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The Introduction begins by recounting the popular view that stock-market-driven short-termism severely damages the US economy. Firms forgo the R&D they need, cut capital spending, and starve themselves of cash by excessively buying back stock to satisfy Wall Street. Stock market pressure means directors and managers cannot manage for the long-term when their shareholders furiously trade their companies’ stocks, they cannot invest enough when stockholders demand rising quarterly profits, they must slash R&D when investors demand that precious cash be used to buy back stock, and they cannot even strategize about the long-term when shareholder activists demand immediate results. If that weren’t bad enough, the stock market’s short-termism is also blamed for environmental degradation, for contributing to global warming, and for employee mistreatment. Due to short-termism, corporations are less socially responsible, in a widely-held view. The Introduction exemplifies these perceptions with statements from national political leaders. However, the Introduction then states, the case for deeply pernicious results from stock market short-termism is weaker on the evidence and on the logic of how markets work than the view popular among pundits and lawmakers. Those lawmakers and pundits who aim at stock-market-driven short-termism can readily miss more likely targets for attacking the ills often attributed to stock market short-termism. For example, stock market short-termism is said to severely damage corporate R&D spending and thereby hold the economy back. But a look at the numbers points to other causes and more propitious targets for improving American R&D. And the environmental, climate, and social responsibility failures emanate from selfishness—externalities in the technical vocabulary—more than from truncated time horizons. The Introduction closes with suggestions that the prominent perception of pernicious short-termism is explained largely by political and social currents: first, targeted interests benefit when stock markets are blamed and, second, a wide but diffuse public dissatisfaction with economic arrangements overall, including discomfort with increasing uncertainty and instability in the workplace, and a generalized disorientation from the rapidity of technological change, which often looks like short-termism but is not. |
