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This whole report is very worth a read. I particularly found section 2.4 to cover something I've felt for a long time. The bottom line is we really need to ree
by dopylitty 3y ago
This whole report is very worth a read.
I particularly found section 2.4 to cover something I've felt for a long time. The bottom line is we really need to reevaluate how the stock markets and finance work, and if they are working for society as a whole.
> This financialization of corporations, which sees enormous
financial markets play an ever-increasing role in the
economy, has exacerbated the focus on short-term
profits over any longer-term goals. It has also directed
investment away from productive uses, instead acting
in the interest of extreme capital by reorientating many
non-financial businesses increasingly towards financial
instruments and activities.
Financialization of all human enterprises seems to be driving society towards a state where no actual productive work is done and instead companies become financial manipulation instruments. Eg Boeing outsourcing all plane manufacturing, airlines making most of their money from points schemes.
The report also covers that most equities are owned by the wealthy, something that refutes a common idea that somehow the "shareholders" benefiting from company greed are regular peoples' retirement funds.
> The super-rich are more likely to own corporations. In
the USA, one of the very few countries for which there
is regular data on the distribution of corporate equities,
the richest 0.1% account for 19.8% of shares owned by
households, the richest 1% own 44.6%, while the poorest
50% own just 1%.146 New research on 24 OECD countries
found that the richest 10% of households own 85% of total
capital-ownership assets – including shares in companies,
mutual funds and other businesses – while the bottom
40% own just 4%.147
It also covers the phenomenon of index funds which is something I also am very interested in. The conventional wisdom for folks lucky enough to have excess money is to put it in index funds. Then you end up in a state where a fair amount of the companies in the world are effectively controlled by the wishes of a few index fund managers. It seems there must be a better way for folks to ensure their ability to retire comfortably.
> Beyond private equity, the ‘Big Three’ index fund managers
– BlackRock, State Street and Vanguard – together
manage some US$20 trillion in assets.218 Research
suggests that this kind of market concentration reduces
incentives for companies to compete and in turn deepens
monopoly power.219 Together they control close to one-fifth
of all investable assets in the world.220 Common ownership
in so few financial firms undermines fairness across the
economy.221 Further to this, Harvard research has argued
that the economic power held by such index funds is
so concentrated that ‘in the near future roughly twelve
individuals will have practical power over the majority of
U.S. public companies’, concerns that were previously
echoed by the founder of Vanguard himself.
- gruez 3y ago>state where no actual productive work is done and instead companies become financial manipulation instruments. Eg Boeing outsourcing all plane manufacturing, How is this any different than nvidia outsourcing semiconductor manufacturing to Samsung or TSMC? There's nothing inherently wrong with companies focusing on their core competency and getting out of low value parts of the value chain. >airlines making most of their money from points schemes. Is there more on this? I suspect this is just an accounting artifact. At the end of the day airlines are selling plane tickets. It's just that they're selling it for cash as well as points, which can be bought with cash. I don't see how selling points can be that much more profitable than selling tickets. Why would banks spend $2 worth of money to get points that consumers can spend to get $1 worth of flights? >Then you end up in a state where a fair amount of the companies in the world are effectively controlled by the wishes of a few index fund managers. It seems there must be a better way for folks to ensure their ability to retire comfortably. Passive index funds mangers have very little latitude to make decisions. They have to track the index, after all. Therefore I'm not sure what the issue is. Moreover if they decide to go rogue, thanks to "financialization" it's trivial to start another fund that acts in the interests of the shareholders.
- tadfisher 3y agoPoints are purchased whether or not the customer is going to use them in the near future. In the meantime, the airline can use this revenue to purchase financial instruments or weather downturns.
- BandButcher 3y agoI see what you mean by the Nvidia outsourcing, its a typical company strategy that i dont think is the root problem. Plus people overseas dont HAVE to accept but obviously they do as for them its a better opportunity financially. But i took the quote "state where no actual productive work is done and instead companies become financial manipulation instruments" to mean that companies now only care about the immediate financial turnaround as opposed to building quality products (normally done out of fear of healthy competition). So because most companies are considilating/merging, the healthy competition goes away and monopolies continue to grow leaving people with fews alternatives. Personally i dont think its so much about stocks/offshoring talent/new world order as much as it is these huge companies and billionaires saying "yes this product or service is shtty, yes it costs more than before, yes the quality will continue to go down, and yes the price will continue to go up, BUT, no gun to your head, you're free to go to the next billionaire company and try them out for the same thing... " See the telecom companies, apple, fast food, etc... I guess the end question is how to farm a healthy mom and pop system, but typically they die because of lack of service-ability and marketing which the big corporations can easily do and have done