So Edward Luce says something very silly indeed in the FT:
For every dollar the top US public companies spend on investment, they are returning eight or nine dollars to shareholders.
Guess who repeats this:
For every dollar the top US public companies spend on investment, they are returning eight or nine dollars to shareholders.
And tells us that:
In one sentence the whole crisis if neoliberal capitalism is succinctly summarised. And it is not that much different here.
When the cost of capital is low and investment should, as a result, be a top priority for business it is investing tiny amounts and is instead fuelling inequality by paying exceptional dividend returns and by buying back shares to boost share prices and so trigger executive bonus schemes.
No wonder people have no faith in big business.
No wonder the rhetoric of the capitalist entrepreneur is so hollow.
No wonder no one believes the claim that business needs tax cuts in order to invest: it already has all the cash it needs to do that.
But it uses that cash to fuel inequality.
This is what it’s game is about. And radical reform is needed.
And this is from an accountant recall. An expert accountant even, one who writes reports for the TUC, one who would change the very structure of our entire economy for us. And an accountant who is willing to believe such dribble?
It’s not even remotely true: so far from reality that you’d need to be leaking brain fluid into your cornflakes to give it a shred of credence.
Luce can be forgiven for he’s just a columnist but Ritchie’s supposed to be, insists in fact that he is, an expert.
The number itself is derived as follows. Stock buybacks and dividends make up about (around and about) 80 to 90% of larger US corporation’s post-tax earnings.
But as an accountant would note companies can finance investment through borrowing. And the cost of repaying that borrowing, the interest paid upon it, is deducted from the numbers before we calculate the post tax earnings of the company.
Thus the amount of post tax earnings that is invested, as against the amount paid to the suppliers of capital, is not a particularly relevant number when looking at the amount that companies are investing.
Because borrowing.
At which point, a look at the actual capex (a reasonable proxy for investment) by S&P 500 companies.
Ignore the right hand side, not relevant. Dunno about you but I take that to be around and about 1:1 actually. Investment (or capex) to shareholder payout. Roughly.
An accountant should know this shit. So that’s accountancy that we have to add to the list of things that Ritchie is ignorant of.