The Value of Everything: Making and Taking in the Global Economy

by Mariana Mazzucato

William Lazonick, the chronicler of share buy-backs, has characterized these two trends, when taken together, as a shift from a model of ‘Retain and Invest’ to ‘Downsize and Distribute’. The first strategy–‘Retain and Invest’–uses finance only to set up a company and start production. Once profits are being made loans are likely to be at least partly repaid because retained earnings are a cheap way of financing the next production cycle and investments to expand market share. The second strategy–‘Downsize and Distribute’–is entirely different. It views companies merely as ‘cash cows’ whose least productive branches have to be sold. The resulting surplus is then distributed to managers and owners, rather than to others such as the workers who have also contributed to the business. The result may hamper the growth of the company and even cut the workforce–‘Downsize’. If the shareholders are happy, however, the strategy is justified.