News Release

Can We Really Build Infrastructure When Wall Street Games the System?

Can We Really Build Infrastructure When Wall Street Games the System?

WILLIAM LAZONICK, william.lazonick@gmail.com
Lazonick is professor emeritus of economics at the University of Massachusetts and president of the Academic-Industry Research Network and has written several papers for the Institute for New Economic Thinking.

He is co-author of Predatory Value Extraction: How the Looting of the Business Corporation Became the U.S. Norm and How Sustainable Prosperity Can Be Restored (Oxford University Press, 2020).

He argues that Wall Street machinations like stock buybacks are effectively “distributions to shareholders that manifest the legalized looting of the U.S. business corporations, rendering employment unstable and incomes inequitable.”

He adds that without regulations on stock buybacks the Biden infrastructure plan will simply send large sums of money to companies that will go right out the door into stock buybacks, just as happened with the Trump taxcuts. To ‘build back better’ the companies need to invest the money in their products and workers, not send it to Wall Street.

He said today: “The Biden administration’s plans to ‘build back better’ must address the transformation in corporate resource allocation that has underpinned the increase in income equality in the United States since the 1980s. The key characteristic of the rise in income inequality has been the concentration of income among the richest households, driven in large part by distributions of corporate cash to shareholders. Over the decade 2010-2019, companies included in the S&P 500 Index spent a total of $5.3 trillion on buybacks, equal to 54 percent of net income, and another $3.8 trillion on dividends, equal to 39 percent of net income.”

See also from the Institute for New Economic Thinking: “Stock Buybacks Stand in the Way of Biden’s Infrastructure Plan” by Lynn Parramore.