So excited to be launching our new Financialization Project. Check out the website here. Part of the goal of the project is to define financialization, and we’ve focused on the changes to savings, power, wealth, and society that have occured over the past 35 years. We’ll have more there soon, but for now check out the general idea here.
We’re also releasing our first paper, “Disgorge the Cash: The Disconnect Between Corporate Borrowing and Investment,” by Roosevelt fellow J.W. Mason. There’s a great writeup of the paper by Lydia DePillis – “Why companies are rewarding shareholders instead of investing in the real economy” – at the Washington Post.
There’s a ton in there, from the key intellectual, ideological, legal, and institutional changes that brought about the shareholder revolution, to reasons to doubt a credit crunch has played any kind of role in the Great Recession. But the core of it is told in these two graphs, dug out from detailed Compustat data:
The first figure shows that a firm borrowing $1 would correlate with an additional 40 cents of investment before the 1980s. Since the 1980s that has collapsed. Today, there is a strong correlation between shareholder payouts and borrowing that did not exist before the mid-1980s. Since the 1980s, shareholder payouts have nearly doubled; in the second half of 2007, aggregate payouts actually exceeded aggregate investment.