In an essay, conservative think tank American Compass Executive Director Oren Cass recommended that policymakers increase capital investment towards productive development. Mr. Cass asserted that over the past several decades, the American economy has shifted from a traditional capitalist system, in which firms use their profits to increase their capital stock, to one in which firms typically disgorge cash to shareholders. Mr. Cass classified the latter system as one of "non-investment," in which "investors" deploy no resources toward the creation of new productive capacity. Instead, Mr. Cass stated that such investment is "merely the trading of assets for profit and power."
To create rules that would encourage the financial sector to put the dissemination of capital towards productive uses, Mr. Oren recommended that policymakers consider:
- establishing a financial transactions tax on secondary market asset exchanges;
- increasing tax rates for short-term capital gains and profits from speculation;
- restricting the ability of financial sector entities to act as both actual investment banks that disseminate resources in the real economy and non-investment firms that establish and trade assets among themselves;
- making private equity firms liable for the debt with which they burden the companies they acquire; and
- requiring non-investment firms that handle assets for public pensions and non-profit endowments to provide comprehensive disclosures.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.