Capital-hoarding

Capital-hoarding refers to the practice of entities, such as individuals, corporations, or governments, accumulating and retaining significant amounts of financial capital, rather than investing it, circulating it, or distributing it more broadly. This often involves prioritizing the preservation and growth of existing wealth over stimulating economic activity, creating employment opportunities, or addressing social needs. It can manifest through practices like accumulating large cash reserves, investing in low-risk assets, and avoiding risky ventures that could benefit society, resulting in reduced investment in the real economy, potential economic stagnation, and increased inequality. The scale of capital-hoarding ranges from individual level wealth to entire corporations holding large proportions of national wealth.

Capital-hoarding meaning with examples

• Critics argued that the tech giant's substantial cash reserves, held offshore, exemplified capital-hoarding. This practice, they contended, deprived the domestic economy of much-needed investment capital, hindering job creation and innovation. Furthermore, the company's reluctance to pay higher wages was seen as another facet of this hoarding behaviour, exacerbating income inequality among their employees and the broader community.
• During the economic downturn, many businesses engaged in capital-hoarding, choosing to sit on their profits rather than invest in expansion or new ventures. This resulted in a slowdown in economic growth and reduced opportunities for workers. Furthermore, this led to decreased tax revenue and potentially larger government debt burdens, which required more taxation from the very people who weren't benefitting from the businesses.
• The government's fiscal policies, favouring tax cuts for the wealthy, were accused of encouraging capital-hoarding. Critics argued that such policies incentivized individuals and corporations to retain their wealth, rather than reinvesting it in the economy. This had consequences of limiting capital available for public infrastructure projects, and other government-run endeavors.
• Following the stock market crash, many investors, fearing further losses, opted for capital-hoarding, withdrawing their investments from the market. This action resulted in a liquidity crisis, which led to the collapse of some financial institutions. The overall sentiment among the investors was one of fear and the preference to hold tight to what was left, to mitigate losses, and to ensure safety of remaining funds.
• The excessive executive compensation packages, accompanied by shareholder buybacks, were cited as evidence of capital-hoarding within large corporations. Instead of reinvesting profits in research, development, and worker benefits, the companies were increasing the wealth of executives. This created the perception of companies prioritizing the enrichment of the few over the health and well being of the many within and around the business.