‘Disappearing Act of U.S. Middle Class’

Economics scholar Bill Lazonick, who teaches at UMass Lowell, contributes to the global discussion about money, labor, and ownership. Here is his latest, co-written for the Korea Times.  “Disappearing Act of the U.S. Middle Class.”


While pressing for restructuring, value extractors and academics who justified this activity argued that U.S. corporations held on to too much “free cash flow” that should be “disgorged” to shareholders as buybacks and dividends. However, what the corporations actually gave away was much more than free cash flow. Many of America’s largest corporations routinely distributed more than 100 percent of net income to shareholders. They then generated the extra money by further restructuring of their workforces, selling off businesses or taking on more debts.

One Response to ‘Disappearing Act of U.S. Middle Class’

  1. Brian says:

    “Shareholding by institutional investors in the U.S. passed the 20% mark in 1970 and has continued increase to reach about the 70% level currently” –This is in direct correlation with the pro-monopoly and neoliberal policies of both democrats and republicans since the 1970’s.

    Not since 1916 has wealth been as concentrated as today. The difference now is that the old trusts usually had one company controlling an entire industry, think US Steel, whereas today we might have two to four big companies controlling an industry, think Lowe’s and Home Depot or the airlines.

    With more market power comes more acquisitions and hostile takeovers which erodes local ownership and turns workers into nameless economic widgets. The invisible hand was supposed to bring more competition and lower prices. Does anyone think Jordan’s Furniture prices have gone down since Berkshire Hathaway bought them out? Amazon and Uber’s prices might be low now but with market domination prices will go up to appease shareholders.

    The challenge will be how to break up the modern day monopolies. Analyzing the numbers is key but how the company behaves should also be a factor. Nobody will balk at breaking up Comcast but sentiment for Google is different. Nonetheless until the monopolies are broken up value extraction and the hollowing out of the middle class will continue.