How the stock market destroyed the middle class

Nonfinancial corporations haven't raised any net capital in the stock market for 21 straight years.
WASHINGTON (MarketWatch) — There’s something seriously wrong with an economy that nurtures a few billionaires but can’t sustain the middle class.

Many factors have been blamed for the plummeting fortunes of the American middle class: globalization, technology, deregulation, easy credit, the winner-take-all economy, and even the inevitable tide of history.

But one under-appreciated factor is a pervasive business model that encourages top managers of American corporations to loot their company for short-term gains, depriving those companies of the funds they need to build and enlarge, and invest in their workers for the long haul.

How do they loot their company? By using large stock buybacks to manage the short-term objectives that trigger higher compensation for themselves. By using those stock buybacks to manipulate the share price, which allows them to use inside information to time their own stock sales. By using buybacks to funnel most of the company’s profits back to shareholders (including themselves).

They use the stock market to loot their companies.

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