Thu 7 Mar 2019, 05:03 AM | Posted by editor
LETTER from John Pickard, Brentwood Labour Party, personal capacity
It is hard to get your head around a figure like $8tn. It means $8,000,000,000,000. But that is the windfall that the shareholders of private industry have had in the last ten years, largely as a result of so-called “quantitative easing” by central banks in the USA, UK, Japan and Europe, according to the Financial Times.
Quantitative Easing is the mechanism used by central banks in the last ten years to keep the world capitalist economy ticking over. In effect, it involves these central banks printing money, which is then available to private banks and big business. But there has been no upsurge in investment in infrastructure, education, transport, roads or other useful public utilities. On the contrary, these have been cut to the bone.
What QE has done is feed money into private hands. But even here there has been no surge in investment in new plant, equipment or jobs; what there has been is a surge in companies buying back their own shares. That does two things: it raises the value of the shares (and this goes a long way to explain record high stock market levels) at the same time reducing the number of shares in circulation. But secondly, it also throws huge amounts of money at the shareholders who are selling (usually part of) their shares.
According to the Financial Times, “US companies handed their shareholders a record $1.25 trillion last year, through dividends and buybacks.”
Since 2009, when buy-backs are added to the dividends given to shareholders the owners of businesses have enjoyed not so much a shower, but a Niagara Falls of money, over $8 trillion, to be precise. According to the FT, “that would at current prices be more than enough to buy all the leading listed companies in the UK, France, Germany, Spain, Italy and Sweden. It is nearly 5 times the size of Russia’s annual economic output and almost equal to the value of all the gold ever mined”. Some windfall.
The buy-back and dividend bonanza is not unique to the USA, because “Buybacks have become an international phenomenon with the global equity market last year shrinking at the fastest pace in two decades, as repurchases overwhelmed the issue of new shares and fresh listings”.
As the poor get poorer and are impoverished by austerity the super-rich get richer and richer. Marx anticipated in the Communist Manifesto 170 years ago that there would be an ever-greater concentration of wealth in fewer and fewer hands. When we are dealing in $trillions, that is precisely what is happening.
