Friday, April 15, 2016

Quarterly capitalism

A while back Bernie Sanders was interviewed by the New York Daily News. He was given a lot of grief because he has been talking a lot about breaking up big banks yet could provide no details of how he would do that or what the fallout on the rest of the economy might be.

Earlier this week it was Hillary Clinton's turn. She said a lot of good things, one of which caught my attention. She commented on a survey of leaders of America's top corporations. The survey asked
If you could make an investment today in plant and equipment, in research, in training and education for your workforce and you could be guaranteed it would pay off in five to 10 years in your bottom line, but it would knock a penny off your share price, would you do it?
The answer was 100% no. That was puzzling to Clinton (puzzling to me too, that type of investment sounds like good sense – not that I have an MBA). So she called up a person who had participated in the survey and asked (which doesn't sound like anything Bernie would do). The response:
You have no idea. The activist shareholders, the market would destroy me. I can't make those kinds of long-term investments.
So we now have "quarterly capitalism" (Clinton's term) in which shareholders are in it for the profit now not better profits later. It is good that Clinton recognizes this.

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