How Shareholder Value Ideology Destroyed the Middle Class - Dr. William Lazonick, UMass - DSPod #308
Dr. William Lazonick is an economist who studies innovation and competition in the global economy, who has recently been focusing on the corrosive role of stock buybacks. We invited him on to explain why this widespread financial practice is such a bad idea in his eyes, and in return were provided with a comprehensive model of what makes a successful economy. In short, Lazonick believes that no economic system can survive without "the firm," the kind of old school corporate organization that maintained a stable a social contract with its workers, sometimes over the course of an entire lifetime. In Lazonick's view, all economic growth and progress comes down to the ability of the firm to honor that social contract, which means he traces the slump we're in to the death of this tradition. But the question is, what caused us to become eternally itinerant workers in search of global opportunties, hopping from job to job every few years? Lazonick's got that answer, too. He points to a radical transformation of our financial and economic system that came to a head in the 1970s.
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FURTHER READING
Eric Williams: Capitalism and Slavery (https://amzn.to/4gvd0rW)
Alfred Marshall: Principles of Economics (https://amzn.to/49AnpR9)
John Kenneth Galbraith: The Great Crash (https://amzn.to/4iuykQp)
Edwin Black: IBM and the Holocaust (https://amzn.to/4gwFce8)
Milton Friedman: The Social Responsibility of a Business is to Increase Profits (https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html)
(00:00) Go!(00:09:21) The Study of Economics: Integrating History and Theory(00:15:21) Capitalism, Innovation, and Economic Growth(00:29:27) Shift from Feudalism to Corporate Structures(00:37:00) Global Capital and Industrial Revolution(00:41:28) Transition to Large Firms in America(00:49:12) Evolution of U.S. Steel and Stock Market's Role(00:52:05) Venture Capital and Initial Public Offerings(00:59:12) Corporate Financial Strategies Pre-Depression(01:03:00) Stock Buybacks and Modern Corporate Strategies(01:09:40) Rise of Mass Unionization(01:20:14) Stock Market Roles and Corporate Control(01:31:10) Managerial Strategy Shifts(01:41:06) Technological Shifts and Corporate Adaptation(01:51:13) Rise of Silicon Valley and Corporate Strategy(01:56:23) Evolution of the Tech Industry(02:02:47) Shareholder Value Ideology(02:18:40) Shift in Investment Strategies(02:26:02) Corporate Focus on Stock Buybacks(02:32:00) Mechanics of Stock Buybacks(02:37:14) Financialization and Market Effects
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