By Rachel Goldfarb, originally published on Next New Deal
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Why Companies are Rewarding Shareholders Instead of Investing in the Real Economy (WaPo)
Lydia DePillis looks at Roosevelt Institute Fellow J.W. Mason's new white paper on how the shift towards increased shareholder payouts since the 1980s has decreased corporate investment.
If you’ve noticed the steep upward trajectory of the stock market over the past few years, looked around and wondered why cash doesn’t appear to be raining down upon your friends and neighbors, you’d be justified in wondering: What’s going on here? If corporate America is doing so well, shouldn’t we feel like things are getting better, too?In the past several years, profits have been increasingly paid back out to shareholders, rather than invested in hiring more people and paying them better. And lately, companies have even been borrowing money to make those shareholder payouts, because with interest rates so low, it’s a relatively cheap way to push stock prices higher.
That’s according to a new paper from the Roosevelt Institute, a left-leaning think tank that's launching a project exploring how the financialization of the economy has unlinked corporates from the well-being of regular people.
Read J.W. Mason's paper, "Disgorge the Cash: The Disconnect Between Corporate Borrowing and Investment," here.
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