I want to turn next to stock buybacks. I want to make sure everyone understands it because if you
do, it gives you a window into another aspect of capitalism that will make you critical.
Trillions, not billions, trillions of dollars are spent in the United States
probably every year but certainly every other year if you put two years together on buying
back stock. What does that mean? It means- take a company. I'll pick one: General Motors.
The board of directors- those 15 or so people that make all these kinds of decisions and allow no one
else by the way to do so- the board of directors decides to take a chunk of its profits, not invest
them in a better car, not hire anybody, none of that, but instead to use billions of dollars from
their profits to go into the stock market and buy shares of their own company General Motors
shares. Perhaps shares owned by your grandmother, perhaps shares owned by your bank, the usual.
Why would they do that? Because the company, by bringing in big purchase orders for General Motors
shares, will drive up the price of General Motors shares on the stock market. And you know who
that's gonna make happy? All the shareholders, all the people who own shares of General Motors seeing
its price go up will get big smiles. As I've told you many times, ten percent of the people
in this country (the richest ten percent) own 80 percent of the shares. So if you do stock buyback,
the biggest beneficiary are the shareholders. How quaint. You know who's among the top 10 percent of
our people? The members of the board of directors of General Motors who make the decision. So when
they raise the price of the shares, they are helping themselves as shareholders, but it's worse
for many top executives. Their pay package is dependent on how well the stock does. So,
if the stock goes up, they get more salary. So there's another incentive.
And what have they done with this incentive? They've taken it a step
further in recent years. More and more large corporations are borrowing money
to buy back their own shares. In other words, they're loading up their company with debt.
They don't care. After a few years, they won't be the chief executive of that company. They'll go
on and up the chain or retire. They're loading up the company with debt to drive up the price which
gives them a bigger salary and a bigger wealth because they own such shares. And by the way,
who produced the profit that the company had? Of course, all the people who work at General Motors-
all of them but the vast majority of them have nothing to say about what is done with
the profits. They wouldn't use them to boost the share prices because they don't own any shares,
and their wages are not dependent on the value of the shares. That's just the top. They're taking
care of themselves, in short. The job of the mass of the people is to come to work, do the work,
produce the goods, generate the profits and then shut up so that the tiny group at the top (the
executives at the top, the major shareholders) can use that money to buy back their shares in
the stock market and boost their wealth and boost their income. What a system. It's the
most undemocratic imaginable. All the other things the corporation could and should do.
Remember the next time a corporate executive refers to himself or herself as a job creator:
buying back your shares creates no jobs at all.