Billionaire Paul Tudor Jones gave an interesting talk at a TED conference this week. He argues that the ever increasing income inequality cannot continue indefinitely. Article
I thought that the purpose of profits was to plow them back into the business to create more and better products and services. Instead, companies are now using much of their profits to increase dividends and buy back huge amounts of their stock. Great for the share price, but it adds to the wealth of the minority of people who own stocks and adds little to societal wealth. (N.B., I own stocks and like dividends and stock buybacks as much as anybody.)
I own shares of Yahoo. They had the dumb luck to own hundreds of millions of shares of the giant Chinese online commerce company Alibaba which recently had the largest IPO ever. Is Yahoo going to invest that 35 billion dollars to build their core business which is valued at zero currently? No, they are going to spin off the Alibaba shares to a new company, “Spinco” :rolleyes: in order to not have to pay taxes on the 35 billion. Apparently this 35 billion will sit in this shell company until either they slowly sell shares to minimize taxes, or more likely Alibaba will just buy it all up as a huge stock buyback. So, we have minimal taxes and increased share price for owners of Yahoo stock. Where is the benefit to American society?
The article I linked to is not very long; I invite you to read it.
PTJ’s views match mine to a “T”. I’m interested in what others think.
James Michener alluded to this in his novel Hawaii. The immense disparity of wealth, with some 95% of Hawaii’s land owned by only a few dozen families, could only be resolved by breaking up the estates, and that must happen. It would either come via taxation, or by revolution.
However, there is a third alternative, and that is a sufficiently harshly policed state where revolution is not possible. There are places on earth was vastly worse wealth disparity than the U.S. could even dream of, and they are maintained in stability by harsh laws and oppressive policing.
It could happen here. (But I’m betting on taxes, instead.)
I used to talk about a Jacobin-style revolution, and I think it can still happen in many places, but I think that in the USA we’ve already transitioned into an Orwellian permanent régime. What we see in the USA today is not a society that’s capable of revolution.
Agreed. The problem is that America today has pretty much zero class consciousness going on, labour unions are basically non-entities, while at the same time the unwashed masses are being industriously set at each others’ throat over bullshit (when they’re not just being drowned in distractions and apathy).
I mean, when you’ve got half of the people whose life is being thoroughly shat on by the New Ancien Régime actively clamouring for it to not only stay in place, but become even more fucked up and unbalanced in every conceivable way, good luck getting started on eating the rich.
Besides, should the revolution somehow come it seems like every two bit police department has fucking tanks these days anyway, so…
I think he argues that capitalism creates a situation that helps some people conclude their own moral rights are exceptional, and act accordingly, and that capitalism continues to work to whatever extent it does because much larger numbers of people don’t think this way. But it’s not necessarily stable. He cites Italy as an example of a place that has descended into asshole capitalism, where capitalism’s grand function of facilitating material wealth and freedom to pretty much everybody has effectively been hijacked. He describes mechanisms such as the law and politics and public disapproval as possibly countering asshole capitalism without revolution. But he sees the US at a tipping point, and the future uncertain.
Where did you get that idea? Why do you think people invest in companies?
Now, it certainly is true that one purpose of profits can be to do as you say, but that’s not the ultimate purpose. The ultimate purpose is to make money for the owners/investors.
Any thoughts as to what would happen post-revolution? I imagine the results will likely be ghastly and not what the initial revolutionaries envisioned.
Also, hasn’t the relative wealth of the ‘average’ person increased dramatically over the past 100 years? That is, we live better (technological advancements well beyond anything thought possible even 50 years ago), wealthier lives than any point in history?
I’m betting on the ‘police state’. The government is supposed to protect the People from corporations. (See the actions of Teddy Roosevelt.) Today the corporations are the government; or at least they are firmly entrenched within it and are gaining more power. (See ‘corporate personhood’ and Citizens United, for examples.) In order for the People to regain control, the People need to vote for curbs on corporations. Half of the voters have bought into the corporate propaganda, and the corporations’ propaganda machines (talk radio and FOX ‘News’) keep them brainwashed. The Internet allows people to spread information, true and false. Since Americans are lazy and not given to introspection (IME), the propaganda tends to gain more traction than factual data. ‘A lie will go round the world while truth is pulling its boots on,’ as it were.
Now, these people who hate the government so much tend to be armed – specifically to protect their rights. But by the time they realise their rights have been usurped by the elite, it will be too late for them to do anything. Or they will continue to trust their corporate overlords, and will continue to do what they are doing now and blame scapegoats for their misfortunes. The corporate government will keep the People under its boot, and the People will attack the targets the elite tell them to. The rest of the world will shake their heads and try to tell people that they can take back the government, but the People will not listen to Socialists.
1984 will be banned, or else people who have read it will be kept under surveillance.
Do you deny that corporations are recognised as ‘persons’, and thus under the First Amendment have the right to give money to politicians? Do you deny that corporations and their owners such as the Koch Brothers largely support the Republican Party? Do you deny that politicians tend to do what their donors wish them to do? Do you deny that Republicans are voted for by people who hold Christian tenets more important than social ones? That these people tend to live in poorer areas of the country? That these people fear The Other (gays, Muslims, Jews, Blacks, Hispanics, etc.), and blame The Other for effectively ‘stealing’ their hard-earned money? Do you deny that Fox ‘News’ is nothing more than a propaganda machine, and that the people who vote for the Party of Corporations tend to get most or all of their news from there?
The GOP is not the Party of Lincoln. It’s not the Party of Roosevelt. It’s not even the Party of Reagan.
Unions are deemed to be a person as well. Unions give more money to the Democrats then the Koch brothers do to the Republicans. MSNBC is a propaganda machine for the Democrats.
See, I can do this too. And last time I checked, it’s not mandatory that one watches Fox News.
Theoretically, people are investing in companies to make money by the company being successful, and increasing profits for the future value of expected earnings growth which is reflected by rising share prices.
By increasing the share price by excessive (compared to historical norms) dividends and stock buybacks, the company is not increasing its future earning potential, but rather just liquidating itself to enrich current shareholders.
I keep seeing more and more “activist” investors who buy a position of 1% or less of a company’s stock and then pressuring the company to raise its share price for short term gains, not what is best for the company for the long term. They want to make a quick buck and run. They couldn’t care less about the future of the company. In the case of Yahoo, an activist investor kept pushing for Yahoo to buy AOL which may have created some synergies and increased profits but would do little for future growth.
The comparison between all unions and the Koch brothers is a bit disingenuous. That would be like me saying that corporations (implying ALL corporations combined) spend more money on Republicans than some local trade union spends on Democrats. True but meaningless.
The correct comparison would be all Union support of Democrats versus all Corporate support of Republicans. I don’t have figures but I suspect that corporations vastly outspend unions in political donations.
And the fact that watching Fox News isn’t mandatory strikes me as a non-sequitor. It’s true but I don’t think anyone here claimed otherwise.
Income inequality is a result - consequence - and not a root cause or problem. It cannot be eliminated short of governmental control that would make the Stalin era seem libertarian. Neither legislation nor punitive taxation will ever do more than make the problem morph.
But a revolution of the truly affected would squash it to meaningless marginalia.
This is incorrect. The purpose of a corporation is to maximize shareholder wealth. Investing profits into projects that increase future expected earnings is one way of doing so.
The corporation can expand an existing product line, create a new one, invest in more modern & efficient PPE, extend into new markets, etc. But each of those projects are evaluated against ROI. If the ROI is not positive, the corporation won’t invest in it. If there’s not enough positive ROI investments in itself that a company can make, it should return the money to shareholders through dividends and stock repurchases.
People also invest for dividends. There is nothing magical about waiting to make money until you sell your stock. Think of owning a rental property. When you collect rent, you don’t necessarily plow all the rent money back into building improvements, expecting to make a profit long term when you sell the property.
False dichotomy. See above.
Then I would advise you not to invest in such companies. Was someone forcing you to do so in the past?
I do not deny that. It is true now and was true in Teddy Roosevelt’s time too.
Yes, I deny that. Firstly, no individual is the owner of any corporation by definition.
Second, corporations donate large amounts to both Democrats and Republicans, rarely favoring one party by a huge margin. In some election cycles, Democrats have gotten more from Wall Street.
That’s an ill-defined question. What’s a “social tenet”? In any case Republican voters are a huge group and a vast diversity of viewpoints.
The poorest city in the country is Detroit, where the voters are overwhelmingly Democratic and have been for many decades.
Deny it. Millions of Republicans are gay, Muslim, Jewish, Black, or Hispanic. There’s no evidence that Republicans enough masse fear those groups or accuse them of stealing anything.
I’m unaware of any party named “the Party of Corporations”.
I deny that any of your predictions are likely to come true. Alternatively, you could give us a timeline for them and we can see for ourselves. And if you claim it’s sometime in the distant future, then we can easily dismiss it as an unsupportable assertion meant to appeal to emotion rather than a logical argument to be taken seriously.
You’re picking a nit. Who are the major stockholders of Koch Industries?
Look at who is in the majority of both houses of Congress. Look at who is trying to give free money to corporations. Look who is giving money to that party.
That there should be no State Church, which Republican voters are trying to get – not as an official church, but by passing laws that are very strongly associated with their religion. Support freedom of choice nor not, but don’t force your anti-choice religious doctrine upon people who may not follow your religion or subset of religion. Yes, Republicans are diverse. But they are the party that wants to remove the freedom women have over their own bodies. They are the ones who are pushing religious doctrine upon civil contracts. (Hint: Marriage is Civil; Weddings may be religious.)
So what about Detroit? Look at a map. Mississippi and Alabama, for example, have more poor people than Detroit, and they vote overwhelmingly Republican. The poorest states, which tend to vote Republican, are predominantly in the South
Seriously? Every time I read about hatred against Muslims (‘America is a Christian Country!’ ‘We should deport all Muslims!’) the comments are coming from right wing voters. Every time I read a comment to the effect of ‘Why should the government take my money just so they can give it to Those People who sit on their porches and have babies they can’t afford and do drugs all day?’ it’s from ‘Red’ voters. Republicans are always pushing for lower taxes on corporations, voting to give corporate welfare to corporations, increase military spending (which primarily benefits defense contractors), and at the same time restrict people’s access to education, food, and housing. They pass laws that overwhelmingly disenfranchise non-Whites.