. I do not share those feelings. As far as I am concerned any SCOTUS judge she would appoint would be just as Wall Street and Corporate friendly as any nominee of a Republican would be. Perhaps not as bat crazy of a right wing nut job, but every bit as ineffective where it really counts. You are fooling yourselves if you believe for one second that Wall Street and Corporations donate millions of dollars without expecting to have the final say in exactly who gets nominated by their candidate of choice.

I do not donate one cent to the DNC. All my donations go directly to the Bernie Sanders campaign. I have also signed a pledge vowing to write in Bernie Sanders in the general election if he is not nominated. I wrote that on my donation request form I received from the DNC and sent it back in lieu of a donation. I sincerely hope they got the message loud and clear.

DAnneMarc's picture
DAnneMarc 8 years 46 weeks ago
#10

Aliceinwonderland ~ I'm with you concerning the Bland case. She is the first of two African American woman who were recently jailed by police and found dead shortly after. Obviously something happened that warrants an investigation. The idea that the police department is doing everything it can to sweep these deaths under the rug show that they too are complicit in the crime. The FBI needs to step in and conduct a thorough investigation. If misconduct is responsible, not only the officers involved; but, the Chief of Police and any of his officers involved must also be held accountable. No one is above the law; and, last I looked, aiding and abetting a homicide carries the same penalty as the murder itself. It's time we start making some big examples out of officers who commit police brutality - regardless of the reason.

mathboy's picture
mathboy 8 years 46 weeks ago
#11

Actually, kend, it's more like going to someone's house and telling them they can't abuse their children. You can't say that sort of policing is off limits under the idea that it's internal to the family. When a business keeps its workers at insufficient pay, so that the CEO can live in even greater luxury, it's morally criminal.

dianhow 8 years 46 weeks ago
#12

Angry Racist TX cop who treated this women so badly will likely get away with it. Its Texas after all. US anti middle class pro wealth policies, loopholes, laws, the dying of middle class is terrifing . I used to be firmly middle class., paid lots of taxes, lived modestly . Then my husbands hard won pension was Slashed...Now as a 72 yr old widow / caretaker I've had to spend our life savings just to get by and help my sick daughter. - pay health care & RX meds which keep going up. Last refill for insulin is

$ 520.00 . Soon I'll be broke unless I die first . I am so sad & disgusted...

dianhow 8 years 46 weeks ago
#13

I was a GOP voter for years GOP changed Not me . GOP wants to privatize everything, kill ( as they call it Reform ) SS & medicare , which millions paid into for their old age. GOP greatly favors , passes anti middle class anti fair wages policies, laws, Deregulation of Corps, airlines , banks & more. NO safe guards to reign in greed . US has been on a SLow ( under the radar ) path to lower wages, busted labor unions, harmful court decisions, Citizens United should be called Billionaires United. Money is NOT Speech if it is that means those w/o lots of money have LESS Speech . Corps are NOT persons . MY husbands hard won pension was slashed ( 10 hr days in a factory ) We saved and planned for our old age for years , then our plans were just wiped out ! If we were a bank or huge corp We would NOT lose anything . We'd be more wealthy than ever . How is that moral or even legal in a democracy ? What became of the America I grew up in ...Im ready to go....

w1ders's picture
w1ders 8 years 46 weeks ago
#14

I agree with those that point out whatever Hillary says is nothing like she will do. She will only try to compete with Bernie because she knows she has to. That is all it is to her, talk. She will do as told by big money and everyone with an ounce of thought knows that. It has been her M.O. for a long, long time. Bernie is the only solution and it will take all of us to stand with him if we ever want to see America great again. I too will write his name in if need be. You can believe what Bernie Sanders says.

donmjr 8 years 46 weeks ago
#15

Uh, you missed something kend... these are NOT private companies. These are publicly traded companies that we're talking about.

https://en.wikipedia.org/wiki/Public_company

tom kauser 8 years 46 weeks ago
#16

billionaires and Federal Reserves and multinationals are money hoarders by design. Billionaires hoard to retain power to both build and destroy. Federal Reserves hoard to enrich themselves at the expense of the worker. even after creating trillions of free reserves over nine years the chair can straight face exclaim "inflation is well below its 2% target" and of course the multinationals hoard in fear of having their money used up on fruitless schemes to give back to community? massive amounts of world income is wasting away in vaults of frightened bankers trying to increase their insecurities ?

chuckle8's picture
chuckle8 8 years 46 weeks ago
#17

tom krauser -- You are being sucked into the ignorance of non-economists. Robert Reich in his book, Aftershock, points out any healthy economy needs at least a 4% inflation rate (that 4% is the CPI number not real inflation; which means real inflation needs to be even more for a healthy economy).

chuckle8's picture
chuckle8 8 years 46 weeks ago
#18

DAnneMarc -- Be sure to save some of your money for Alan Grayson and Elizabeth Warren.

chuckle8's picture
chuckle8 8 years 46 weeks ago
#19

Kend -- I hope you realize that you have self-identified as a cancer cell.

tom kauser 8 years 46 weeks ago
#20

ignorance of wondering what happened to 20 trillion in credit? i happen to believe that money is everywhere its just not moving around much or nearly enough because of hoarding? your book may be dated and should be updated to reflect the economic potential of having 18 trillion dollars worth of growth frozen on the Fed balance sheet? or 40% inflation is do able why stop at 4%? Sadly OUR ECONOMY HAS AN 18 TRILLION DOLLAR BALANCE SHEET OVERHANG THAT MUST BE SOLD OFF INTO THE ECONOMY BEFORE GROWTH CAN BEGIN meaning massive deflation BUT STAY AWAY FROM BONDS because INTEREST RATES COULD SOONER rise than FALL? Get out of economics and get a Brit. LIT degree which is currently more marketable?

tom kauser 8 years 46 weeks ago
#21

the economy operates to pay interest on the national debt being housed at the FEDERAL RESERVE BANK OF NY. to get back to even the economy will have to work triple? work for the FED and the bankersters themselves and than the GDP? The Fed draws out its cut and than the rest of the 350 million Americans work for themselves after paying off the bankers national loan? being the third party on a two party loan really sucks once you realize it!

Aliceinwonderland's picture
Aliceinwonderland 8 years 46 weeks ago
#22

Reply to #12 & #13: dianhow, it hurts to read posts like yours. It pains me to know how much hardship you’ve had to go through to see what the GOP is really about. It hasn’t always been this extreme, I’ll grant you that much. But if it wasn’t for the GOP, we would have had a single-payer, cradle-to-grave healthcare system in place long before you or I were even born.

I cannot over-emphasize the importance of us voting these toxic clowns out of office. The president can’t do much without a Congress he (or she) can work with.

The GOP’s policies, and those of corporate Dems, have been LITERALLY killing and bankrupting American citizens for decades. These psychopaths who’ve taken over our Congress are dangerous. With all our divergent points of view, we hold one thing in common: the curse of living in such “interesting times”. If you’re not a billionaire, you’re vulnerable whether you know it or not. We need the sort of mass movement Bernie Sanders is calling for, and we need it NOW. Or we’re toast. It’s really that simple.

tom kauser 8 years 46 weeks ago
#23

crusaders and grasshoppers

tom kauser 8 years 46 weeks ago
#24

everyone has got to be stupid when you owe the Fed so much!

chuckle8's picture
chuckle8 8 years 46 weeks ago
#25

tom kauser -- The reason for 4% inflation vs 40% is based on historical data (not by me, but Thom has mentioned it and Dr. Reich used it). The Fed founding policy is to balance inflation and unemployment. With only the money supply in their control, I think they do a wonderful job; especially when the gop policy, as described by Jude Winnewski, is to destroy the economy while a democrat is in the WH.

Using your words, "hoarding" and "moving around", the job of the govt is too increase demand so business will quit hoarding cash and invest it in the economy.

If you think eliminating the $18 T debt is the answer, you should look at the only time the budget has been balanced. Andrew Jackson did it and it led to the worst economic crash in the US economy. Of course, that was long ago. However, every time the deficit becomes small, the economy takes it on the chin. You should look at the DOW about 1 year after Clinton drove the deficit to nearly zero. The metric one should be looking at is the ratio of the debt to GDP.

Who should get out of economics? I am not in it.

Roland de Brabant's picture
Roland de Brabant 8 years 46 weeks ago
#26

Simple again, Thom. The economy serves the trust fund babies who own it.

Roland

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