How One Economist Exposed A Dirty Corporate Secret

[KamaAina]

http://www.huffingtonpost.com/2015/02/23/how-one-economist-exposed_n_6737100.html

There are many gauges of the depth and breadth of economic inequality, and they often measure what middle-income working people have today against what they had prior to 1980 – that time when homes were affordable, along with doctor visits and college educations. Yet few of the astonishing charts and metrics that have captured this widening gulf explain how it all came about. So when economist William Lazonick pointed a finger at a very specific aspect of corporate behavior, people took note.

In a September 2014 Harvard Business Review article, Lazonick, a University of Massachusetts at Lowell professor, declared that much of the trouble began when corporate America decided to stop funding research and development (which introduces new products, expands the manufacturing base and creates more jobs), and instead concentrate its efforts towards increasing profits through stock buy-back schemes.

“Five years after the official end of the Great Recession, corporate profits are high, and the stock market is booming,” wrote Lazonick. “Yet most Americans are not sharing in the recovery.”

Lazonick identified the top 10 stock repurchasers nationally from 2003-2012. The list included Exxon Mobil, Microsoft, IBM and Walmart as well as four companies headquartered in California’s Silicon Valley – Cisco Systems, Hewlett-Packard, Intel and Oracle.

[mrdmk]

1. This makes perfect sense because the stock market does not add to the economy

If most of the profits are going to stock buy backs i.e. treasury stock, then money is only going to the corporation, not to the employees, stock holders and certainty not to the economy.

[TexasProgresive]

2. In the early 70s I worked in R&D product development

I don't think my job exists anymore.