7:37 minutes

Like many in Iowa I get former congressional candidate JD Scholten’s weekly newsletter “You’re Probably Getting Screwed.” It’s a down to earth look at the way working Iowans are getting screwed by our really screwy capitalistic system that gives most of the power over our lives to corporations.

Last week I almost ignored what turns out to be one of the most important articles this newsletter has posted. The subject is stock buybacks and how this practice screws the economy and the people that work for such companies.   

Kudos to Justin Stofferahn for his concise and very understandable article. Stofferahn points out corporations are taking profits that are created through the labor of working men and women like you and me and using that money to buy back corporate stock which in turn raises the price which makes those who have the company’s stock (usually corporate officers) richer while laborers lose raises, bonuses and benefits:

Stock buybacks are exactly what they sound like. A company buys up its own shares which then boosts the stock price. Put another way by Illinois Congressman Sean Casten, buybacks are “the process by which top executives at a company reward themselves handsomely for not producing what their company is alleged to produce.” Stock buybacks are a defining feature of today’s financialized and highly consolidated economy that is stripping companies for parts. Just look at Boeing, which has used its dominant market position to screw workers and build planes that fall apart.

Between 1998 and 2018 Boeing executed $61 billion in stock buybacks which amounted to over 80 percent of the company’s profits, enriching Boeing CEOs and the investment firms that own much of its stock. What did Boeing not spend money on? Workers! The company has laid off around 45,000 workers between November 1998 and January 2024. Money also clearly has not been put into building better planes or even ones that work as they are intended to.

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While major retailers like Target and restaurant chains like Applebees have seen their costs moderate or even decline recently, that savings is not being passed along to consumers, but is being used to fuel more stock buybacks. According to Bloomberg, consumer discretionary and consumer staples firms in the S&P 500 increased spending on share buybacks in the fourth quarter by 53% and 80% respectively.” You are getting screwed to the benefit of Wall Street.

Stock buybacks might have become commonplace, but they are an ahistorical financial engineering project. In 1982 just two percent of corporate profits went into stock buybacks but today that share has skyrocketed to 70 percent. This change was driven by policy. Prior to 1982 stock buybacks were mostly prohibited and seen as a form of stock manipulation, but the SEC under President Reagan eliminated that prohibition as part of its broader effort to eliminate antimonopoly protections. The companies that benefited from this change were not the small businesses that power main street, but some of the country’s most dominant corporations.

Thus the profits generated from the labor of a company’s laborers that in the 1950s would be reinvested in workers wages or company improvements are now being invested into pushing up the company’s stack. Stock buybacks do nothing for the workers but do benefit stock holders who are often company officers . So the benefit of the profits now trickles up from the worker to the boss. 

One thing is for sure. No MAGA or Republican will ever give labor a fair shake. As JC Watts Sr. (father of JC Watts former Republican politician and Oklahoma quarterback) once noted: 

“A black man voting for the Republicans makes about as much sense as a chicken voting for Colonel Sanders.”

I believe this is true of workers also.

One of the most frequently cited quotes on Labor Day is President Lincoln’s short statement of the relation of labor and capital from 1861:  

Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration. Capital has its rights, which are as worthy of protection as any other rights.”