Stock buybacks don't create jobs
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In addition to badly needed microchips,
Intel produces totally useless stock buybacks. On its website the company proudly proclaims to
have spent $152 billion on stock buybacks since 1990. That’s not a typo:
$152,000,000,000. Which is why I call it "Stock Buybacks Я Us."
Intel took $152 billion of its revenues,
some portion of which could have been used for R&D and building new
microchip facilities in the U.S. as well as paying workers more, and instead
funneled it to its largest Wall Street stockholders and corporate executives,
enriching the top fraction of the top one percent.
A company repurchasing its own shares sees
earnings per share rise because there are fewer shares in circulation. Share
prices rise, though nothing new is made, and the largest stockholders,
including top Intel executives, cash out with eye-popping profits. Intel CEO
Pat Gelsinger hauled in $179 million in 2021, most of it coming from
stock-related compensation.
Stock buybacks are a form of stock
manipulation, which is why they were outlawed by the Securities and Exchange
Commission after the Great Depression, up until deregulation in 1982, that
limited buybacks to two percent of profits. Now it’s all the buybacks your
corporation can eat, with nearly 70 percent of all corporate profits going to
this form of stock manipulation.
So, why are we giving Intel another $8
billion?
National security is at risk, we are told. Semi-conductors are far too important to our defense and to our economy to be produced overseas, especially in or anywhere near China, our communist enemy de jure. If we don’t bribe Intel to build here, the argument goes, they just might go elsewhere. They are in business to produce profits (and stock buybacks) not national security.
But the biggest selling point, as always,
from politicians of both parties, is Jobs! Jobs! Jobs! The White House calculates that
Intel will generate 20,000 temporary construction jobs and 10,000 more
permanent manufacturing jobs because of this grant.
But what’s to stop Intel from shoveling
taxpayer grants into more stock buybacks?
Not much. Senator Chris Van Hollen (D-Md.)
writes:
“While the legislation specifically prohibits the use of CHIPS funds for stock buybacks and dividend payments, these restrictions do not explicitly prohibit award recipients from using CHIPS funds to free up their own funds, which they can then use for those purposes.”
Senator Elizabeth Warren (D-Mass.) is already
worried that BAE Systems, a much smaller CHIPS recipient, but also a buyback
recidivist, has not said it would refrain from stock buybacks for the duration
of its CHIPS money.
Intel hasn’t made that pledge either. In
fact, Intel’s website states it still has authorization to conduct
another $7.24 billion in
stock buybacks.
How can you tell if such a large company is
using CHIPS money or other money to conduct its buybacks? You can’t.
Doesn’t the CHIPS Act prohibit Intel from
conducting mass layoffs?
Not a chance.
Intel could very well increase jobs in some
locations while cutting jobs in other locations. And there is evidence that
they are doing that right now.
As the CHIPS Act was moving through
Congress in 2022, strongly lobbied for by CEO Gelsinger, Intel laid off
approximately 2,000 employees in
California. Now, the company says, it “is
working to accelerate its strategy while reducing costs through multiple
initiatives, including some business and function-specific workforce reductions
in areas across the company."
What that word salad means is that by the
time Intel creates 10,000 new manufacturing jobs, it will have laid off more
workers than that. And they know there’s nothing the government will do about
it.
Why are most politicians so gutless about
preventing mass layoffs?
That’s a longer story that I cover in Wall
Street’s War on Workers. Simply put, our political system
refuses to acknowledge that mass layoffs are the ruination of working people.
More than 30 million working people have
suffered through mass layoffs since 1996. Last year there were more than
260,000 jobs lost in the highly prosperous tech sector, with another 50,000 so
far this year. In January 2024, there were 82,000 layoffs across
the economy.
Many of those workers will suffer greatly
both from financial loss and deterioration of their health. (For those worried
about the catastrophic impact of artificial intelligence, the Challenger Report claims
AI killed only 381 jobs in January 2024.)
It should be a no-brainer for the
government to make a simple regulation:
If you are supping at the taxpayer trough,
you can’t conduct compulsory layoffs of taxpayers. All your layoffs must be
voluntary. That is, you have to buy workers out. No forced layoffs!
Most elected leaders believe that
regulating corporations about how they can and can’t destroy jobs is blasphemy,
an attack on sacred capitalist freedoms, something that only the Communists
would do! In addition to the ideological blowback, the political establishment
actually buys the corporate line that halting mass layoffs would make
corporations uncompetitive, which is total nonsense.
Here’s a telling piece of evidence.
In 2021, Siemens Energy, the German-based
company with 90,000 employees globally, decided to stop making equipment used
in oil extraction and fracking. In Germany, 3,000 workers were to lose their
jobs, and another 1,700 in the U.S.
In Germany, companies must live within a
legislated system of codetermination, meaning that half the seats
on a company’s board of directors are held by worker representatives, and
labor-management committees run the day-to-day operations of each facility. (As
an aside, this system was urged upon German businesses by the U.S. after WWII,
because we believed unionized workers were less likely than their bosses to
cozy up to fascists.)
In Germany, the workers used their power to
persuade Siemens management to agree to no forced layoffs. On top of that,
Siemens agreed not to shut down six facilities and instead put other production
lines in them.
In the United States? All 1,700 workers
lost their jobs AND the president of Siemens USA was invited
to the infrastructure bill signing ceremony.
In honor of the legislation she had the
gall to say, “This is a
historic moment in America – one that sets the stage for decarbonizing the
economy, boosting U.S. manufacturing, creating jobs, and increasing equity.”
Moral of the story: In addition to
fabricating hypocritical public statements, global corporations have incredible
flexibility and resources to modify production, employment, wages, and working
conditions. “No forced layoffs” would not put Siemens or Intel or any other
global corporation out of business. Instead, there might be a microscopic dip
in stock buybacks!
Every single company that is getting a
CHIPS grant has the capacity to modify its operations to avoid forced layoffs,
just as Siemens has done in Germany. In fact, every company that gets a federal
contract should agree to do the same, as well as forswearing stock buybacks.
There’s only one way out of this non-stop
shakedown: expand labor unions and build a powerful mass movement.
The second moral of the story: Wall Street
and corporate America are so accustomed to getting their way that they will
only pursue national goals when they are bribed. No matter how rich, no matter
how large their stock buyback scams, they want our tax dollars with no strings
attached. And very few politicians have the nerve to resist.
There’s only one way out of this non-stop
shakedown: expand labor unions and build a powerful mass movement. Until we,
the people, rise up and demand it, no one will derail the Wall Street gravy
train that runs from our pockets to theirs via stock buybacks and pink slips.
And we wonder why so many Americans think
the system is rigged and that democracy isn’t working for us.
LES LEOPOLD is the executive director of the Labor
Institute and author of the new book, “Wall Street’s War on Workers: How Mass Layoffs and Greed
Are Destroying the Working Class and What to Do About It."
(2024). Read more of his work on his substack here.
