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Is Stagflation the Norm?
Full text linkAs much of the world grapples with post-Covid price gouging, it seems like a good time to revisit our understanding of inflation. In this post, I’m going to test Jonathan Nitzan and Shimshon Bichler’s ‘stagflation thesis’.
The idea is that ‘stagflation’ — economic stagnation combined with high inflation — is not some exogenous ‘market shock’. According to Nitzan and Bichler, stagflation is a business strategy — one of two main routes to profit.
The first route to profit is for businesses to hold prices steady while they try to sell more stuff. The second route is to jack up prices. Since this latter option requires restricting the flow of resources (stuff that flows freely cannot be dear), Nitzan and Bichler reason that when inflation rears its head, it ought to come with economic stagnation. In other words, stagflation is the norm.
If this stagflation thesis is correct, then inflation ought to correlate negatively with economic growth. Looking at the United States, Nitzan and Bichler find evidence that it does. Here, I broaden their stagflation research by looking at all countries in the World Bank’s global development database.
I find that both within and across countries, economic growth (measured in terms of energy use) tends to decline as inflation increases. So Nitzan and Bichler appear to be onto something. Over the last half century, stagflation is the general rule
Stocking Up on Wealth … Concentration
Full text linkThere’s an old joke that economics is too important to be left to economists. In the same vein, I think rich people are too important to be left to the self-help industry.
Yes, the popular appeal of you-can-get-rich-too books is obvious. But what’s not obvious is why so few social scientists study wealth.1 Clearly, the public thirsts for serious inquiries about the rich. (Thomas Piketty’s opus on inequality was a bestseller.) But for the most part, social scientists are content to focus on ‘poverty’ and let the self-help gurus wax about ‘wealth’.
The irony, in my view, is that poverty and wealth are two sides of the same coin. Concentrated wealth begets concentrated poverty. Still, there is an asymmetry between the two extremes. As a rule, poor people have little power, which means they cannot be blamed for their own poverty. But almost by definition, the rich wield power to their own benefit, which means they create the conditions of their own opulence … and everyone else’s misery.
Given their power over society, I find myself on a research kick studying rich people. This post concludes the binge with a look at what drives wealth concentration among the richest Americans. I find that there’s a straight line between wealth concentration, corporate consolidation, and the strategy of ‘buying, not building’. In short, Peter Thiel is correct when he says that ‘competition is for losers’
All You Need to Know About Climate Change
Full text linkWhat if I told you that they knew everything? And that they have known it for a very long time? On January 13 of this year, 2023, in the journal Science, perhaps the most important article to date on climate change was published. In political, social, and ethical terms, this article represents the equivalent of a nuclear bomb, despite the fact that (as is sadly obvious to expect) no one in mainstream news channels (and very few in academia) has mentioned it
Technological Change and Strategic Sabotage: A Capital as Power Analysis of the US Semiconductor Business
Full text linkRapid technological change is often touted as a fundamental reality of capitalist societies. It is also presented as concrete evidence for the supposed progressive improvement of material well-being that characterises the capitalist system of social order. Since its emergence in the mid-20th century, semiconductor technology in many ways exemplifies this view. Yet the rapid advancement of semiconductor technology has also been accompanied by social conflict. The history of the technology is as much a story of frequent global chip ‘shortages’ and geopolitical disputes as it is one of exponentially growing computational power. The purpose of this study is to examine how the two sides of this story—progress and conflict—are linked. Starting from the theoretical political economic framework of capital as power, I put organized social power at the centre of this inquiry. I examine the behaviour of large semiconductor manufacturing firms in an attempt to uncover empirical relationships between capital investment, chip ‘shortages’, prices, and profits. Using quantitative and qualitative analysis, I find evidence that dominant semiconductor firms have engaged in systematic underinvestment in order to control chip prices for differential gain
המהפכה המשטרית" וקבוצות ההון הדומיננטיות" (Regime Change and Dominant Capital)
Full text linkהמשברים האחרונים בישראל, המכונים בשם אורווליאני טיפוסי "המהפכה המשפטית", הובילו לשתי תגובות סותרות לכאורה: האחת הייתה של פירמות ההשקעה ומיני כלכלנים ואנליסטים והתגובה השנייה הייתה של נתניהו ומרעיו למה שהם מכנים "רפורמה". מי צודק? האם צודקים ראשי קבוצות הון דומיננטיות המתריעים מפני "הפגיעה בדמוקרטיה", "הפרת שיווי המשקל שבין הרשויות", "הברחת הון סיכון", "שיבוש היציבות" ושאר מיני אזהרות? או שמא צודקים נתניהו וכנופייתו, המבטיחים שהליברליזציה בישראל משגשגת, שכלכלת ישראל מבוססת על יסודות איתנים ותמשיך לצמוח ובעיקר, כי היא נמצאת בידיים אחראיות ומנוסות. לנו נראה כי שני הצדדים צודקים
Degrowth and Capital: Assembling a Power-Centred Theory of Change
Full text linkIn the context of contemporary socio-environmental shifts, the concept of “degrowth” advocates for transforming societies to ensure environmental justice and a well-being for all within planetary boundaries. This PhD thesis, positioned within degrowth studies, provides a processual, holistic and interdisciplinary exploration of the dynamics between degrowth transformations and capital accumulation, understood as an all-encompassing power process.
I start by critically exploring the role of capital accumulation in the unfolding of degrowth transformations, highlighting some shortcomings of conventional views that predominantly see capital accumulation as a primarily production-oriented process. While, historically, the degrowth project has opposed economism, these perspectives tend to overlook the deep intertwinement between economics and politics in the intersection between degrowth transformations and capital accumulation. This thesis then considers the theory of “Capital as Power” (CasP), which dissolves the boundaries between economics and politics in the study of capital. Key implications of CasP for the unfolding of degrowth transformations are highlighted. Through this lens, I identify four distinct elements of dynamics, each represented as a causal loop diagram (CLD), capturing the complex relationship between degrowth transformations and the power processes of capital accumulation. Using insights from Social Practice Theory (SPT), I further investigate how degrowth-aligned practices, reforms, and ruptures may be inhibited by “strategic sabotage” processes that bolster capital accumulation, conceptualising four modes of sabotage, set into motion through two additional elements of dynamics. These six elements of dynamics are then assembled into a single CLD, which is used to explore four scenarios for the unfolding or marginalisation of degrowth transformations against the process of capital accumulation.
In short, as the journey progresses, this thesis assembles a power-centred theory of change for degrowth against the process of capital accumulation. It emphasises the importance of understanding and navigating these power dynamics for those willing to move towards a degrowth society
How the Rich Get Richer
Full text linkThe rich get richer.
It’s a phrase that packs a lot of punch. It’s potent rhetoric, yet surprisingly accurate at describing how rising inequality plays out.
Of course, there’s nothing inevitable about the rich getting richer. We just happen to live in an age of growing corporate despotism. And our friends at Forbes have been there to document the disease.
Forbes.
Forbes who loves the free market. Forbes who loves obscene wealth. Forbes … the unwitting social scientist?
When Malcolm Forbes started publishing his rich list — the Forbes 400 — back in 1982, he surely wasn’t intending to do social science. By all accounts, Forbes simply loved opulence, and wanted to celebrate those who had the most of it.
It was part of a 1980s trend that fetishized obscene fortunes. For the middle class, there was the saccharine show ‘Lifestyles of the Rich and Famous’, which exalted the excesses of elite living. But for the upper class there was something less crass — a list that ignored the material trappings of wealth. It was called the Forbes 400, and it did nothing but report the raw numbers of capitalism — the capitalized wealth of the richest Americans.
In hindsight, Malcolm Forbes’ obsession with wealth seems ominous — kind of like the Sackler’s claim that OxyContin wasn’t addictive. But while Malcolm Forbes certainly cheerled the excesses of modern capitalism, he (and his magazine successors) also left an exquisite record of how US elites enriched themselves.
Sure, the enrichment left a big mess. But for the moment, let’s forget about cleaning it up and instead, investigate how it happened. Come, let’s look at how the American rich got richer
제국주의와 금융주의 : 어느 결합체에 관한 이야기(비클러 & 닛잔 2012) (Imperialism and Financialism: A Story of a Nexus)
Full text link지난 세기 동안 제국주의와 금융주의의 결합은 마르크스주의 이론과 실천에서 중심축이었다. 수많은 마르크스주의자가 이 결합이 전 세계를 병폐에 빠뜨린 원인이라 생각했다. 하지만 시간이 지남에 따라 그들이 이 결합에 부과한 역사적 역할은 극적으로 변했다. 핵심적으로 변화한 것은 잉여와 유동성 흐름의 성격과 방향이었다. 20세기로 접어들면서 제국주의와 금융주의의 결합체가 명확해졌다. 그 결합체의 첫 번째 구현 형태는 금융 자본이 ‘초과’ 잉여를 수출할 수 있는 식민지를 얻기 위해 제국주의자들이 벌인 쟁탈전을 설명했다. 다음 두 번째 버전에선 중심부의 잉여가 국내로 흡수되고 군사 지출과 금융 중개라는 ‘블랙홀’로 빨려 들어가는 독점 자본주의의 신제국주의적 세계를 상정했다. 세 번째 스크립트는 종속적인 주변부에서 금융 중심부로 잉여가 유입되는 세계체계를 가정했다. 그리고 가장 최근 판본은 미국이라는 중심부의 공동화를 설명한다. 즉, 중심부인 미국은 이미 자체 생산 연료의 상당 부분을 태워버렸고 이제는 세계체계의 외부 유동성을 사용하고자 나머지 세계를 ‘금융화’하는 ‘적색 거성’이다. 본 논문은 마치 카멜레온과 같은 이러한 변형의 윤곽을 보여준다. 그리고 그 결합체에서 놓친 게 무엇인지 따져본 뒤, 이를 유지할 가치가 있는지 묻는다.
Over the past century, the nexus of imperialism and financialism has become a major axis of Marxist theory and praxis. Many Marxists consider this nexus to be a prime cause of our worldly ills, but the historical role they ascribe to it has changed dramatically over time. The key change concerns the nature and direction of surplus and liquidity flows. The first incarnation of the nexus, articulated at the turn of the twentieth century, explained the imperialist scramble for colonies to which finance capital could export its excessive surplus. The next version posited a neo-imperial world of monopoly capitalism where the core's surplus is absorbed domestically, sucked into a black hole of military spending and financial intermediation. The third script postulated a World System where surplus is imported from the dependent periphery into the financial core. And the most recent edition explains the hollowing out of the U.S. core, a red giant that has already burned much of its own productive fuel and is now trying to financialize the rest of the world in order to use the system's external liquidity. The paper outlines this chameleon-like transformation, assesses what is left of the nexus and asks whether it is worth keeping
Does the US Tax Code Encourage Market Concentration? An Empirical Analysis of the Effect of the Corporate Tax Structure on Profit Shares and Shareholder Payouts
Full text linkEXECUTIVE SUMMARY
Concerns about the market power of large corporations are growing. There are good reasons why monopoly now features so prominently on the political and economic agenda. Mounting evidence shows that corporate concentration stifles innovation and investment, resulting in lower-quality goods and services and less economic dynamism. Concentration is also a catalyst for rising wealth and income inequality, as monopolistic firms are able to suppress workers’ wages and charge consumers higher prices.
Most of the public policy debate has been focused on the role of antitrust law in combating the monopolistic practices of large corporations. But recently, the focus has shifted somewhat, as more and more people come to recognize the role of federal and state-level taxation in understanding corporate concentration in the US. Yet, there are still many questions about the effect of taxation on market structure: Is there a tax advantage associated with bigness, as measured by revenues? If so, is this advantage confined to a few “bad apples” or is it widespread among large corporations? What role do the domestic and foreign tax systems play in encouraging monopoly power? What does an analysis of the relationship between tax and monopoly tell us about wider macroeconomic shifts in the US economy over the past few decades?
The purpose of this brief is to address these questions by analyzing and comparing the overall effects of the US tax code on the profit share of large and smaller corporations.
Our analysis reveals a striking tax advantage for big business in the US. Specifically, we find that the total post-tax profit share of the top 10 percent of listed corporations since the mid-1980s is consistently and significantly higher than their total pre-tax profit share, indicating that the overall tax structure (domestic and foreign) fuels profit concentration at the top of the corporate hierarchy. For example, in the most recent period covered in our analysis, 2019–2022, the overall tax structure has boosted the post-tax profit share of large corporations by 2.32 percentage points relative to their pre-tax share. We then assess the contribution of different tax jurisdictions to concentration by estimating the pre-tax and post-tax profit shares of large corporations, domestically and internationally. Here, our analysis reveals that the domestic tax structure is especially influential in driving concentration. Over the past four decades, the domestic post-tax profits of large corporations have been much larger than their pre-tax share, with the domestic tax structure augmenting the profit share of large corporations by 3.79 percentage points in 2019–2022. The effect of the foreign tax structure on profit concentration is more ambiguous. In most periods it is either slightly positive or slightly negative. For 2019–2022, the foreign post-tax profit share of large corporations was 0.87 percentage points higher than their pre-tax share. Based on these findings, we argue that the tax structure, especially the domestic tax structure, plays a crucial but still underappreciated role in exacerbating the monopoly problem.
We go on to consider the wider consequences for the US economy of big business’s tax advantage. The political justification for corporate tax cuts—including those that were part of the Tax Cuts and Jobs Act (TCJA) of 2017—is that they would free up money for companies to invest in productive capacity, in turn generating higher employment and wages. But as our analysis shows, the capital expenditures of large corporations tend to decrease, not increase, when their tax advantage grows. Instead of fueling productive investment, the tax savings of large corporations are principally used to pay out dividends and buy back their own stock. This means that large corporations are less disposed to investments that may indirectly benefit ordinary workers and more disposed to shareholder value enhancement that directly benefits the asset-rich. Overall, we find that the tax system contributes in crucial ways to rising corporate concentration and to widening inequality among households.
With the objective of leveling the playing field, our findings offer powerful justification for the restoration of graduated statutory corporate income tax rates in the US alongside a global minimum effective tax rate of 25 percent and a graduated excise tax on share buybacks. The monopoly problem has become endemic to US capitalism, and corporate tax reform on its own will not solve it. Yet one clear advantage of taxation is that it has a direct, and therefore much more easily discernible, effect on distributive outcomes compared to other policy measures. A more holistic approach, combining corporate tax reform with more robust antitrust regulation, the strengthening of workers’ rights, and increased public ownership in key sectors, is needed to build an economy based on equity, fairness, and prosperity for all
Regime Change and Dominant Capital: Lessons from Israel
Full text linkIsrael’s ongoing crisis – or ‘judicial coup’ in popular parlance – has elicited two opposite responses. The first comes from global rating agencies, economists and investment strategists who see Israel’s country risk rising. The opposite reaction, by Prime Minister Netanyahu and his acolytes, insists that the ‘coup’ is much ado about nothing, and that the country remains stable and strong as ever. So, who is right