A “license to loot” is what our guest, economist William Lazonick, calls stock buybacks. Until the Reagan Revolution, stock buybacks were considered market manipulation and at the very least are an unproductive use of profits used only to pump up the stock price and enrich upper management, while neglecting workers’ wages, capital expansion, and innovation. Ralph and Professor Lazonick break it all down for you.
William Lazonick is Professor Emeritus of Economics at the University of Massachusetts Lowell. His recent work includes Predatory Value Extraction: How the Looting of the Business Corporation Became the US Norm and How Sustainable Prosperity Can Be Restored, and the forthcoming book Investing in Innovation: Confronting Predatory Value Extraction in the U.S. Corporation.
The ideology that enables buybacks, that makes a lot of people including economists say, “Oh, they’re just fine. The money’s just going to the economy,” is what I call the myth of the market economy—the way in which we get capital formation in the economy is just by money zipping around. But it doesn’t work that way. The money has to stop somewhere.
William Lazonick
It’s not because the United States does not have the capability to do these things— the capability is in the wrong hands. And it’s being wasted and destroyed. So it’s not simply the amount of money that’s making people rich. But those people who are getting rich are actually getting rich by helping to destroy the industrial base of the United States, including the middle class.
William Lazonick
These giant companies— these US companies that grew in the USA on the back of their workers, went to Washington for subsidies or bailouts when they were greedy or in trouble, and had the US Marines defend them around the world— are not only disinvesting on a massive scale in the necessities for a productive economy. But they are engaging in the ironic trend that can be called the corporate destruction of capitalism, whose base, in essence, is investment.
Ralph Nader
While these corporate bosses insist on massive domination of our political economy—from Washington to Wall Street— they’re not delivering. For the economy, for the workers, for the people who are trying to make it through every day and protect their families and their descendants. In behaving this way, they have reached a historic level of conflict of interest with their own companies.
Ralph Nader
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This content originally appeared on Ralph Nader Radio Hour and was authored by Ralph Nader.