S7 E11: Better Capitalism?
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Stock Buybacks: Unproductive Capital
- Stock buybacks are when companies use profits to buy back their own shares, instead of investing in growth or raising worker pay.
- Market fundamentalists argue that this returns capital to investors who can then invest it more productively elsewhere.
- However, there's no evidence this happens, and the capital often ends up in index funds, not productive investments.
- This removes capital from the productive economy and puts it back into financial markets where it might not contribute to anything productive.
- Stock buybacks became legal in 1982 and reached over $1 trillion in 2022 for S&P 500 companies.
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