The New Normal is “Maximizing Shareholder Value”: Predatory Value Extraction, Slowing Productivity, and the Vanishing American Middle Class

In the United States, concentration of income and wealth among the very richest households have become extreme, while middle-class employment opportunities have disappeared. Building since the late 1970s, the instability and inequity in the economic system is now undermining productivity growth. The important contribution of Servaas Storm, “The New Normal: Demand, Secular Stagnation, and the Vanishing Middle Class,” demonstrates the integral relation between the sources of slowing productivity growth and the downward mobility into low-productivity service jobs that characterizes the vanishing U.S. middle class. In this comment, I focus on the “financialization” of the U.S. business corporation, a phenomenon that is consistent with Storm’s general argument. From this perspective, I ask whether Storm’s contention that demand-side factors are stifling productivity growth and causing the middle class to disappear cannot better be viewed as a supply-side problem of corporate resource allocation. My perspective integrates Storm’s important findings on intersectoral differences in productivity growth with an analysis of how, since the 1980s, the financialization of the business corporation has destroyed middle-class career employment, pushing an increasing proportion of the U.S. labor force into low-productivity and low-paid service jobs. In the spirit of Storm’s analysis of the vanishing middle class and the failure of neoclassical economists to deal with this critical question, I call for a focus on the governance of the innovative business enterprise, with a view to reducing, and ideally eliminating, the power of “predatory value extractors” to enrich themselves while leaving most Americans worse off.