Written by: Chaotic Indian
It’s all a case of “rich get richer, poor get poorer” in the United States of America as 18 corporate companies currently hold a whole third of the American wealth. The top 1% includes some of the biggest names in the market, like Microsoft, Google, Coca-Cola and the like.
According to Standard and Poor, a New-York based credit rater, the amount of wealth held by the 18 major firms has jumped from 27% in 2009 to a whopping 36% in 2013.“In our view, current US corporate tax policy and accommodating credit market conditions have been primarily responsible for this growing wealth gap,” the report said. The top firms hold a mind-boggling 89% of the total wealth, leaving only 11% for smaller firms.
S&P noted that most of the bigger firms earned their revenue from offshore, and that a majority of the cash flow was generated overseas. “As a result, overseas cash continues to accumulate untouched,” the report said. “It’s undoubtedly going to increase.” The report further stated that, “We believe the availability of cheap debt has been a key driver for the record cash balances for not just the top 1 percent, but for US corporates overall.” Despite taking up debts, the firms are in a much better position than they were 5 years ago.
Multinational Corporations(MNCs’) had earned more than $1.95 trillion from foreign earnings, up 11.8% from a year earlier. More and more people choose to use goods and services made by foreign brands all over the world, as brands continue to become more popular and cheaper at the same time.
This monopoly of wealth hoarding affects smaller companies and investors, as well as the Govt of the United States. As most of the major MNCs’ accumulate wealth from overseas, the US Govt faces a loss of more than $80 billion this fiscal year from a delay in bringing back corporate profits. Further, investors worry as the top 1% companies “would likely not have provided the returns that shareholders have become accustomed to in recent years,” the report said, as the cash balance would have been a lot lower after deducting returns to shareholders and the like.