By Rachel Goldfarb, originally published on Next New Deal
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Corporate Borrowing Now Flows To Shareholders, Not Productive Investment: Study (IB Times)
Owen Davis reports on J.W. Mason's new white paper, "Disgorge the Cash," explaining how the paper fits into a growing body of research that suggests flaws in our basic understanding of economics.
How is it that amid stiff market competition and increasing debt loads, companies have found so much money to spend on shareholders?A new paper by Mason helps explain the trend. Starting in the 1980s, Mason argues, corporate executives increasingly prioritized pleasing shareholders over making the meat-and-potatoes investments of the kind that built the transistor, the 747 and the middle class. As a result, he writes, “Finance is no longer an instrument for getting money into productive businesses, but getting money out of them.”
Mason’s study joins a growing body of research that suggests some of our most basic assumptions about the economy might be off -- or at least woefully outdated. “A lot of our ideas about corporate finance are still based on this older idea of how the world works,” Mason says.
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