Capitalism has produced many benefits. The capitalism of the early 20th century, in particular, has helped the average citizen to become wealthier than ever before. At no time in man’s history has so much wealth been accumulated by the general population. However, it is becoming increasingly apparent that troublesome side effects accompany one particular aspect of capitalism: the fact of companies pandering to short-term shareholder expectations.

The United States and Britain rose to preeminence, in large part, because they were nations of producers. They manufactured products that they could sell to the rest of the world at a profit. Exporting these goods led to net inflows of money and investment, which in turn helped create more middle-class jobs and a higher standard of living.

Companies that performed well were rewarded by higher share valuations. Consequently these companies had cheaper access to money, and could grow and expand quicker.

A problem developed as companies went to greater and greater lengths to attract money and investors. The focus of industry became short-term shareholder returns. Companies’ whole purpose became geared toward topping the profit made in each previous year. Then, as the contest to attract investment became more competitive, these same companies started focusing on topping semi-annual profits. Today, the situation has developed to the point where companies that fail to improve earnings on even a quarterly basis have their stock prices pummeled by shareholders.

Because of this, many companies no longer care if they are providing an essential service at home or if they are manufacturing strategic goods necessary for the safety and well-being of the nation. Instead, they are fixated on continually meeting shareholder expectations.

This is the case, as exemplified by the recent announcement by British company bae Systems. bae, Europe’s largest defense company, recently announced that it would be selling off its 20 percent stake in European aircraft manufacturer Airbus.

When asked why bae was seeking to sell its Airbus stake, one company spokesman explained it would bring the advantage of “delivering maximum returns to its shareholders” (Press Association Newsfile, April 7). The bbc said bae would probably use the proceeds for offshore investments (bbc News, April 6).

So instead of building with a long-term vision to strengthen their nations, as corporations used to do, this shareholder-pleasing mentality influences many companies to focus on short-term earnings regardless of the effect on their employees and the long-term health of their national economies.

Selling these Airbus shares means there will no longer be any British corporate influence over the 13,000 UK Airbus employees or the 135,000 other supply and support jobs in Britain that rely on them. The decisions to hire, fire, expand or shut down UK operations will come entirely from outside the UK.

Regarding possible ramifications of the sale, Robert Peston, the bbc’s business editor, said, “There will inevitably be fears that, over time, the manufacturing capability and the high-skilled engineering jobs will leave the UK” (ibid.).

According to the bbc, the UK government is concerned about job losses at least, and will be looking to obtain job security guarantees for the existing industry. But words are not enough, says gmb union leader Paul Kenny: “We want the government to quickly and decisively step in to protect the aviation industry in the UK which has been funded by the taxpayers. … The gmb is not prepared to accept worthless and unenforceable guarantees regarding the longer term. gmb members do not want to be part of another Rover. There is a vital national economic interest at stake here and the government has the powers to act to stop this sale” (Press Association Newsfile, op. cit.).

Rover was the British vehicle manufacturing giant that was previously owned by bae Systems before it was sold to German-owned bmw in 1994. This month marks the one-year anniversary of Rover’s collapse and bankruptcy.

Even if there are no short-term job losses, there are other longer-term issues that could be affected by the sale. One of these issues is future investment.

The fact that Airbus would become a fully foreign-owned company worries some Britons that Airbus will lose incentive to further develop UK plants and facilities, and that it will shift future outlays into other countries. Amicus National union officer Ian Waddell also frets about the long term, hoping that the UK factories will still “continue to get investment so that they maintain their world-leading competitive advantage on wings and fuel systems” (ibid.).

Whatever the outcome of bae’s Airbus sale, there certainly are some disturbing trends in America and Britain. Companies are increasingly pandering to investors who are seeking short-term appreciation in stock values. As such, many of these companies are no longer acting in the best interest of their nations.

Increasingly, in the search for higher return, these companies have been moving their operations outside of America and Britain to low-cost countries. Unfortunately, the technology, jobs, money—and sometimes, infrastructure vital to national security—go with them.

Today, America and Britain have to import many of the goods that they used to produce themselves. They import hundreds of billions of dollars more of goods each year than they export. America’s trade deficit (which is the value of goods and services imported over those exported) for 2005 was $723.6 billion, while the UK’s was $114 billion. This means that, through trade, $23,263 dollars left the U.S. every second of every day last year. In the UK, more than $3,600 per second was lost.

These trends are draining America and Britain dry. For more information on the consequences of manufacturing leaving America, refer to our article, “The Death of American Manufacturing.”

In times of peace, foreign control of strategic industries and infrastructure may not be an immediate threat, even if the loss of technology and lack of investment slowly erode a nation’s competitiveness and wealth. But in times of war, this erosion of strategic industry will really be felt.

Even discounting bae’s sale of its 20 percent stake in Airbus, over 145,000 UK jobs were already either directly or indirectly controlled by Germany, France and Spain through their 80 percent ownership of Airbus—and that is just one company. How many jobs within the U.S. and Britain are foreign-controlled? How much damage could be caused by enemies of the U.S. or Britain in a time of war? How much political leverage can foreign companies exert on British and American governments?

But beyond those questions, manufacturing trends suggest that America and Britain have been losing strategic industry and subsequently their technological advantage to foreign nations—and that is the pitfall of pandering to stockholders. In seeking to maximize shareholder returns, corporations have been pressured to leave their home countries and have set up shop in foreign nations where production costs are lower. Even though this may increase company and shareholder returns, it is slowly but surely draining the wealth from America and Britain.