The rising share prices seen daily are a symptom of the priority given to shareholder return over wages in industries of the developed world.
Health insurance and utility cost perpetual rising prices exemplify the fact that prices must rise by 10+% a year to satisfy shareholders desire for earnings growth.
Donald Trump and his stoolies falsely stated that corporate tax cuts would flow into higher wages, but this did not happen apart from some minor one-time payments of bonuses.
After the tax cuts profit growth stalls again without more stimulus.
https://www.salon.com/2011/03/29/failure_of_shareholder_capitalism/ Quote: The failure of shareholder capitalism
Companies exist for their workers and their communities -- not just their CEOs and their investors
MICHAEL LIND
MARCH 29, 2011 3:01PM (UTC)
The verdict is in: The Thatcher-Reagan-Blair-Clinton model of capitalism is a failure.
By cutting taxes, slashing wages and destroying unions, the U.S. was supposed to lead the world in high-tech industry. But a recent study by the Asian Development Bank found that the majority of the added value of iPhones assembled in China come from high-tech companies in Japan, Germany and South Korea, whose inputs dwarf those from American companies. For a generation we've been told that the European and Asian capitalist countries were doomed by statism and high wages. Instead, they dominate global high-tech industrial production, while the U.S. continues to be deindustrialized.
Oh, well, who needs manufacturing, anyway? Let the rest of the world make things; we'll invent them and live off the royalties. Right? Wrong. The tech sector employers only a tiny number of Americans -- and offshoring the production of goods invented here will only shrink that number further.
Most Americans work in the nontraded service sector. In the last decade, as the economist Michael Mandel has pointed out, almost all of the new jobs have been created in health, education and government, which share one characteristic in common: low productivity and rapidly escalating costs. The other big growth area, before the 2008 crash, was in the largely unproductive FIRE (finance, insurance, real estate) sector, where high salaries enticed smart young Americans who might have manufactured useful goods and services into manufacturing the toxic financial products that brought down the world economy. The homeland of Margaret Thatcher became even more dependent on a bloated financial sector than the over-financialized U.S.
Still not convinced that the Anglo-American model of the last generation is a failure? Orthodox economists recite the dogma that if productivity goes up worker compensation will follow. But according to the economist Alan Blinder in a Wall Street Journal Op-Ed titled "Our Dickensian Economy" last year, since 1978 productivity in the nonfarm business sector has grown by 86 percent, while real compensation -- wages plus benefits -- has grown only 37 percent. Take out the increased benefits, which tend to be eaten up by cancerous health insurance costs, and the real average hourly wage has not increased in 35 years.
Where have those missing gains from productivity growth gone? To a small number of rich American shareholders, CEOS and highly paid professionals, thanks to "shareholder capitalism."
Shareholder capitalism is the doctrine that companies exist solely to make money for their shareholders. It is frequently contrasted with stakeholder capitalism, which holds that companies exist for the benefit of their customers, workers and communities, not just for ever-fluctuating number of mostly remote and unengaged passive investors who just happen to own stock in them, often without even being aware that they do.
The rise of shareholder capitalism in the U.S. is often dated to an influential article in the Journal of Financial Economics in 1976, titled "Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure" by Michael C. Jensen and William H. Meckling. They argued that shareholders should demand higher returns from complacent corporate managers. The idea of shareholder value was publicized by a 1981 speech in New York by Jack Welch, who had just taken over General Electric, and by Aflred Rappaport's 1986 book "Creating Shareholder Value."
The shareholder value movement sought to persuade corporate managers to ignore the interests of all stakeholders like workers, customers and the home country, other than shareholders. Granting CEOs stock options, in addition to salaries, was supposed to align their interests with those of the shareholders.
The theory had an obvious problem: Who are the shareholders and what are their interests? Most publicly traded companies have shares that are bought and sold constantly on behalf of millions of passive investors by mutual funds and other intermediates. Some shareholders invest in a company for the long term; many others allow their shares to be bought and sold quickly by computer software programs.
Unable to identify what particular shareholders want, CEOs with the encouragement of Wall Street have treated short-term earnings as a reliable proxy for shareholder value. According to shareholder value theory, breaking up a firm and selling its pieces might maximize shareholder value in the short run more than long-term investments that would not pay off for many years. ...