As the U.S. economy struggles to recover from the Great Recession, the erosion of middle-class jobs and the explosion of income inequality have endured long enough to raise serious questions about whether the U.S. economy is beset by deep structural problems. My argument is that the employment problem that the United States now faces is largely structural. But the structural problem is not a labormarket mismatch between the skills that prospective employers want and the skills that potential workers have, as many economists have argued. Nor is the problem automation. Rather, the employment problem stems from changes in the ways that U.S. corporations employ workers as a result of rationalization, marketization, and globalization. Nevertheless, the disappearance of previously existing middle-class jobs does not explain why, in a world of technological change, U.S. business corporations have failed to use their substantial profits to invest in new rounds of innovation that can create new high value-added jobs to replace those that have been lost. I attribute that organizational failure to the financialization of the U.S.corporation. In Part II, I review evidence showing fundamental structural changes that, since the early 1980s, have eroded U.S. middle-class employment opportunities. Then, in Part III, I present evidence that, over the same period, the remuneration of top executives of both industrial and financial corporations has been a major reason for the increasing concentration of income at the top. Part IV discusses the emergence of stock buybacks as a massive and systemic way in which these corporate executives seek to boost their companies’ stock prices, and hence, via stock-based compensation, their own incomes. This Part further identifies how, in many different ways and in many different industries, this financialized mode of corporate resource allocation has undermined the prosperity of the U.S. economy. Finally, I conclude in Part V by identifying the types of changes in the institutional and ideological environment of the United States that are needed to put the nation back on a path to sustainable prosperity.
William Lazonick, The Financialization of the U.S. Corporation: What Has Been Lost, and How It Can Be Regained, 36 SEATTLE U. L. REV. 857 (2013).
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