Yves here. A terse but cogent description of how executive grifting has moved on to the deeper pockets of government.
By Lynn Parramore, Senior Research Analyst at the Institute for New Economic Thinking. Originally published at Institute for New Economic Thinking website
There’s a familiar myth in American politics: that of the no-nonsense business leader who cuts through red tape and gets results. It fuels the belief that running a country is just like running a company — and that executives, with their boardroom instincts and bottom-line mindset, are exactly what government needs.
But that myth collapses under the weight of what corporate leadership has actually become — and what happens when it migrates into public office.
Economist William Lazonick has spent decades analyzing that transformation. He argues that corporate America has abandoned its commitment to innovation and productive investment, replacing it with a laser focus on cost-cutting, price gouging, and tax dodging to boost profits so they can do more stock buybacks—all in the name of maximizing shareholder value. Most executives are no longer rewarded for building durable businesses or contributing to the real economy—they’re rewarded for how efficiently they extract value from the companies that they control.
Lazonick calls this model a “scourge,” blaming it for weakening U.S. technological leadership, driving massive inequality, and destabilizing the broader economy. Now, he warns, this same extractive logic is infiltrating the federal government.
The ongoing 2025 budget debates are a case in point. Under the guise of “efficiency” and “fiscal responsibility,” the Trump administration has proposed slashing $163 billion from federal spending — cuts that would gut education, housing, and medical research—all of which are essential for value creation. The language mirrors what executives have long used to justify layoffs, offshoring, and disinvestment. But in this case, it’s not a corporation being hollowed out. It’s the state itself.
Lazonick argues that this shouldn’t surprise anyone. “Because these people have gotten away with looting corporations, they’ve come to believe it’s their right to loot the state,” he says. Even among tech figures who’ve built or have led the building of real products—like Elon Musk, Jeff Bezos, and Mark Zuckerberg—Lazonick notes a mindset of entitlement: “They treat the resulting wealth as entirely their own, as if they alone earned it.” That thinking now shapes public policy, where deregulation and budget cuts benefit the wealthy while dismantling protections for workers and consumers.
Take Musk, for example. As head of the Department of Government Efficiency (DOGE), he’s worked to weaken regulatory agencies like the Consumer Financial Protection Bureau and the National Labor Relations Board—both of which would typically oversee parts of his business empire. At the same time, his companies continue securing massive federal contracts, including a potential $2 billion FAA deal, raising serious concerns about conflicts of interest. As Lazonick and colleague Matt Hopkins argue in a recent piece for the Institute for New Economic Thinking, Musk has advanced through a “perilous system of corporate governance” driven by shareholder primacy—fueling inequality and eroding America’s technological leadership. His tenure at DOGE is simply more of the same: dismantling oversight, channeling public resources into private ventures, and treating government as just another asset to extract.
Musk’s corporate empire—Tesla, SpaceX, and Neuralink—owes much of its success to taxpayer-funded research and government support. Tesla was launched with the help of federal loans and electric vehicle subsidies. SpaceX builds on decades of NASA-funded R&D and now depends on billion-dollar public contracts. Even Neuralink draws heavily on publicly funded neuroscience work. Despite the mythology of private-sector genius, these companies are deeply rooted in public investment. Yet the public sees little return.
And the mindset isn’t limited to Musk. President Trump and his family are taking the corporate model Lazonick describes to new heights, using government as a platform for private enrichment. Eric Trump recently promoted the family’s latest crypto venture, making the president a major crypto player while shaping federal policy toward that very industry. The Trump family’s 60% stake in World Liberty Financial, now attracting major investment, has intensified concerns over conflicts of interest. Meanwhile, under Eric’s leadership, the Trump Organization has struck a controversial $5.5 billion deal with a Qatari state firm to build a luxury golf resort—despite Trump’s previous pledge to avoid foreign deals while in office.
Trump has also issued executive orders to “streamline” federal procurement and contract reviews. While marketed as anti-waste measures, critics see them as a backdoor for directing government business to favored contractors, including those with family ties. The line between public service and private gain has rarely been thinner.
Lazonick warns that the stakes are high. When corporations prioritize shareholder payouts over real investment, society loses—but when governments adopt the same model, the consequences are compounded. We’re not just talking about fragile companies. We’re talking about the erosion of public institutions, rising inequality, and a democracy that serves fewer and fewer people.
To reverse course, Lazonick argues we need deep structural reform in how corporations—and by extension, governments—operate. That means banning stock buybacks, reining in executive compensation tied to manipulated stock performance, and reinvesting profits in innovation, workers, and communities. It means embracing a stakeholder model of governance that sees corporations not just as wealth machines, but as stewards of social value.
Because if we don’t fix these systemic flaws, the looting won’t stop. It’ll only deepen—and spread.
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A great first step would be to ban stock buybacks that are explicitly or effectively funded by debt. Those are truly demonic and you would think it would be easy to build consensus behind such a ban.
Take a look at the buybacks of Intel, for example, which were tantamount to putting a lit match to billions of dollars that could have instead financed capex, innovation, and true shareholder value.
No buybacks that exceed R&D for a given year.
No buybacks if a company has laid off workers in the previous year
Large scale layoffs result in no buybacks for 5 years.
Better yet, no buybacks at all.
Trump in his last term also suggested the stoppage of stock buybacks but, dems stomped on the idea.
Not that Trump was just bloviating and lying cause it makes him look cool or helps him look biggly thats what he does….non the less
As well as banning stock buybacks, what about re-instating Glass-Steagall? Repealing that went a long way to bringing on the 2008 Crash. Thank, Bill.
Good idea! Keep the uninsured deposits, merchant banking and other risks separate from the checking, savings and other consumer products and services. One less free ride for crooks on the public nickel, and less exposure to systemic Too Big To Fail.
Prof Hudson would be pleased with this article. Move from financial capitalism back to industrial capitalism.
Bit late for the US I think. The trick is finding and maintaining the ‘sweet spot’ before you head off to full blown socialism once you move in this direction. Very few countries pull it off, depends on the culture I think. France got close, but then the ‘social contract’ became too ingrained and restraining. Hudson, I think, argues Russia and China are prototypes albeit from different starting places.
I’d love to see some eventual discussion, perhaps by Hudson or others of political capitalism and how to neuter that. Too many in Washington, and in other government centers like Sacramento, Albany and others, look at the budgets as trough spigots for their donors and actors that escape public scrutiny. Witness at the federal level the opaque process in project funding through NGOs, with purposeful lack of auditability. It would be instructive to see who really gets how much versus what is in the glossy presentation by the oily politician. Visualize Newsom, or Hillary in Haiti, if that helps.
The notion of worthy causes is another casualty of the same mindset that encourages rapacious behavior in the private sector. Spin with words, obfuscate, delay and await the next news cycle to help the public to remain unaware.
At this point,
I would take full-blown socialism over all I have hitherto seen. In a democratic state I mean.
A Fortune magazine article from March 19, 2025 by Alena Botros is titled, “The true genius of Elon Musk is his ‘subsidy harvesting strategy,’ political science professor says.”
USC professor Jeb Barnes said, “DOGE is a way for Elon Musk “to sort of carve out a rent-seeking opportunity extraordinaire” while “pointing to an already successful tactic for him: accumulating subsidies.” “Musk has reportedly collected $38 billion in government funding over the years through contracts, loans, subsidies, and tax credits, according to a recent Washington Post analysis.”
Furthermore, the article goes on to state, “Musk might even be making a play to fold in artificial intelligence by creating a market for chatbots and other applications in the government, Barnes said, calling it the ultimate contract. There are some signs that this could already be happening,…”
https://fortune.com/2025/03/19/elon-musk-subsidy-harvesting-strategy-tesla-spacex-xai-doge/
No one can become a billionaire without exploiting the government, the workers, the consumers, or all of them.
Exactly!
Thank you for the link.
BIG government
BIG fraud.
States’ rights!
https://usafacts.org/articles/how-many-people-work-for-the-federal-government/
Big government is not the problem in America. Bad government stemming from corrupt politics and leaders is a problem. Corruption and warmongering are the problem. Talking about big government is right wing misdirection.
I was surprised by some of the facts about current and historic govt employment.
Thank you, Yves.
It won’t surprise you that Blighty is no better as per the following:
https://www.thisismoney.co.uk/money/markets/article-14168257/Private-equity-sharks-cash-foster-care.html
https://www.thecanary.co/uk/analysis/2024/12/10/foster-children-uk/
https://www.thisismoney.co.uk/money/markets/article-14249631/Private-equity-profits-fostering-crisis-engulfs-childrens-care.html
Late last week, it was revealed that the National Fostering Agency Limited, owned by a Delaware fund, made £160m in 2023 and 2024.
Mum raised the alarm in Whitehall before Covid and suggested strengthening oversight, as this privatisation was unlikely to be reversed, but nothing happened.
“To reverse course, Lazonick argues we need deep structural reform in how corporations—and by extension, governments—operate. That means banning stock buybacks, reining in executive compensation tied to manipulated stock performance, and reinvesting profits in innovation, workers, and communities. It means embracing a stakeholder model of governance that sees corporations not just as wealth machines, but as stewards of social value.”
Agreed. Put these ‘structural reforms’ presuppose that we have a national legislative body that works for the good of the people, and not to increase their own private net worth.
We are blessed with a Congress that whistles and looks the other way in the face of Genocide; why should we believe they care about instituting structural reforms that benefit their own people?
The above is all true but one should quarrel with the “now” in the headline. Bill Clinton set out to “reinvent government” and wanted to turn Social Security over to Wall Street. Obama foamed the runways and like Clinton became very wealthy after office. His Veep ran deals while still in office and pardoned his entire family preemptively on leaving the presidency. One should point out that our entire political class now works to make sure corruption stays in place so it’s unclear who will be advocating for reform.
Trump is simply more blatant in his corruption than his predecessors. The crisis as they see it is the turning over of the rock.
No quibbles with the main thrust of this piece, but the pile-on for stock buybacks is silly, because it’s pushing on a string.
Banning stock buybacks does precious little to fix the problem, because companies have multiple other levers to juice the stock price. Companies have four main capital allocation choices: 1. Invest in the business (capex or buy another company) 2. Hold cash 3. Dividends 4. Stock buybacks.
So you ban stock buybacks? The company will just pay more dividends (which are not yet under attack, though it’s still a massive transfer to investors). That will boost the stock price, too. Then it’s just an optimization issue about which gets the most after-tax return to investors. And since the tax code treats capital income more “fairly” than earned income, capitalists are better off.
So you ban dividends and buybacks? Then the company just goes and buys another company, and then the compensation consultants just raise C-suite comp to reflect the higher wages at other “comparable” companies, and execs win again.
Even if the company holds more cash, it’s money that could be paid out as higher comp and bonuses to the C-suite, which controls the reins, obviously. Or they could simply use the cash to lobby for more friendly policies. Again, you’re not reducing the political power of companies and end up just squeezing a balloon.
So a company has four main capital allocation choices — are you going to ban all of them because you’re not getting higher wages and investment in the business? In other words, if you’re trying to rein in the company’s capital allocation decisions, you’ve already missed the boat. The problem has to be tackled before the profit is made — either with policies that address wages and capital investment or those that raise taxes, either corporate or personal (such as those favoring capital income), thus lowering the incentive for execs to self-deal. Higher corporate tax rates increase the value of investing over a longer period, since they effectively mean that the government is sharing part of the burden of doing so (i.e., an investment is staff is a cost that’s partly borne by the government at the percentage of the tax being paid.)
The US needs higher tax rates and a more progressive tax schedule to raise the incentives to invest in the future, reduce the profitability of asset-stripping and lower the value of self-dealing.
Sorry, Lazonick’s various “…deep structural reform[s]” are all eyewash…chump-change. Even the oligarchs that were our so-called founding fathers were highly skeptical and suspicious of extending corporate charters. Maybe they had thought the matter through and figured that eventually limited liability corporate charters would be handed out like candy kisses and corporations would take total control over actual citizens.
We need a constitutional amendment that says corporations and other artificial entities are not citizens. Only natural born humans are citizens with all the rights due to citizens. Moreover, money in no way constitutes free speech and cannot suborn free speech. Then it will be easy to tinker around the edges with Lazonick’s various reforms.
I am waiting for the bottom to fall off.
On the same train of thought, how much fat is there to harvest from the public assets and the individual wealth (to be squeezed for any kind of fees, towards more expensive everything) in the US? A generation, less than a generation?
Much of the commetariat seems quite comfortable with the notion that most things economic, political and cultural in our country are coming apart.
Are each of us also a part of that process?
Is it reversible?
So little control finally–Is that true?
Maybe it’s not our/their country, literally or figuratively.
Since a lot of the Western commentariat seem to be fairly wealthy, perhaps they have helicopters and anticipate flying off from the ruins of the US to . . . where, exactly?
In the annuls of Western History, the US has come to mirror what the Roman Empire evolved into: a class of elites with a sparse middle class and lots of slaves.
Eventually, the Roman Empire over-reached its capabilities. With the intrusion of foreign invaders and political squabbles within its military and the Autocrats, eventually it died.
We sense that “America” is at a crossroad.
If you have a little property, it’s time to start growing your garden greens.
These corporate leader types are all psychopaths incapable of human compassion or empathy. What little there was that was restraining the worst of them was obliterated by the second coming of Trump. They won’t stop their looting and destruction of what good remains in government until there is nothing of value left to loot. As Milton said long ago, “Better to reign in Hell then serve in Heaven.”