Stock Buybacks and Deregulation

It’s in capitalists’ nature to exploit workers for the maximization of profit. However, the growth of a powerful labor movement and the New Deal regulatory state in the ’30s and ’40s temporarily put a check on corporate power in the United States. The dominant sectors of the economy conformed to a business model that, at least to a degree, viewed product quality and worker retention as the ingredients for company profitability.

But now, this business model has unraveled. CEOs and shareholders maximize profit by buying back their own stock and giving themselves bonuses. Leopold provides a detailed but accessible account of how hedge funds also drive this process through buying up corporations, loading them with debt, and stripping their profitable assets. The dual pressure for money to facilitate stock buybacks and to pay back the debt further fuels layoffs and cost-cutting.

Readers will get a clear historical account of how and why this financialization of the economy takes place. Under the New Deal regulatory state, stock buybacks were rare because the Securities Exchange Commission (SEC) interpreted them as stock manipulation. But with the crisis of stagflation during the 1970s came the beginnings of the deregulatory wave, which was kicked off by Democratic president Jimmy Carter.

Under Ronald Reagan in the 1980s, stock buybacks were encouraged again when the SEC created Rule 10c-18 that allowed corporations to put profits back into their own stocks. One graph featured in the book shows that in 1981, only 2 percent of corporate profits went to stock buybacks. By 2016, it was 68 percent. From 2010-2019 alone, an astonishing $6.5 trillion has gone into stock buybacks.

Needless to say, the money going into stock buybacks is money that doesn’t go toward increasing workers’ pay and benefits, or research and development for better quality products.

Wall Street’s War on Workers is full of examples of major corporations engaging in massive stock buybacks before announcing waves of layoffs. Leopold emphasizes that this kind of financialization lies at heart of layoffs — even more so than automation, which tends to dominate contemporary discussions about unemployment.

Recently Meta/Facebook, Alphabet/Google, and Microsoft have announced tens of thousands of layoffs. While many commentators have cited the automation of white-collar work as the culprit, Leopold highlights that in just one quarter of 2022 these firms conducted $28 billion in stock buybacks.

While many on the Left are now aware that stock buybacks are on the rise, we should all strive for a more nuanced understanding of this process and its links to job loss.

“For Every Blue-Collar Democrat We Lose . . .”

“For every blue-collar Democrat we lose in western Pennsylvania, we’ll pick up two more Republicans in the suburbs in Philadelphia, and you can repeat that in Ohio and Illinois and Wisconsin.” In the last few years, this quote from Senate Majority Leader Chuck Schumer in 2016 has risen to the level of infamy.

Schumer’s logic, which he shares with much of the party’s top brass, is an excuse and retroactive justification for a phenomenon that has accelerated since 2016: the dealignment of working-class voters away from the Democratic Party. Many are just dropping out of politics altogether, but a critical mass has also moved toward the Republicans.

A strength of Leopold’s book is that it pushes back against the morbid fatalism of the Democratic Party leadership. Schumer and company depict the decline of their working-class base as a fact of nature, as inevitable as the weather. But in fact, it’s the result of deliberate policy choices that our political class has the ability to change.

One of the most dramatic examples of this dynamic covered in Wall Street’s War on Workers is that of Mingo County, the site of the great West Virginia coal wars during the early twentieth century. When Franklin D. Roosevelt’s administration stepped in to intervene on the side of workers, the Democratic Party secured long-lasting loyalty from the county’s miners.

Even in 1996, Bill Clinton won 69.7 percent of the vote in Mingo County. But as mass layoffs have accelerated over the last thirty years, the Democratic share of the vote has steadily plummeted. In 2020, Joe Biden could only muster a dismal 13.9 percent in Mingo.

And what became of Mingo County’s economy? With no kind of transition plan from the federal government, the area became one of the opioid capitals of the country. By 2019, for example, pharmaceutical companies filled prescriptions for millions of opioids per year in one town of only three thousand people. Not surprisingly, West Virginia led the United States in overdose death rates in 2020.

Mingo County’s trajectory may be an extreme example, but it illustrates a general trend in areas that have been heavily impacted by mass layoffs. Mainstream coverage of the dealignment phenomenon often focuses on the partisan push and pull of social issues. To his credit and our benefit, Leopold instead focuses on the full extent of mass layoff carnage in white working-class “blue wall” counties, and how it connects to Democrats’ declining percentage of votes.

But What About the Deplorables?

Democrats have cynically mobilized identity politics to provide cover for their struggles with working-class voters. These white workers, they claim, have become increasingly bigoted and intolerant. They flee the Democratic Party because they don’t support progressive policies on social issues like immigration, abortion, and racial inequality. Why would we want to be in coalition with these people anyway?

Again, Wall Street’s War on Workers cuts through the noise and clearly debunks this unfortunately popular idea with an analysis of three voter surveys involving tens of thousands of people before and after elections.

Leopold defines the “white working class” as people who call themselves white, are in the bottom two-thirds of the income distribution, and do not have a four-year college degree. In truth, class is more complicated than that: for example, many college-educated workers, such as nurses, should be included in our definition of the working class. But for the purposes of this book, the definition provided best encapsulates the section of white workers who are experiencing mass layoffs and fleeing the Democratic Party.

The results of the book’s voter survey analysis would surprise commentators on MSNBC. On most of the questions about social issues, white workers have trended more liberal over time. There wasn’t much daylight between the views of white workers and white-collar managers on racial issues.

To put it another way, there are tens of millions of white workers with fairly liberal views on social issues. By dismissing these people as hopelessly reactionary and closed-minded, the Democrats are leaving these votes on the table and opening up the door to opportunistic right-wing politicians of all stripes. This book does a great service to our movement by skillfully and empirically dispelling these unhelpful generalizations about white workers.

The Question of Political Agency

In February 2016, United Technologies announced that it was moving a Carrier plant to Mexico. This move did not come out of thin air; as Leopold points, the company had promised to return $22 billion to shareholders via dividends and stock buybacks.

Shrewdly sensing the political opportunity, presidential candidate Donald Trump used his influence to essentially shame Carrier into keeping the plant open. While Trump’s actual presidency did not reflect this one bold move, it nonetheless demonstrated the potential for top political leaders to use their bully pulpit and actually intervene to stop mass layoffs. Sadly, we can’t point to any recent examples of Democratic politicians doing anything close to what Trump pulled off at Carrier. They appear to have ceded this terrain, to both workers’ detriment and the party’s.

If nothing else, readers will come away from Wall Street’s War on Workers with the idea that there are things we can do to save good jobs in this country. Leopold explores how workers in Germany have used the codetermination model and works councils to successfully avoid the same kind of destructive layoffs we regularly see in this county. Leopold floats a variety of policy proposals, including using the Defense Production Act to stop layoffs and banning stock buybacks.

The right to a good job is the fundamental pillar of a decent and secure life. The Left must take up this fight if we’re serious at all about building a working-class movement to challenge inequality. Wall Street’s War on Workers is an essential tool for this task.