The irony is that, in the long term, the economic landscapes that such companies dominate eventually go fallow. The towns where massive retailers operate, for example, lose the ability to provide sustainable revenue to themselves or the corporations hoping to profit off them. In the relentless pursuit of growth, these companies extract the money that the people and businesses in their markets use to transact—or even buy stuff from the extractive company itself. And while these companies are great at growing by extracting value from their marketplaces and labor forces, they are really bad at putting their money to work, so that it can continue growing over the long term. They can store capital, but don’t deploy it.
In fact, in the past 75 years, corporate profits have gotten smaller as businesses’ total value has increased. Many corporations simply keep cash in the frozen storage of share prices, and as the emphasis has been put on fiscal tinkering, companies have become less interested in innovating. They have started to depend on acquisitions for growth, which is one reason why big pharmaceutical companies simply buy smaller ones that develop new drugs.
I’ve consulted to multiple Fortune 100 CEOs who have actually broken down in tears as they’ve recounted selling their companies’ few productive assets in order to show growth to shareholders. They are tired of cannibalizing their own businesses, laying off loyal employees, and making their companies less enduring just to satisfy the demands of short-term growth imposed by the market.
This is where economic policy comes in. The current economic operating system is programmed to encourage growth and discourage distributed prosperity. One major reason shareholders are incentivized to destroy a business en route to increasing its share price, rather than just accepting a dividend, is that capital gains are taxed at less than half of what earnings are taxed at. That encourages extraction over transaction. More than two-thirds of the income of the top 0.1 percent comes from passive gains, not value creation.
So, if the economy is to be tilted less toward accumulation and the storage of capital, and more toward increasing the velocity of money as it travels between people and businesses, the tax code is a good place to start making revisions. This would mean rewarding revenue, earnings, and even payroll with lower tax rates, while discouraging capital gains with higher ones. Imagine if companies were busy trying to figure out how to avoid taxes by doing business, instead of by selling assets, laying off employees, or hiding earnings overseas.
That is just one example—there are plenty of other ways that the American economy currently prioritizes growth. Banking policy offers few rewards for banks that facilitate local reinvestment rather than lending and then extracting working capital, and it leaves little room for local and complementary currencies. At the moment, the largest companies are the ones that are rewarded with better interest rates, access to lawmakers, and other advantages of scale, but instead rules could be put in place to encourage businesses to learn to succeed in the lowest possible weight class, instead of striving to monopolize a single market. These are the sorts of things that could be changed so that prosperity could be more evenly distributed—and so that big business could be rescued from the cross of growth.