Saturday, December 5, 2015

December 5 2015. Share Buybacks revisited—a symptom of entrenched corporate corruption, and massive under-investment in the real economy.




Image result for niagara falls

There is a positive Niagara (see picture in case you were wondering) of data demonstrating that the U.S. economy is being singularly ill-served by the current American Business Model—yet the status quo seems near impervious to reform.

I guess that should scarcely be a surprise because the ultra-rich have long had the levers of power in their hands—and they like things just the way they are. In fact, they have become downright comfortable with what they have achieved. The offensive they started in the 70s to roll back the gains labor had made under the New Deal, and after after WW II, has been such a resounding success that the very special status of the ultra-rich has become the accepted norm—the American Way, so to speak. It has become institutionalized and hereditary.

It is a widely accepted fact that the ultra-rich and their followers are no longer subject to the same rules, regulations, and restrictions as other Americans. Look no further than the Great Recession to appreciate that even the most blatantly criminal behavior corporate behavior no longer has consequences. Forget drug-dealing. that’s for the little people. Financial criminality and corporate corruption, within the free-fire financial zones of wars, are the way to go.

Of course, for the latter to really take off, you need wars. Not a problem as far as the American Business Model is concerned.

We do what has to be done to make a profit—regardless of what it is.

We have friends in the highest places. We should. We put them there. We know how to create and sustain virtually indefinite wars to create the necessary financial opportunities. We’ve had plenty of practice since WW II—and we made out like gangbusters in Vietman.

Yes, the U.S. lost the war—but WE didn’t. Don’t confuse the U.S. with the MICC.

One is a country—rather past its prime. The other, the U.S. Military Industrial Congressional Complex, is a de facto syndicate that ensures that the money flow continues on an unimaginable scale. And, yes, needless to say, it flows to us. What would be the point otherwise!

Blood flows too—but not our blood. The rest, whether it be American, hostile, or someone caught in the wrong place at the wrong time, is just a cost of doing business. And, it’s a cost we don’t bear.

We, The (Ultra-Rich) People run things—and we should not be confused with the little people who do what they are told—and who are kept distracted, deluded, disciplined and denied—and otherwise socially controlled.

They, the little people, outnumber us massively, but they are ignorant, divided, and dependent on us for their every need—so they do what they are told. They are too scared not to. We keep them confused, insecure, fearful—indeed downright frightened—and we keep them financially struggling and in debt. We feed their prejudices and play on their emotions. We threaten them with financial doom—and with terrorism. We squeeze their pay, deny them job security, increase their copayments, refuse them worker rights or paid vacations, laugh at gender equality and maternity leave, eliminate their defined pensions, deny them accurate information—and make sure they never have a chance to organize against us.

It’s not difficult. We control the political and legal systems and the media—and , thanks to computerization and Big Data, we now know everything they do. They can’t organize without our knowing—and then we respond. We own virtually all the resources of power. We have access to the most powerful surveillance systems in the world. We retain the most talented and expensive lawyers. We finance the elections of most of the judges. We make sure that the police, who we have made heavily militarized, know which side their bread is buttered. They have no chance against us. 

Trade unions have been rendered near irrelevant in the private sector—and badly bloodied in the public—and who else can challenge the dominance of the rich and privileged.

So, who else is going to push for reform?

The obvious answer is the American people by way of the electoral process. That is what the Constitution dictates—and that is what it is there for.

But, the ultra-rich have learned to game the Constitution—and have made the Republican Party little more than a Right Wing extremist tool.

Meanwhile, all too many Democrats are in thrall to corporate interests as well—particularly financial interests. That is where the money is.

So, who is representing the typical American?

No political party—as matters stand.

SHARE BUYBACKS & DIVIDENDS AS A PERCENTAGE OF NET INCOME (blobs above the line indicate an expenditure on share buybacks greater than earnings).

The purpose of share buybacks is to push up the corporate share price so that corporate CEOs and other senior executives, who are largely paid in shares, can make ever more money.

The money that is used, which comes from earnings and borrowings, should be being used for productive investment which will prepare the corporation concerned for the future (Training; Research & Development; Plant & Equipment).

Instead, the bones of a trillion dollars a year is going into this kind of dubious financial engineering.

It pushes the stock market up—but leaves the real economy short of investment—and less able to compete internationally.

Productivity suffers (and is suffering).

You end up with a hollowed-out economy which, superficially looks successful enough—if you focus on such inadequate metrics as GDP growth and employment—but which skips over underlying weakness like an over-valued stock market, massive under-investment elsewhere, a deteriorating infrastructure, ever climbing debt, gender inequality, inadequate productivity growth, loss of international competitiveness, and most of the working population living in economic insecurity.

And then we have the catastrophic state of U.S. healthcare—and health—combined with the disturbing fact that Americans, on average, die two years or more sooner than the citizens of other developed nations.

Less an American Dream than a nightmare.

Share buybacks used to be illegal—and should be again.

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