There's another factor too (and apologies if this has already been raised): firms are bought by the raising of loans which are then loaded on to the companies. A recent example is Debenhams, which was bought by a private equity group for £600 million in 2003; it was fleeced by the owners, who paid themselves £1.2 billion in dividends before selling the company in 2006, leaving it with £1 billion in debts (before the takeover Debenhams' debt was £100 million).This is an increasingly common practice, and seems especially rife in football. The Glazer family's takeover of Manchester United, for example, was paid for largely by loans secured against the club's assets; these are costing it around £60 million a year. The total debt of the club is now approaching £500 million, but the family are still helping themselves to £20 million a year in dividends.This process is politely referred to as involving leveraged investment, though corporate looting seems a more appropriate term.
Richard Carter ● 1729d