Large shareholders hit record wealth as prices keep rising
The vast majority of corporations did not use higher profits from the Trump tax cuts to pay bigger salaries or to invest in new businesses and technologies. What they have been doing is gobbling up competitors so that they can increase prices – and make even more money. Rural Virginians experience this reality every day – suppliers have dwindled for almost everything we buy, as they have been bought up by bigger companies who can then ratchet up prices.
And what have corporations done with the extra profits? Many have poured them into bigger dividend payments to shareholders and to stock buybacks. When a company buys back its shares from the open market, it reduces how many shares are outstanding and has the net effect of raising the stock price for remaining shareholders. And who most benefits from these financial moves? Large shareholders, including CEOs, board directors and wealthy investors.
The problem is that, according to a 2021 poll, nearly half of American families - 48% to be exact - do not own any stock. That’s up from 34% before the financial crisis in 2008, a Republican-led financial deregulation disaster. The problem is even bigger in rural areas where sole proprietor farmers and small businesses do not have fancy corporate stock retirement plans.
What makes matters even worse is that, even for those families in the bottom half who do own some stocks, their holdings are worth on the average just $54,000 – probably barely enough to live on for a year if you had a financial or health setback. While stock prices saw double digit increases during the pandemic, folks who owned little or no stock and suffered layoffs or other financial hardships just fell further behind. And that is why just 1% of households now own nearly 38% of all stocks… in all companies! To give this another perspective, just 745 billionaires are worth more than 74.5 million American households.
And where do investment bank “wealth management” advisors tell folks with money to invest during inflation? In stocks of large companies that sell stuff we need – because they can and do raise their prices, and their dividend payments. The Washington Post reported recently that Proctor and Gamble, of soap and toilet paper fame, “has raised prices in all ten of its product categories, boosting profits”.
So next time a neighbor brings up the Republican mantra that tax cuts and less regulation are “good for the economy”, ask them how their stock portfolio has done? Have they benefited from this massive funneling of money up the wealth ladder, while having to pay more for everything?
To blame Joe Biden for all this makes no sense. It is his White House that launched an initiative in 2021 to even the playing field in the meat industry, and in many other industries that have been plagued by pricing monopolies that hurt consumers but benefit corporations and their wealth shareholders. In President Biden’s own words: “No more tolerance of abusive actions by monopolies. No more bad mergers that lead to massive layoffs, higher prices and fewer options for workers and consumers alike.” For more information, read here.
