Record Profits, Record Stock Buybacks: Another Looming Crisis?
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- Published on Thursday, 28 May 2015 04:15
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A Socialist Project e-bulletin .... No. 1123 .... May 28, 2015
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Record Profits, Record Stock Buybacks:
Another Looming Crisis?
Sam Gindin
Has the economy recovered or is it about to sink into another crisis? Do the shenanigans in finance that we regularly read about play a role in developing a stronger capitalism or do they cover up failures that will soon blow up in their faces? These can be mind-numbing questions, but they're questions that activists, in particular, can't ignore.
Profits are a particularly critical indicator of the state of a capitalist economy because they are generally understood to drive investment. Investment in turn has a determining effect on jobs, wages (to the extent that an increase in jobs increases workers’ bargaining power) and a growing tax base that can support social programs. Today, however,... this link between profits and investment seems broken: while profits are booming, investment is stubbornly lagging. How are we to understand this?
For some, there is a simple answer. They square the circle by arguing that profits are actually not doing all that well. But the statistical contortions involved in making high profits disappear is a hard sell, with all the news of corporations sitting on rapidly growing hoards of cash. The head of the Bank of England (and former head of the Bank of Canada), Mark Carney, called this "dead money," lamenting the refusal of corporations to put their profits back to work in the economy.
