More Growth, Please

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Remember that record pile of cash that U.S. companies have amassed over the past year? It’s finally being put to use:

For months, companies have been sitting on the sidelines with record piles of cash, too nervous to spend. Now they’re starting to deploy some of that money — not on hiring workers or building factories, but to prop up their share prices.

Sitting on these unprecedented levels of cash, U.S. companies are buying back their own stock in droves. So far this year, firms have announced they will purchase $273 billion of their own shares, more than five times as much compared with this time last year, according to Birinyi Associates.

….Some companies are buying back shares partly because they don’t want to invest in developing new products or services while consumer demand remains weak, analysts said. “They don’t know what they want to do with all the cash they’re sitting on,” said Zachary Karabell, president of RiverTwice Research.

I’ve always hated companies that do share buybacks. I know all the arguments in favor of it, but as far as I’m concerned it’s nothing more than a desperate effort to curry favor with shareholders and meet short-term bonus targets, carried out by a management team that has no idea how to grow their business. And if they don’t know how to grow their business, they should just announce that they’ve decided to adopt the corporate model of a regulated utility and start paying out regular, steadily growing dividends.

End of rant. Aside from all that, though, this particular news tells us once again that the most likely cause of slow economic growth right now isn’t structural, it’s cyclical. People aren’t buying stuff, and because of that businesses aren’t investing in growth. Increase demand, and they’ll start up again.

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DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily crazy—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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