The Growth Of Global Rentier Capitalism And Poltical Discontent

A paper presented at the University of Chicago's Booth School of Business described the "vicious circle" of business concentration which has led to the development of rentier capitalism.  This was a process that started in the US, but has become a global phenomenon.  As the business sector becomes more concentrated it becomes more profitable.  That leads to greater political power which leads to even greater business concentration and more political power.

The study was based on data derived from the financial statements of publically traded corporations in 56 developed nations.  One measure of market concentration used in the study is the market capitalization of publically traded firms.  In 1995 the market capitalization of the top 100 firms was 31 times that of the bottom 2,000 firms.  By 2015 the market capitalization of the top 100 firms grew to 7,000 times the market cap of the bottom 2,000 firms.  That has not been accompanied by employment growth.  The market cap of the top 100 firms grew by a factor of four.  Employment growth was less than half of the growth in their market cap.

They measured economic rents by comparing profits with the return on assets.  Economic rent is the difference between the return on assets and profits.  Economic rent, or surplus profit, was 4% between 1995 and 2000.  It grew to 23% between 2009 and 2015.  Most of the growth in surplus profits or rent occurred in the top 100 firms.  Rents were 16% of total profits 1995-2000.  They were 40% of profits 2009-2015.

Hyper-globalization contributed to market concentration and the growth of economic rents.  The primary goal of corporate executives has been to increase shareholder value.  Much of their compensation is based upon the growth in earnings per share of stock.  That determines their bonuses and stock options constitute the bulk of their total compensation.  Over the last 30 years they have shaped trade and investment agreements; they have captured state regulators and they have increased their market power.  The power of nation states has declined in relation to the growth of market power that is concentrated in our largest global corporations.  That has contributed to much of the public discontent that we see in the US and in Europe.  It has also been a major source of growing income and wealth inequality.