How Shareholder Value Ideology Destroyed 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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