Economist and former secretary of labor Robert Reich says the United States won't recover if big businesses, Wall Street and high-income families do better than small business, Main Street and low-income families.
"The earnings of companies in the Standard & Poor's 500 stock index tripled in the fourth quarter, but this does not mean the rest of the U.S. economy is doing well," Reich recently wrote in the Financial Times.
"Meanwhile, they continued to slash jobs and cut costs at home."
“Nor does the fact that big U.S. companies have lots of cash signal a broader recovery,” Reich says.
“Much (of the cash) is being used to buy other companies, which usually leads to more job losses … Much of the rest is being used to buy back their own stock in order to boost their share prices.”
There were 62 such buybacks in February, valued at $40.1billion – the biggest share buyback since September 2008, Reich notes.
“The major beneficiaries are shareholders, including top executives, whose pay is linked to share prices,” he says. “But the buybacks do nothing for most Americans.”
The picture on Main Street is the opposite, Reich points out: Small businesses are not selling much because they have to rely on U.S. consumers and Americans still are not buying much and are also finding it hard to get credit — and until that changes, there is no real recovery.
The majority of those interviewed in a recent Bloomberg National Poll say they don’t like Wall Street, banks or insurance companies and favor letting the government punish bankers who helped cause the worst financial crisis since the Great Depression.
The poll also shows a dislike of the nation’s top corporate bosses, with nearly two-thirds saying they have an unfavorable opinion of business executives — a rating that rivals the public’s disdain for Congress, which was viewed with disfavor by 67 percent of respondents.
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