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Wall Street’s fixation on quick profits wreaking havoc in the ‘real’ economy, report says

Apr 02, 2021

Vast sums of money sloshing around the financial sector are enriching shareholders but producing little real-world value, according to a new analysis of business investment from American Compass, a conservative think tank.

The analysis by Oren Cass, a former senior fellow at the Manhattan Institute and a former adviser to Mitt Romney’s 2012 presidential campaign, finds that much of the money that businesses once funneled into productivity-increasing assets — structures, equipment and intellectual property — is now being diverted to shareholders instead.

This pursuit of short-term payouts over long-term investment appears to be depressing economic growth, the report finds, exacerbating inequality and making it harder than ever for American workers and their families to get ahead.

Historically, profitable businesses return some of their excess earnings to shareholders and invest much of the rest back into the company in the form of new machines, new buildings and intellectual property. These so-called capital investments have traditionally been one of the drivers of economic growth.

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