Record global dividend payouts fuel rising social inequality

Will Morrow

A new report published this week by the financial advisory firm Janus Hendersons shows that the world’s largest corporations will hand out $1.43 trillion in dividend payments to their shareholders in 2019, setting a new record.

Ten years after the global financial crisis began in 2008, wages continue to stagnate, poverty is rising, and workers everywhere are lyingly told that there is no money for such elementary social needs as healthcare, education and pensions. At the same time, the class of corporate executives and billionaire shareholders continues to rake in incredible sums of money.

According to the report, which is based on data calculated for the world’s 1,200 largest companies, total dividend payments surpassed half a trillion US dollars in the second quarter of this year, reaching $513 billion. To place this number in context, the amount handed out directly to shareholders in 2019 will be more than the annual economic output of Spain, a country of 47 million people. In just three months, the 20 largest companies alone paid $87.9 billion in dividends, roughly twice the total economic output of Tunisia (population 11.5 million) for an entire year.

Dividends are payments made by companies to their shareholders on a quarterly or annual basis, with every share entitling its owner to receive an amount determined by the company’s board. The money for these payments does not arise out of thin air. It is extracted from the collective labour of the working class. Its source, as Karl Marx discovered more than 150 years ago, is the surplus arising from the difference in value between what the workers are paid in wages and what they produce in the course of their work.

The figures contained in the report demonstrate how the share market serves as a mechanism for the transfer of wealth up the income scale from the working class to the wealthiest sections of society. The overwhelming majority of shares of all these corporations are dominated by a relative handful of investment firms and hedge funds which are controlled by a tiny layer of billionaire and multi-millionaire shareholders.

One hundred years ago, the Russian Marxist revolutionary Vladimir Lenin, analyzing the development of imperialism at the turn of the 20th century, noted that an essential feature of this period of capitalist decay was an “extraordinary growth of a class, or rather, a stratum of rentiers, i.e., people who live by ‘clipping coupons,’ who take no part in any enterprise whatever, whose profession is idleness.” Today, the processes then analyzed by Lenin have developed to a far greater level of maturity.

The growth of dividend payments is just one expression of how corporate profits are being used, not to re-invest into productive capital, but for essentially parasitic financial activities to directly enrich the corporate and financial elite.

The financial investment firm Moody’s reported last June that stock buybacks in 2018 by the S&P 500 companies (500 US-based companies that comprise around 80 percent of the US market) had doubled from the previous year to reach $467 billion in the year to March 2019. Stock buybacks occur when companies purchase their own stock in order to artificially inflate their own share price. Their sole purpose is to increase the wealth of shareholders by raising the price of the shares that they own.

Goldman Sachs data published at the end of July shows that in the 12 months ending March 31, the same S&P 500 spent 103.8 percent of their free cash flow on dividend payouts and stock buybacks. In other words, they spent more than their income in direct handouts to investors over the same period. This is the first time that this has taken place since the period of 2006–2008, in the immediate lead-up to the 2008 financial crash produced by the criminal speculative activities of the corporate and financial elite. In the period since, these activities have not only continued, they have intensified.