The sterilisation of savings in companies’ cash reserves

In OECD countries: Income distribution is skewed to the detriment of wage earners; As a result, profits have risen beyond what is needed to finance investment; Companies have used this increase in profits to increase their cash reserves. This has resulted in lower household incomes and demand, the counterpart of which is an increase in companies’ cash reserves, leading to: A fall in total demand (fall in household demand without an increase in corporate investment); An increase in the savings rate (corporate savings invested in cash instead of household demand) and a sterile use of savings (increase in companies’ cash reserves). This is an inefficient equilibrium: beyond a sufficient level of profitability, it would be better to distribute productivity gains to households.