Baines, Joseph; B ian, Hage Sandy
A icle — Published Ve sion
Ren ie ship and In ellec ual Monopoly in Con empo a y
Capi alism: Concep ual Challenges and Empi ical
Possibili ies
Socio-Economic Re iew
P o ided in Coope a ion wi h:
The Bichle & Ni zan A chi es
Sugges ed Ci a ion: Baines, Joseph; B ian, Hage Sandy (2024) : Ren ie ship and In ellec ual
Monopoly in Con empo a y Capi alism: Concep ual Challenges and Empi ical Possibili ies, Socio-
Economic Re iew, ISSN 1475-147X, Ox o d Uni e si y P ess, Ox o d, Iss. OnlineFi s , pp. 1-29,
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A icle
Ren ie ship and in ellec ual monopoly in
con empo a y capi alism: concep ual
challenges and empi ical possibili ies
Joseph Baines
1,
�and Sandy B ian Hage
2
1
Depa men o Eu opean and In e na ional S udies, King’s College London, London, UK,
2
Depa men o In e na ional Poli ics, Ci y, Uni e si y o London, London, UK
�Co espondence: [email p o ec ed]
Abs ac
In ecen yea s, he concep s o en ie ship and in ellec ual monopoly ha e gained
p ominence in discussions abou he weakening link be ween co po a e p o i abili y
and capi al in es men in high income coun ies. Howe e , he e ha e been ew i
any a emp s o cons uc measu es o en ie ship and in ellec ual monopoly using
i m-le el inancial da a. The absence o such wo k, we a gue, is symp oma ic o
challenges in delinea ing wha quali ies as en —whe he i be in angible en o
o he wise. In place o s a ic concep ions o en and in ellec ual monopoly, we
de elop a amewo k o analyzing en ie iza ion and in ellec ual monopoliza ion as
dynamic and a iega ed p ocesses ha a e closely ela ed o inancializa ion. We
apply he amewo k o he analysis o he ans o ma ion o non- inancial i ms in
he USA since he mid- wen ie h cen u y and show how i helps cla i y he linkages
be ween i m-le el dynamics and ends associa ed wi h household inequali y,
co po a e s a i ica ion and secula s agna ion.
Key wo ds: capi alism, inancializa ion, i m s a egy, inno a ion, mul ina ional i ms, powe
JEL classi ica ion: D4 ma ke s uc u e, p icing, and design; L1 ma ke s uc u e, i m s a egy,
and ma ke pe o mance; L2 i m objec i es, o ganiza ion, and beha io
1. In oduc ion: en edux
In he oolki o he e odox poli ical economy, he concep o inancializa ion has been
widely deployed o cap u e ans o ma ions in con empo a y capi alism o e he pas ew
decades (Eps ein, 2005; S ockhamme , 2008). Mo e ecen ly, ano he concep has loomed
la ge: en ie ship (Mazzuca o, 2019; Ch is ophe s, 2020). O cou se, he analysis o en is
no hing new. I ex ends all he way back o he classical poli ical economis s in he la e
© The Au ho (s) 2024. Published by Ox o d Uni e si y P ess and he Socie y o he Ad ancemen o Socio-Economics.
This is an Open Access a icle dis ibu ed unde he e ms o he C ea i e Commons A ibu ion License (h ps://
c ea i ecommons.o g/licenses/by/4.0/), which pe mi s un es ic ed euse, dis ibu ion, and ep oduc ion in any
medium, p o ided he o iginal wo k is p ope ly ci ed.
Socio-Economic Re iew, 2024, Vol. 00, No. 0, 1–29
h ps://doi.o g/10.1093/se /mwae076
A icle
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eigh een h and ea ly nine een h cen u ies. Bu he concep la gely ell ou o a ou in he
pos -Wo ld Wa II pe iod (Pike y, 2014; Saye , 2023). Wha , hen, accoun s o his ecen
esu gence? One eason is ha he concep o en o eg ounds compe i ion and monopoly
powe mo e sys ema ically han he concep o inancializa ion. The emphasis on monopoly
powe inhe en o en ie ship is c ucial because i helps o explain one o he key empi ical
puzzles wi hin he inancializa ion li e a u e: he weakening link be ween p o i abili y and
domes ic in es men in high income coun ies (Gu i�
e ez and Philippon, 2016; Du and and
Gueude , 2018; O hangazi, 2019). The concep o en also p omises o illumina e
co po a e-le el dynamics in he closely ela ed li e a u e on in ellec ual monopolies
(Pagano, 2014; Du and and Milbe g, 2020; Rikap, 2021). Indeed, en ie ship is seen mos
s a kly in he knowledge economy gi en ha in angible asse s such as pa en s and o he
kinds o in ellec ual p ope y enable gian ech i ms o gene a e in o ma ion o knowledge
en s simply om hei legal igh o exclude o he s om using hose asse s.
Despi e he connec ions ha en ie ship has wi h bo h inancializa ion and in ellec ual
monopoly, he ela ionship be ween hese phenomena emains unde explo ed. One p ob-
lem is ha while schola s ha e de eloped a ange o sophis ica ed measu es o gauge p o-
cesses o co po a e inancializa ion, he e has been li le i any wo k ha has managed o
measu e en s, in angible o o he wise, a he i m-le el. Add essing his challenge o mea-
su ing en s, we a gue, is key o be e unde s anding he a icula ion o inancializa ion,
en ie ship and in ellec ual monopoly wi hin con empo a y capi alism. Ou main con en-
ion is ha he pauci y o measu emen o co po a e en s a ises om a p oblem o empi i-
cal ope a ionaliza ion: speci ically, as Be h S a o d (2024, p. 41) has poin ed ou : ‘ he e is
no p ac ical way o dis inguish he en componen wi hin any gi en income’. Wi hou a
means o dis inguishing en om non- en income, he e is no way o con iden ly measu -
ing en ie ship a he co po a e le el.
In he i s sec ion o he a icle, we accoun o his p oblem by o e ing an o e iew o
he genealogy o en in he his o y o economic hough om he classical poli ical econo-
mis s h ough o con empo a y analysis. In he second sec ion, we con end ha making he
ca ego y o en amenable o empi ical ope a ionaliza ion using co po a e inancial da a
equi es a undamen al shi . Ra he han y o empi ically di e en ia e pu e en s om
pu e p o i , we need a dynamic app oach ha app ehends en ie iza ion as a p ocess.
Speci ically, we a gue en ie iza ion is a play when co po a e p o i abili y is aised in se -
ice o inancial e u ns a he han p oduc i e in es men . In o he wo ds, i is a pa icula
species o i m-le el inancializa ion, which mani es s when sha eholde payou s g ow ela-
i e o capi al expendi u es and when e enues g ow ela i e o cos s. By ex ension, in ou
amewo k, in ellec ual monopoliza ion can be disce ned when his p ocess o en ie iza ion
is combined wi h in angible accumula ion.
Wi h his schema, in he hi d sec ion, we explo e he dynamics o en ie iza ion and in-
ellec ual monopoliza ion among non- inancial i ms in he USA om 1950 o 2019. We o -
e h ee key indings. Fi s , en ie iza ion and in ellec ual monopoliza ion in he US
co po a e s uc u e ha e become inc easingly p ominen since he 2000s. Second, on a sec-
o al le el, whe eas sec o -wide p o i abili y and payou - o-in es men a ios we e weakly
nega i ely co ela ed in he mid- wen ie h cen u y, hey a e now s ongly posi i ely co e-
la ed; and whe eas sec o -wide in angible-in ensi y and ma ke capi aliza ion we e once
s ongly nega i ely co ela ed, hey a e now weakly posi i ely co ela ed. Thi d, he sec o s
which ha e been a he o e on o p ocesses o in ellec ual monopoliza ion—pha ma and
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mo e ecen ly ech—a e among he mos unequal in e ms o i m-le el p o i , wi h a signi i-
can anche o small, unp o i able bu inno a ing companies subo dina ed o he leading
i ms in hese wo sec o s. In he inal sec ion o he a icle, we explain how hese indings
help us be e unde s and he p ecise mechanisms behind he p o i -in es men gap and
en enched household inequali y in high-income coun ies.
2. Whe e is he en ? The mo phology o a concep
We canno do jus ice o he complexi y and sophis ica ion o he li e a u e on en in his
sho e iew. Ra he ou aim in his sec ion is o engage wi h he e olu ion o en analysis
s ic ly wi h espec o he challenge o delinea ion and measu emen . Do exis ing heo iza-
ions o en om he e a o classical poli ical economy onwa ds enable us o dis inguish
en om non- en income a he le el o co po a e inancial da a? And do hese heo iza-
ions, by ex ension, allow us o quan i y en ? Ou con en ion is ha on bo h coun s hey
do no . Whe he his is a concep ual p oblem wi hin en heo y o jus a me hodological is-
sue depends on one’s iewpoin . Exis ing heo iza ions o en ha e ce ainly guided e-
sea ch ha gene a es ich insigh s bu ha do no a emp o sys ema ically measu e en s
using co po a e inancial da a (e.g. Ha ey, 2012; Pu cell e al., 2020). F om his pe spec-
i e, he concep ual alue o en heo y and he challenges o empi ical ope a ionaliza ion
can be conside ed en i ely sepa a e ma e s. Howe e , i one adop s he s ingen empi icis
iew ha any heo iza ion o en should enable us o delinea e and measu e p ecisely how
much en is being acc ued, and ha such measu emen s a e bes applied o he quan i a i e
a chi ec u e o capi al i sel —co po a e inancial accoun s— hen he me hodological issue
becomes a concep ual p oblem (see Ni zan and Bichle , 2009). Gi en ou own analy ical
p io s, we end owa ds he la e pe spec i e. Howe e , his o cou se does no in alida e
he o me iewpoin .
In Adam Smi h’s w i ings, en is unde s ood as one o he h ee unc ional ca ego ies o
income ha co espond o he h ee g ea classes o capi alis socie y. Whe eas wages a e
ea ned by labou and p o i s acc ue o capi alis s, en is paid o landowne s. Ren om
Smi h’s pe spec i e is essen ially land en , and in his adding-up heo y o exchange alues,
‘na u al p ices’ a ound which ac ual ma ke p ices g a i a e, a e he sum o wages, p o i
and en . Explo ing he iew ha labou is he sole p e equisi e o alue, Smi h (1977/1776,
pp. 76–77) also con ended ha bo h en and p o i a e deduc ions om ha which is p o-
duced by labou :
The eal alue o all he di e en componen pa s o p ice, i mus be obse ed, is measu ed by
he quan i y o labou which hey can, each o hem, pu chase o command. Labou measu es
he alue, no only o ha pa o p ice which esol es i sel in o labou , bu o ha which
esol es i sel in o en , and o ha which esol es i sel in o p o i .
These a gumen s an icipa ed an idea which subsequen ly became cen al o much o he
li e a u e on en ie ship: ha en is unea ned income in ol ing he ans e o unds om
p oduce s a he han a con ibu ion o o e all weal h (Mazzuca o e al., 2023, p. 509). Bu
since p o i was deemed by Smi h as being pa o his ans e o unds, he undamen al
dis inguishing ac o be ween p o i and en was no om Smi h’s pe spec i e ha p o i
was a o m o income ha de i ed om p oduc i e ac i i y and en was a o m o income
Ren ie ship and in ellec ual monopoly 3
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ha de i ed om unp oduc i e ac i i y, bu a he ha p o i acc ued o he owne s o cap-
i al s ock and en o he owne s o land. F om Smi h’s posi ion, he e o e, he e was no is-
sue in de e mining wha en is: i simply en ailed measu ing he income collec ed by
landowne s. Howe e , om a con empo a y pe spec i e, whe e en is seen as pa o he
income ha is acc ued by co po a ions om ope a ions ha ex end well beyond landown-
e ship, he ques ion o wha p ecisely quali ies as en becomes mo e oublesome.
Da id Rica do de eloped en heo y wi h his concep o di e en ial en , which held
ha he magni ude o en was de e mined by he di e ence be ween he p oduc ion cos
on any gi en si e and he p oduc ion cos o he mos ma ginal land b ough in o cul i a ion
(S a o d, 2023). Wi h his concep ualiza ion, Rica do con ended ha en is a su plus ha
a ises om he di e en ial p oduc i i y o land a he han jus a componen o he na u al
p ice o goods as Smi h sugges ed. Ka l Ma x buil on Rica do’s analysis o di e en ial en
h ough his concep ion o wha Anwa Shaikh (2016, p. 265) calls ‘ egula ing capi al’:
hose wi h he lowes -cos condi ions ha a e ep oducible by o he s o sa is y demand in
any gi en indus y. F om Ma x’s pe spec i e, ma ke p ices g a i a e owa ds he sum o
he cos s o he egula ing capi al and he a e age a e o p o i . The e o e, whe e lowe -
cos p oduce s ha e condi ions o p oduc ion which a e no ep oducible, he landholde
acc ues en s in he o m o excess p o i (Shaikh, 2016, pp. 265–266). In de eloping his
heo y, Ma x supplemen ed his no ion o di e en ial en wi h wo addi ional concep uali-
za ions: monopoly en ha de i es om con ol o a non-subs i u able ea u e o a com-
modi y, and absolu e en ha acc ues o a class o owne s simply on he basis o he igh
o exclude non-owne s ia he ins i u ion o p i a e p ope y (Pu cell e al., 2020).
The sophis ica ion o Ma x’s heo y is bo ne ou by he p odigious esea ch i has helped
inspi e. Mo eo e , gi en ha Ma x was w i ing a a ime when he mode n accoun ing sys-
em was in emb yonic o m, he can be o gi en o p oducing analy ical ca ego ies which
a e no eadily amenable o empi ical esea ch ha uses co po a e inancial da a. Tha said,
in Ma x’s concep ion o di e en ial en s, he issues o dema ca ion and measu emen pe -
sis . As one leading Ma xis heo is o en , E ik Swyngedouw (2012, p. 311), admi s:
‘de e mining he magni ude o en [ … ] emains heo e ically complex and empi ically in-
ac able’. The e is no s aigh o wa d way o iden i ying which companies a e ‘ egula ing
capi als’ because beyond a ew selec indus ies whe e wha is p oduced is ela i ely homog-
enous—such as mining and oil p oduc ion—cos cu es a e impossible o cons uc wi h
any accu acy. The concep s o monopoly and absolu e en a e simila ly ha d o pin down
since, in p ac ical e ms, i is impossible o iden i y wha po ion o income is de i ed om
he non-subs i u able elemen o a pa icula commodi y and wha po ion is de i ed om
he baseline condi ions o class powe enjoyed by all owne s. In an analysis ha conside s
Ma x’s ypology o en s in he con ex o he eal es a e sec o , Wa d and Aalbe s (2016,
p. 1764) ecognize hese challenges: ‘ he di e en o ms o en , i mus be made clea , may
be a wo k simul aneously and a e empi ically indis inguishable as he ac ual en is only
paid in lump sum’. Ou side o eal es a e whe e en does no e en p esen i sel as a ‘lump
sum’ he p oblems o iden i ica ion and measu emen ob iously become e en mo e exed.
Economis s who began w i ing a e he ma ginalis e olu ion sough o es ablish a
baseline o measu ing en by ex ending Rica do’s heo y o di e en ial en o all ac o s
o p oduc ion and by b eaking decisi ely om Ma x’s class-analy ic lens. In condi ions o
equilib ium, income on he ma gin was unde s ood by ma ginalis s as he en - ee
‘ ese a ion p ice’ o each ac o o p oduc ion. These p ices simul aneously e lec each
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ac o ’s ma ginal con ibu ion and a e he minimum necessa y o a ac hem ou o ei he
idleness o al e na i e use (S a o d, 2023, pp. 352–355). Any income ea ned in excess o
his ese a ion p ice is de ined as en . Howe e , his heo iza ion i sel led o p oblems.
Rica do’s heo y o di e en ial en appea ed compelling whe e he baseline was land o
which he e was no o he use. Bu in he case o capi al, he e may be my iad al e na i e
uses whose p o i abili y is only in ini esimally smalle han he use o which i is being pu .
This makes he en de i ed om a gi en use i sel in ini esimally small. A a mo e unda-
men al le el, i also assumes ha p o i s de i ed om al e na i e uses a e hemsel es de e -
mined unde compe i i e condi ions and a e hus en - ee. In p ac ice, he p ices de i ed
om al e na i e uses need no be seen as en - ee because each e lec he balance o powe
be ween pa ies in ol ed in exchange (see Hale, 1923). F om his ela ional pe spec i e, as
Be h S a o d (2023, p. 353) con ends: ‘i makes no sense o use p ices ha a e al eady dis-
o ed by he unequal con ol o e sca ce and monopolised asse s as a benchma k o es i-
ma ing wha p opo ion o incomes a ise om ha e y inequali y’.
Ma x’s concep o absolu e en a leas a an analy ical le el add esses he ole played
by p e-exis ing inequali ies o class powe in he o ma ion o en . The ma ginalis econo-
mis s nei he de eloped he concep ual ocabula y no he empi ical means o app ehend
he ole played by unequal ela ions o class powe in en gene a ion. The o mula ion ha
neoclassical economis s came o emb ace— ha en was ‘paymen in excess o compe i i e
p ice’ (S a o d, 2023, p. 355) – simply assumed ha compe i i e p ices ob ained in eali y
and we e empi ically disce nible. Bu as he Camb idge Con o e sy e ealed, he e is no
way ha neoclassical economis s can de e mine he ma ginal p oduc i i y o capi al since
he e ogeneous capi al goods canno be agg ega ed independen ly o he p ices hey a e
mean o explain. And he e o e, he e is no means o es ablishing wha p ecisely would
cons i u e ei he ma ginal p oduc o en (Ni zan and Bichle , 2009, pp. 77–83).
An icipa ing his con o e sy, Tho s ein Veblen—w i ing a he beginning o he wen ie h
cen u y—a oided using he concep o en wi h e e ence o mode n co po a ions al o-
ge he ; and he was dismissi e o a emp s by his con empo a ies, such as Al ed Ma shall,
o apply he concep o business en e p ise, de iding such wo k as ‘unduly bulky, unwieldy,
and inconsequen ’ (Veblen 1900, p. 264). Veblen a gued ha , in ac , many o he p ocesses
associa ed wi h he concep a e pa o he o dina y dealings o business in which gaining
‘di e en ial ad an age’ o e o he i ms had become he p ime mo i e o ce wi hin capi al-
ism (Veblen, 2013/1904, p. 201, n. 6). C ucially, o Veblen, he p o i a ising om his di -
e en ial ad an age de i es om he powe o es ic indus ial p oduc i i y, a he han
om ac ually con ibu ing o p oduc i i y (Ni zan and Bichle , 2009; Veblen, 2013/1904).
To he ex en ha en is e e ed o in Veblen’s wo k, i is speci ically in ela ion o land
en , jus as i was in he wo k o ea ly classical poli ical economis s such as Adam Smi h.
In con as o Veblen, Joseph Schumpe e did no iew he es ic i e capaci y o busi-
ness as necessa ily nega ing indus y. Jus as b akes allow mo o is s o a oid acciden and
o ul ima ely d i e as e , Schumpe e (2003/1943, pp. 88–89) a gued, co po a ions’ capac-
i y o es ic indus y in pe iods o po en ial dis up ion allows hem o a oid collapse and
inc ease ou pu o e he long un. As a backd op o his heo iza ion o capi alis p o i s,
Schumpe e ad anced a ‘ci cula low model’ in which an economy is in a s a e o gene al
equilib ium. In hese s a iona y condi ions, capi alis p o i would end owa ds ze o and
he e would be no economic de elopmen . Such a model had no desc ip i e o p esc ip i e
alue o Schumpe e bu i did p o ide him a use ul coun e poin o his analysis o how
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capi alism ac ually ope a es as an e olu iona y sys em. Fo Schumpe e , capi alis de elop-
men occu s as inno a o s achie e echnological b eak h oughs which gene a e
‘en ep eneu ial p o i s’, and as imi a o s ca ch up, he new echnology is di used leading
o a pe iod o ‘compa a i e quie ’ du ing which p o i s e u ned o no malcy, only o he
cycle o begin anew (Schumpe e , 2003/1943, p. 83). Such en ep eneu ial p o i s, o
Schumpe e (1983/1934, p. 184), ha e no hing o do wi h ma ginal p oduc i i y:
he p oblem o p o i lies p ecisely in he ac ha he laws o cos and o ma ginal p oduc i i y
seem o exclude i . And wha he ‘ma ginal en ep eneu ’ ecei es is wholly a ma e o indi e -
ence o he success o he o he s.
E en hough in ou iew Schumpe e exagge a ed he posi i e impac s o la ge-scale
business, his e olu iona y app oach has he me i o decisi ely w es ing he ques ion o
p o i away om he concep o ma ginal p oduc i i y. Impo an ly, Schumpe e did no
equa e en wi h en ep eneu ial p o i . In ac , like Veblen, he was e icen o in oke he
e m beyond i s applica ion o land—o wha he called ‘na u al agen s’ (Schumpe e , 1939,
p. 575). On he a e occasion whe e he does apply he concep o en wi h e e ence o
business, i desc ibes he ‘unea ned inc emen ’ ha ensues a e he ini ial en ep eneu ial
b eak h ough has been made. Schumpe e (2002/1911, p. 111) is explici ha his
‘unea ned inc emen al income is no a ewa d o pe o mance’. Howe e , inso a as e-
s ic i e s a egies ope a e like b akes in a ca — acili a ing wha Schumpe e (2003/1943,
p. 87) calls a ‘balanced ad ance’ in he p omo ion o economic p og ess— o wha ex en
can income de i ed om such s a egies be uly conside ed ‘unea ned’? Schumpe e igh ly
de-emphasizes ma ginal p oduc i i y in his analysis, bu he does no p o ide any means o
p ac ically delinea ing he ‘unea ned inc emen ’ om ‘en ep eneu ial p o i ’, no o ha
ma e does he ell us wha app op ia e ‘ ewa d o pe o mance’ would be. In he annals o
en heo y Schumpe e he e o e lea es us wi h gene a i e insigh s bu no means o app e-
hending and gauging en as a de e mina e economic ac .
Wi hin he con empo a y he e odox li e a u e on en , he mos impo an con ibu ions
ha e come om schola s b oadly in luenced o a ying deg ees by Ma x, Veblen and
Schumpe e . One o he leading con empo a y heo is s o en is B e Ch is ophe s (2019)
who akes issue wi h hose schola s who concep ualize en in e ms o ‘unea ned income’
(see e.g. Saye , 2015; Mazzuca o, 2019). We ha e al eady aised ou own doub s abou he
analy ic e icacy o he dis inc ion be ween ea ned and unea ned income. Ch is ophe s
(2019) does so om a decidedly Ma xis pe spec i e, a guing ha all p o i is unea ned in-
so a as labou is he sole sou ce o alue, and i is he su plus ex ac ed om labou a he
han any hing ‘ea ned’ by capi alis s ha cons i u es he basis o p o i . He acknowledges
ha in And ew Saye ’s case he e is an a emp o g apple wi h his p oblem h ough he no-
ion o ‘wo king capi alis s’ whose p o i is pa ly ea ned o he ex en hey help o o ganize
wo k, o a leas inso a as such p o i is ‘dependen on suppo ing p oduc i e ac i i y’
(Saye 2015, p. 87). Bu as Ch is ophe s (2019, p. 315) poin edly asks ‘whe e [ … ] does
‘suppo ing’ p oduc i e ac i i y end and ac ually ‘doing’ i begin?’ As a ollow-up o
Ch is ophe s’ ques ion, we migh ask: how do we de e mine wha amoun o p o i comes
om suppo ing p oduc i e ac i i y and wha amoun o p o i de i es om es ic ing i in
he sense concei ed in Veblen’s analysis? Jus as we ha e a gued in ela ion o he his o ical
con ibu ions o he analysis o en , he e is a signi ican challenge aced by con empo a y
6 J. Baines and S. B. Hage
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heo is s in d awing clea lines upon which any wo kable de ini ion o en should
be based.
Ch is ophe s’ a emp a add essing he challenge o delinea ing en consis s in a guing
ha en a ises om he conjuga ion o wo condi ions. Fi s , ha i is ‘income de i ed
om he owne ship, possession, o con ol o sca ce asse s’; and second ha his income is
gene a ed ‘unde condi ions o limi ed o no compe i ion’ (Ch is ophe s, 2019, pp. 308–
309). This de ini ion is help ul in ha i s ays clea o he seemingly i esol able ma e o
quan i ying wha po ions o capi alis income a e ‘ea ned’ and ‘unea ned’. Howe e , in e-
sol ing one p oblem o delinea ion, i c ea es wo new p oblems. The i s is di e en ia ing
sca ce asse s om non-sca e asse s. As Ma x himsel an icipa ed in his concep o absolu e
en s, all asse s a e sca ce inso a as hey a e ancho ed in he legal igh o exclusion (see
also Ni zan and Bichle 2009, p. 228). Beyond his undamen al ac ega ding he baseline
condi ions o exclusion as encoded by p i a e p ope y, we migh conside sca ci y also in
ela i e e ms. Howe e , e en i we did ind a way o gauging he ela i e sca ci y o an as-
se , he e is no objec i e way o de e mining he poin in his con inuum be ween he wo
poles o comple e sca ci y and comple e abundance in which asse s quali y as ‘sca ce’.
Simila ly, he e is he issue o delinea ing wha cons i u es ‘limi ed o no compe i ion’.
When we acknowledge ha in ac ually exis ing capi alism, pe ec compe i ion a ely i
e e exis s hen i becomes clea ha in almos all si ua ions compe i ion is o a ying
deg ees ‘limi ed’. Ra he han he e being a b igh line ha di ides pe ec ly compe i i e
ma ke s om ma ke s whe e compe i ion is comple ely absen , he one ma ke o m shades
in o he o he . The e o e, while Ch is ophe s (2019, p. 315) is su ely igh o ask Saye
whe e ‘suppo ing’ p oduc i e ac i i y ends and ac ually ‘doing’ i begins, o his al e na i e
de ini ion o en o be analy ically ac able we should ask whe e is compe i ion ‘limi ed’
enough o be de ined as such? And whe e, o ha ma e , does ‘sca ci y’ end and ‘non-sca -
ci y’ begin?
In e es ingly, con empo a y en heo is s including Ch is ophe s (2019, pp. 321–322)
in oke Michał Kalecki’s (1971) concep o he deg ee o monopoly as a way o e idencing a
ise o monopoly powe inhe en in en ie ism. Ges u ing o ou conce ns abou delinea-
ion, Saye (2023, p. 1473) also e e ences Kalecki app o ingly in claiming ‘[m]onopoly
need no be an all-o -no hing ma e : he e can be deg ees o monopoly’. Howe e , he in-
oca ion o Kalecki’s wo k aises uncom o able ques ions o hese schola s’ app oaches o
en ie ship. I he e a e deg ees o monopoly, does ha mean he e a e also ‘deg ees o
en s’? And i en i sel can be seen as a ma e o deg ee, doesn’ ha make he concep un-
enable in i s amo phousness? Saye (2023, p. 1473) en u es his possibili y bu is hen
quick o dismiss i :
The e is ine i ably o en some unce ain y o uzziness ega ding ‘whe e o d aw he line’, be-
cause i may be di icul o es ima e wha p ices would be in he absence o monopoly. He e, we
mus a oid he allacy o con inuum, acco ding o which he absence o a clea di iding line
mus mean he absence o any di e ence, as i he exis ence o some unclea cases mean he ab-
sence o any clea cases. I is he mos eg egious o ms ha should conce n us mos .
The passage ge s o he hea o wha is a s ake in concep ualizing en . Do we d aw
sha p lines o do we hink in e ms o a con inuum? In ou iew, Saye ’s a gumen s in a-
ou o sha p lines a e uncon incing. The line be ween en and p o i is no ‘unce ain’ o
‘ uzzy’; i is inde inable because o he dualisms unde pinning en heo y a e impossible o
Ren ie ship and in ellec ual monopoly 7
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ope a ionalize a he le el o i m-le el da a. As we ha e seen in his e iew, hese dualisms
include ea ned and unea ned income, sca ce e sus non-sca ce asse s, compe i ion e sus
monopoly and much else besides.
In ying o wed he en /p o i dualism wi h he deg ee o monopoly, Saye is o ced o
make a majo concession. Since he bounda ies be ween en and p o i a e blu ed, he
a gues ha we should conce n ou sel es wi h he ‘mos eg egious cases’ o en ie ship. Bu
i we mus con ine ou analysis o only he mos ex eme cases o en ie ship hen wha
alue is he e in deploying he concep in he i s place? A c ucial eason why he concep
o en ie ship has become so p ominen is because i is mean o cap u e some hing gene al
abou he na u e o con empo a y capi alism (Ch is ophe s, 2020; Baglioni e al., 2023).
Limi ing he s udy o en o he mos eg egious o ms seems, in ou iew, unnecessa ily e-
s ic i e, especially o hose who wan o employ he concep o en s o analyse he wide
s uc u al ans o ma ions in he capi alis economy. This is no o say ha he insigh s o
his o ical and con empo a y schola ship on en should be dis ega ded al oge he . As he
nex sec ion shows, he e is much we can and should lea n om his wo k. Bu o make he
concep o en bo h analy ically and empi ically ac able, we mus shi o a new oo ing.
3. Towa ds a new amewo k: inancializa ion, en ie iza ion and
in ellec ual monopoliza ion
As we ha e a gued so a , he li e a u e on en has encoun e ed signi ican challenges in de-
ining he concep o en in opposi ion o o he o ms o income, and la gely because o
his, he e has been a dea h o s udies ha seek o quan i y en a he i m-le el. The way
h ough his impasse, we con end, is o undamen ally e-o ien ou ocus. Ra he han
seeking o app ehend en in s a ic e ms—as i i is a ype o income ha can be delinea ed
a any poin in ime—we should ins ead ocus on en ie iza ion as a dynamic, open-ended
and a iega ed p ocess. Fo easons ha will become clea in his sec ion, we de ine en ie i-
za ion as he aising o p o i ma gins in se ice o inancial e u ns ins ead o long- e m in-
es men . In ad ancing his unde s anding o en ie iza ion, we d aw on he e odox
li e a u es wi hin and beyond he schola ship on en ie ship: he i s is he pos -Keynesian
li e a u e on ma ke powe ; he second is he c i ical schola ship on co po a e inancializa-
ion; and he hi d is he analysis o p eda ion and in ellec ual monopoly inspi ed by bo h
Ma x and Veblen. In building ou al e na i e amewo k, we go h ough each o hese con-
s i uen elemen s o ou app oach in u n, i s by a icula ing he ela ionship be ween en -
ie iza ion and inancializa ion, and hen by a icula ing he ela ionship be ween
en ie iza ion and he ise o in ellec ual monopolies.
3.1 The ela ionship be ween en ie iza ion and inancializa ion
The s a ing poin o he pos -Keynesian li e a u e on ma ke powe is Kalecki’s a o emen-
ioned concep o he deg ee o monopoly, which modelled he le el o compe i ion wi hin
capi alism in e ms o he p ice ma kup (Melmi�
es, 2023). On he basis o his me ic,
Kalecki posi ed ha he highe he deg ee o monopoly, he g ea e capi al’s o e all income
sha e. A subsequen b anch o pos -Keynesianism, known as in es men inancing heo y
de eloped a mo e nuanced iew o ma kups and hei ela ionship o compe i ion (Wood,
1975; Eichne , 1976). Acco ding o his app oach, high ma kups migh no e lec monop-
oly powe , bu ins ead he i m’s need o in e nally inance i s g ow h, which could be due
8 J. Baines and S. B. Hage
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ex ac ion was becoming a key o ce wi hin US capi alism as a whole. This pe iod has help-
ully been e med by Au ay e al. (2021) as ‘Financializa ion Ma k I’. In his inancializa-
ion egime, se e al s ylized ac s can be disce ned. High in e es a es se ed o inc ease he
hu dle a es on p oduc i e in es men , diminish companies’ p o i ma gins and educe hei
capaci y o inance in es men ex e nally h ough aising deb . In e na ional compe i ion
u he squeezed p o i abili y—exace ba ing companies’ di icul ies in inancing in es men
in e nally h ough e ained ea nings. Finally, changes in co po a e go e nance b ough he
in e es s o manage s in alignmen wi h sha eholde s, while legal and egula o y shi s
unde mined labou ’s ba gaining powe in i m decision-making, so ha sho - e m e u ns
o equi y owne s became inc easingly p io i ized o e long- e m in es men (Au ay e al.,
2021; Schwa z, 2022).
The hi d shi has aken place om he 2000s onwa ds. The payou - o-in es men a io
inc eased a a g ea e a e han be o e and, a e he bu s ing o he do -com bubble, a e -
age p o i abili y began o ise signi ican ly. This ma ked he beginning o he pe iod ha
Au ay e al. (2021) e m as ‘Financializa ion Ma k II’. In his inancializa ion egime, he
deepening o global alue chains and he u he decline in labou ’s ba gaining powe pu
downwa d p essu e on consume demand and u he weakened in es men . The monopo-
liza ion o capi al has led o a concen a ion o p o i among he la ges i ms which ha e a
lowe ma ginal p opensi y o in es . And he s eng hening o in ellec ual p ope y p o ec-
ions has s ymied he capaci y o smalle i ms in he USA and ab oad o upg ade in highe
alue-added ac i i ies (Du and and Milbe g, 2020). Finally, he eme gence o pe manen
uni e sal owne s, such as BlackRock, wi h c ossholdings in my iad companies has discou -
aged in es men s ha may h ea en o induce p o i -des oying compe i ion in mul iple
p oduc ma ke s (Aza e al., 2018). In con as o Financializa ion Ma k I, he o e all d i -
ing o ce behind inancializa ion is less he es ain s on ex e nal inancing (high in e es
a es) and in e nal inancing (low e ained ea nings), bu a he a d ying up o p o i able in-
es men oppo uni ies in he con ex o deepening labou e enchmen , co po a e
1950-59
1960-69
1970-79
1980-89
1990-99
2000-09
2010-19
2.5
3
3.5
4
4.5
5
5.5
6
6.5
7
0.1 0.3 0.5 0.7 0.9 1.1
snig aM i o P eN (%)
All Fi ms
DEGREE OF RENTIERIZATION
INTANGIBLE ACCUMULATION
Di idends and S ock Buybacks /
Capi al In es men ( a io)
In angible Asse s /
Tangible Fixed Asse s ( a io)
1950-59
1960-69
1970-79
1980-89
1990-99
2000-09
2010-19
20
30
40
50
60
70
80
90
100
110
120
0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6
Ma ke Capi aliza ion (% o GDP)
All Fi ms
Figu e 4. Ren ie iza ion and in angible accumula ion o all US non- inancial i ms, 1950–2019.
Sou ce: Compus a and Pe e s and Taylo To al Q Se ies h ough WRDS.
No e: Each da a poin cap u es he a e age alue in a en-yea window.
Ren ie ship and in ellec ual monopoly 15
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monopoliza ion and equi y owne ship cen aliza ion (Au ay e al., 2021). By he end o
2010s, non- inancial co po a ions egis e ed p o i ma gins ha we e las eached in he
1950s. Bu unlike he 1950s, in he 2010s hese i ms ema kably spen as much on sha e-
holde payou s as hey did on capi al in es men : signi ying he p ominence o en ie iza-
ion in he US economy.
How do he da a p esen ed in he igh cha in Figu e 4 on in angible in ensi y and ma -
ke capi aliza ion map on o his pe iodiza ion? In angible in ensi y appea s o ise h ough-
ou he whole pe iod apa om he 1970s. Howe e , his decade o appa en e e sal is
solely he esul o he in oduc ion o a la ge numbe o u ili y i ms in o he da ase wi h
huge angible oo p in s (see Supplemen a y ile). By discoun ing he e ec s o hese u ili y
companies, and by ocusing on he a e o change o in angible in ensi y a he han i s le -
els, we see a s uc u al b eak in dynamics in he ea ly 1980s. In he h ee p eceding decades,
he g ow h a e in in angible in ensi ica ion was declining, bu om he mid-1980s o he
la e-2000s, in angible in ensi ica ion p oceeded a an inc easing a e. The apid ise in in-
angible asse alues ela i e o angible ixed asse s coincided wi h he en enchmen o in-
ellec ual p ope y wi hin he USA om he 1980s onwa ds, and subsequen ly ab oad
h ough he 1995 Ag eemen on T ade-Rela ed Aspec s o In ellec ual P ope y Righ s and
he ade ag eemen s ha ollowed (O si and Co ia , 2006; Du and and Milbe g, 2020).
While g ow h a es in in angible in ensi y ha e since subsided, hey a e no down o he le -
els eached in he ea ly 1980s. The ake-o in he in angible in ensi ica ion o US-lis ed
companies om he 1980s is consonan wi h he ise o equi y ma ke s and he concomi an
decline o bank-based sys ems. As in angibles se e as poo colla e al o banks, companies
om he ea ly 1990s onwa ds inc easingly u ned o equi y ma ke s o aise inance (Baines
and Hage , 2021). And as equi y became a p ominen pa o hei capi al s uc u e, compa-
nies inc easingly made in es men s in highly speci ic in angible asse s, a he han ela i ely
gene ic, colla e alizable angible asse s, o sa is y sha eholde s’ demands o imp o ed ela-
i e pe o mance (Pagano, 2019).
4.1 Disagg ega ing by sec o
The p eceding analysis p o ides a i id agg ega i e pic u e o he dynamics o US capi al-
ism, bu we ha e ye o es ablish how p ocesses o en ie iza ion and in angible accumula-
ion a y ac oss sec o s and i m-size. We begin by disagg ega ing he da a on sec o al lines,
classi ying i ms in en di e en sec o s ha accoun o 70% o he ma ke capi aliza ion
o all companies in ou en i e da ase om 1950 o 2019: appa el and oo wea ( ashion);
au omo i e manu ac u e s; de ence and ae ospace; ood and be e age; hea y indus y;
ho els and es au an s (hospi ali y); ossil uels and mining (ex ac i es); pha maceu icals;
e ail; and ech (see Supplemen a y ma e ial o mo e de ails). Figu e 5 compa es he en
sec o al g oups acco ding o he ou main pa ame e s o his s udy: ne p o i ma gins, he
payou - o-in es men a io, he in angible in ensi y a io and ma ke capi aliza ion. To
ace changes in hese pa ame e s o e he pos -wa pe iod he igu e shows snapsho s o
he 1950s ( he op wo cha s) and he 1980s ( he bo om wo cha s).
Figu e 5 clea ly shows ha in he 1950s he e was a nega i e, albei weak, co ela ion
be ween sec o s’ p o i ma gins and hei payou - o-in es men a io. The mos p o i able
sec o s such as he ech and ex ac i e sec o s ended o o e ela i ely low sha eholde
payou s. Simila ly, we can see ha he sec o s ha had he highes agg ega e ma ke alua-
ions ended o be angible-in ensi e. By he 1980s he e was a clea shi : he mos
16 J. Baines and S. B. Hage
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p o i able i ms no longe we e hose ha ended o ha e he lowes payou - o-in es men
a io, bu a he he highes . Mo eo e , wi h he decline in he ela i e capi aliza ion o
angible-in ensi e sec o s such as he ex ac i es, au omo i e and hea y indus ies, and he
ise o he in angible-in ensi e pha ma sec o , he nega i e co ela ion be ween in angible
in ensi y and ma ke capi aliza ion was weakening.
Figu e 6 ounds o he s o y ega ding sec o -wide dynamics by p esen ing en ie iza-
ion and in angible accumula ion me ics o he 2010s ( he op wo cha s), and by p esen -
ing how he co ela ions be ween sec o al ne p o i ma gins and payou - o-in es men
a ios, on he one hand, and ma ke capi aliza ion and in angible in ensi y, on he o he ,
ha e shi ed in each decade om he 1950s onwa ds ( he bo om wo cha s). The ends
ha i s came o he o e in he 1980s ha e only become mo e acu e. In he 2010s, he sec-
o s which a e he mos p o i able end also o be hose ha ha e he highes payou - o-
in es men a io, and he sec o s which once domina ed US indus y and ha ga e o m o
pos -wa wage ba gaining—au omo i es, hea y indus y and he ex ac i e sec o s—a e
among he leas p o i able. Though he co ela ions we p esen should be judged wi h g ea
cau ion gi en he limi ed numbe o obse a ions, hey sugges a clea ans o ma ion
Appa el &
oo wea
Au o
De ence &
ae ospace
Food &
be e age
Fossil uels
& mining
Hea y
indus y
Ho els &
es au an s
Pha ma
Re ail
Tech
0
2
4
6
8
10
12
0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
)%(snig aM i o P eN
Di idends and S ock Buybacks /
Capi al In es men ( a io)
DEGREE OF RENTIERIZATION - 1950s
R = -0.30
Appa el &
oo wea
Au o
De ence &
ae ospace
Food &
be e age
Fossil uels
& mining
Hea y
indus y
Ho els &
es au an s Pha ma
Re ail
Tech
-1
0
1
2
3
4
5
6
7
8
0 0.2 0.4 0.6 0.8 1 1.2
Ma ke Capi aliza ion (% o GDP)
In angible Asse s /
Tangible Fixed Asse s ( a io)
INTANGIBLE ACCUMULATION - 1950s
R = -0.63
Appa el &
oo wea
Au o
De ence &
ae ospace
Food &
be e age
Fossil uels &
mining
Hea y
indus y
Ho els &
es au an s
Pha ma
Re ail
Tech
0
2
4
6
8
10
12
0.2 0.4 0.6 0.8 1 1.2
)%(snig aM i o P eN
Di idends and S ock Buybacks /
Capi al In es men ( a io)
DEGREE OF RENTIERIZATION - 1980s
R = +0.61
Appa el &
oo wea
Au o
De ence &
ae ospace
Food &
be e age
Fossil uels
& mining
Hea y
indus y
Ho els &
es au an s
Pha ma
Re ail
Tech
-1
0
1
2
3
4
5
6
7
8
9
0 0.4 0.8 1.2 1.6 2 2.4 2.8
Ma ke Capi aliza ion (% o GDP)
In angible Asse s /
Tangible Fixed Asse s ( a io)
INTANGIBLE ACCUMULATION - 1980s
R = -0.36
Figu e 5. Deg ee o en ie iza ion and in angible accumula ion by sec o , 1950s and 1980s.
Sou ce: Compus a and Pe e s and Taylo To al Q Se ies h ough WRDS.
Ren ie ship and in ellec ual monopoly 17
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wi hin US capi alism o e he pas se en decades. Wha was once a weak nega i e co ela-
ion be ween sec o al p o i ma gins and he payou -in es men a io has u ned in o a
s ong posi i e co ela ion; and wha was once was a ela i ely s ong nega i e co ela ion
be ween sec o al capi aliza ion and in angible in ensi y has u ned in o a weak posi i e one.
To u he g apple wi h hese shi s and hei mac oeconomic implica ions, we mus disag-
g ega e he da a by i m-size. This is he inal s ep o ou analysis.
4.2 Disagg ega ing by size
Figu e 7 e eals he une en pa e ns o en ie iza ion and in ellec ual monopoliza ion in ou
en sec o s, acco ding o he ou pa ame e s o conce n, in e ms o i m-size. Fi ms a e
anked by e enue wi hin each sec o and s a i ied in he op 10%, he i h o nin h deciles
and he bo om 50%. We see ha by he 2010s he op 10% secu ed highe p o i ma gins
han i ms in bo h he i h o nin h decile and he bo om 50% in e e y sec o , and ha
-0.30
0.25 0.24
0.61*
0.81** 0.79** 0.75**
-0.5
0
0.5
1
1950s 1960s 1970s 1980s 1990s 2000s 2010s
CORRELATION: PROFIT MARGINS V
PAYOUT-TO-INVESTMENT RATIO
Pea son
Coe icien
Appa el &
oo wea
Au o
De ence &
ae ospace
Food &
be e age
Fossil uels
& mining
Hea y
indus y
Ho els &
es au an s
Pha ma
Re ail
Tech
0
5
10
15
20
25
30
35
0 2 4 6 8 10
Ma ke Capi aliza ion (% o GDP)
In angible Asse s /
Tangible Fixed Asse s ( a io)
INTANGIBLE ACCUMULATION - 2010s
R = +0.21
Appa el &
oo wea
Au o
De ence &
ae ospace
Food &
be e age
Fossil uels
& mining
Hea y
indus y
Ho els &
es au an s
Pha ma
Re ail
Tech
0
2
4
6
8
10
12
14
0 1 2 3 4 5
)%(snig aM i o P eN
Di idends and S ock Buybacks /
Capi al In es men ( a io)
DEGREE OF RENTIERIZATION - 2010s
R = +0.75
-0.63** -0.59*
-0.50
-0.36
0.02
0.25 0.21
-0.8
-0.4
0
0.4
1950s 1960s 1970s 1980s 1990s 2000s 2010s
CORRELATION: CAPITALIZATION V
INTANGIBLE INTENSITY
Pea son Coe icien
Figu e 6. Deg ee o en ie iza ion and in angible accumula ion by sec o in he 2010s, and he co ela-
ion be ween a iables om he 1950s onwa ds.
Sou ce: Compus a (2022) and Pe e s and Taylo To al Q Se ies h ough WRDS.
No e: ��and �deno e signi icance a 99% (P>0.1), and 95% (P>0.05) le els, espec i ely
18 J. Baines and S. B. Hage
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4.5
7.6
3.7
3.0 1.7
-2
0
2
4
6
8
10
1950 1970 1990 2010 2030
pe cen
PROFIT MARGINS
Appa el &
Foo wea
0.7
2.5
0.8
1.2
1.0
0
1
2
3
1950 1970 1990 2010 2030
a io
FINANCIALIZATION
Appa el &
Foo wea
0.1
1.1
0.03
0.4
0.01
0.11
0.01
0.1
1
1950 1970 1990 2010 2030
pe cen
MARKET VALUE
Appa el &
Foo wea
0.7
2.5
1.2
3.4
0
1
2
3
4
5
1950 1970 1990 2010 2030
a io
INTANGIBLE ASSETS
Appa el &
Foo wea
Top 10% 5 h-9 h Decile Bo om 50%
6.9
4.1
3.4
4.5
5.2
-0.9
-6
-4
-2
0
2
4
6
8
10
1950 1970 1990 2010 2030
pe cen
PROFIT MARGINS
Au omo i e
1.0
0.3
0.5
0.7
0.7
0.5
0
0.2
0.4
0.6
0.8
1
1.2
1950 1970 1990 2010 2030
a io
FINANCIALIZATION
Au os
2.5
0.8
0.3 0.3
0.1
0.01
0.01
0.1
1
10
1950 1970 1990 2010 2030
pe cen
MARKET VALUE
Au os
0.3
0.8
0.4
1.6
2.0
0
1
2
1950 1970 1990 2010 2030
a io
INTANGIBLE ASSETS
Au os
Top 10% 5 h-9 h Decile Bo om 50%
3.2
7.2
4.4
5.5
4.5
5.3
0
2
4
6
8
10
1950 1970 1990 2010 2030
pe cen
PROFIT MARGINS
De ence &
Ae ospace
3.4
0.4
1.3
0.2
1.2
0
1
2
3
4
1950 1970 1990 2010 2030
a io
FINANCIALIZATION
De ence &
Ae ospace
0.2
1.6
0.5 0.6
0.1 0.1
0.01
0.1
1
10
1950 1970 1990 2010 2030
pe cen
MARKET VALUE
De ence &
Ae ospace
0.3
4.4
0.6
2.1
3.5
0
1
2
3
4
5
1950 1970 1990 2010 2030
a io
INTANGIBLE ASSETS
De ence &
Ae ospace
Top 10% 5 h-9 h Decile Bo om 50%
2.6
7.2
3.8
8.0
4.4
-0.2
-3
-1
1
3
5
7
9
1950 1970 1990 2010 2030
pe cen
PROFIT MARGINS
Food &
Be e age
2.4
0.8
1.6
0.8
0.4
0
1
2
3
1950 1970 1990 2010 2030
a io
FINANCIALIZATION
Food &
Be e age
0.5
3.0
0.7 1.4
0.2
0.01
0.01
0.1
1
10
1950 1970 1990 2010 2030
pe cen
MARKET VALUE
Food &
Be e age
0.9
3.8
0.8
2.4
0
1
2
3
4
5
1950 1970 1990 2010 2030
a io
INTANGIBLE ASSETS
Food &
Be e age
Top 10% 5 h-9 h Decile Bo om 50%
9.3 5.1
-5.2
10.7
-10
-5
0
5
10
15
20
25
1950 1970 1990 2010 2030
pe cen
PROFIT MARGINS
Fossil
Fuels &
Mining
0.4
0.5
0.1
0.3
0.1
0
0.2
0.4
0.6
1950 1970 1990 2010 2030
a io
FINANCIALIZATION
Fossil
Fuels &
Mining
3.4
7.2
3.3
1.8
0.6
0.1
0.01
0.1
1
10
1950 1970 1990 2010 2030
pe cen
MARKET VALUE
Fossil
Fuels &
Mining
0.2 0.2
0.1
0.1
0
0.1
0.2
0.3
0.4
0.5
1950 1970 1990 2010 2030
a io
INTANGIBLE ASSETS
Fossil Fuels
& Mining
-72.3
-120
20
1950 2020
Top 10% 5 h-9 h Decile Bo om 50%
6.9
6.4
6.8 4.7
8.6
-1.6
-4
0
4
8
12
1950 1970 1990 2010 2030
pe cen
PROFIT MARGINS
Hea y
Indus y
0.5
1.3
1.0
0.5 0.4
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1950 1970 1990 2010 2030
a io
FINANCIALIZATION
Hea y
Indus y
2.6 2.9
1.9 1.6
0.5 0.3
0.01
0.1
1
10
1950 1970 1990 2010 2030
pe cen
MARKET VALUE
Hea y
Indus y
0.1
1.8
0.3
1.7
1.3
0
0.4
0.8
1.2
1.6
2
2.4
1950 1970 1990 2010 2030
a io
INTANGIBLE ASSETS
Hea y
Indus y
Top 10% 5 h-9 h Decile Bo om 50%
Figu e 7. Ren ie iza ion and in angible accumula ion o US i ms by sec o .
Sou ce: Compus a and Pe e s and Taylo To al Q Se ies h ough WRDS.
No e: Each da a poin cap u es he a e age alue in a en -yea window.
Ren ie ship and in ellec ual monopoly 19
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Top 10% 5 h-9 h Decile Bo om 50%
5.5
11.4
4.0 4.4
3.5
-1.7
-4
0
4
8
12
1950 1970 1990 2010 2030
pe cen
PROFIT MARGINS
Ho els &
Res au an s
0.2
2.8
1.5
0.5
0
1
2
3
1950 1970 1990 2010 2030
a io
FINANCIALIZATION
Ho els &
Res au an s
0.02
1.5
0.5
0.01
0.01
0.1
1
10
1950 1970 1990 2010 2030
pe cen
MARKET VALUE
Ho els &
Res au an s
0.2
0.9
0.3
0.6
0.5
0
0.2
0.4
0.6
0.8
1
1950 1970 1990 2010 2030
a io
INTANGIBLE ASSETS
Ho els &
Res au an s
Top 10% 5 h-9 h Decile Bo om 50%
7.8
17.5
10.4
0
5
10
15
20
25
1950 1970 1990 2010 2030
PROFIT MARGINS
Pha ma
0.5
4.8
0.7
1.2 0.8
0
1
2
3
4
5
1950 1970 1990 2010 2030
a io
FINANCIALIZATION
Pha ma
9.0
0.4 0.7
0.2
0.3
0.01
0.1
1
10
1950 1970 1990 2010 2030
pe cen
MARKET VALUE
Pha ma
9.4
1.3
16.4
32.9
0
10
20
30
40
1950 1970 1990 2010 2030
a io
INTANGIBLE ASSETS
Pha ma
-64.6
-80
0
1950 2020
-4,380
-5000
0
1950 2020
Top 10% 5 h-9 h Decile Bo om 50%
2.9 3.1
2.9
2.4
1.4
-1
4
1950 1970 1990 2010 2030
PROFIT MARGINS
Re ail
pe cen
0.8
1.7
1.3
0.5
0.9
0
1
2
1950 1970 1990 2010 2030
a io
FINANCIALIZATION
Re ail
0.8
4.0
0.4
1.3
0.1
0.2
0.01
0.1
1
10
1950 1970 1990 2010 2030
pe cen
MARKET VALUE
Re ail
1.0
1.5
0.7
2.0
2.6
0
0.5
1
1.5
2
2.5
3
3.5
1950 1970 1990 2010 2030
a io
INTANGIBLE ASSETS
Re ail
Top 10% 5 h-9 h Decile Bo om 50%
11.6 12.4
8.9
4.0
5.4
-13.8
-15
-10
-5
0
5
10
15
20
1950 1970 1990 2010 2030
PROFIT MARGINS
Tech
pe cen
1.5
1.4
0.3
0.9
0
0.4
0.8
1.2
1.6
1950 1970 1990 2010 2030
a io
FINANCIALIZATION
Tech
3.0
27.9
1.1
5.0
0.1
0.5
0.01
0.1
1
10
100
1950 1970 1990 2010 2030
pe cen
MARKET VALUE
Tech
3.1
0.2
5.3
0.7
6.2
0
2
4
6
8
1950 1970 1990 2010 2030
a io
INTANGIBLE ASSETS
Tech
-60
0
1950 2020
Figu e 7. Con inued.
Figu e 8. Summa y o changes o op 10% i ms o e he las six decades.
Sou ce: Au ho s’ elabo a ion.
20 J. Baines and S. B. Hage
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gene ally by he 2010s he gap be ween he p o i ma gins o he op 10% and he bo om
50% o e e y sec o was highe han in any o he six p e ious decades. In ac , in he
1950s, he di e ence in he p o i ma gins o he la ges and smalles i ms was ela i ely
mino . While i is ue ha he sample o ha decade is smalle han in he ollowing deca-
des (see Table A3 in he Supplemen a y ma e ial), he mino di e ences in he 1950s a e il-
lus a i e o he ac ha he la ges i ms ended o pu sue expansion ia di e si ica ion
and ho izon al and e ical in eg a ion a he han p o i maximiza ion (Chandle , 1990);
and ha in ecen decades he e has been a signi ican pola iza ion in he p o i abili y o
la ge and small i ms in he USA.
O e all, we ind ha he sec o s can now be di e en ia ed in wo main g oups. The i s
g oup comp ises sec o s whe e he la ges i ms end o be signi ican ly mo e p o i able and
inancialized han smalle i ms in he same sec o , bu less in angible-in ensi e. The dispa -
i y in p o i ma gins is pa icula ly p onounced in he pha maceu ical and ech sec o s, as
Figu e 9. Summa y o changes o i ms in he i h o nin h deciles o e he las six decades.
Sou ce: Au ho s’ elabo a ion.
Figu e 10. Summa y o changes o i ms in he bo om 50% o e he las six decades.
Sou ce: Au ho s’ elabo a ion.
Ren ie ship and in ellec ual monopoly 21
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he e is an ex ao dina y concen a ion o p o i s o he la ges companies, and a displace-
men o cos s and isks on smalle , mo e in angible-in ensi e i ms ha unde ake a la ge
po ion o R&D. Gi en he scale o he p o i ma gin declines o he smalle g oups, we
c ea ed inse s so ha he declines could be cap u ed a he app op ia e axis scale. Simila
bu much less p onounced dynamics be ween la ge and smalle i ms a e a play among e-
ail as well as appa el and oo wea companies. The second g oup comp ises hospi ali y,
ood and be e age, de ence, hea y indus y and ex ac i e sec o s in which—like he sec o s
o he i s g oup— he la ges i ms end o be signi ican ly mo e p o i able and inancialized
han smalle i ms in he sec o , bu —unlike he sec o s in he i s g oup—mo e
in angible-in ensi e.
In he i s g oup, he ou sou cing by la ge companies o isky R&D ac i i ies appea s o
be pa icula ly p ominen , especially o pha ma and ech companies—while o he smalle
appa el and oo wea and e ail i ms, he need o pu sue b and-building and inno a i e de-
sign in al eady sa u a ed ma ke s aises hei in angible in ensi y ela i e o hei la ge coun-
e pa s (Soene , 2015; Rabino ich 2023). And in he second g oup, he ex ensi e use o
anchising by he la ges hospi ali y companies and he widesp ead ou sou cing o angible
p oduc ion by he la ges i ms in hea y indus y, de ence and he ood and be e age sec o
a e p edominan p ac ices— hus aising he in angible in ensi y o he la ges i ms in hese
sec o s ela i e o hei smalle coun e pa s (see Schwa z, 2022). This lea es us wi h one
special case: he au omo i e sec o . The au o sec o is dis inguished by he ac ha —unlike
all o he sec o s in his s udy—i s la ges i ms ha e lowe payou - o-in es men a ios hen
hei smalle coun e pa s. This sugges s ha despi e he ise o buye -d i en alue chains
cha ac e ized by he dispe sion o angible p oduc ion ac i i ies o my iad supplie s, he au-
omo i e sec o emains p ima ily s uc u ed by p oduce -d i en chains led by capi al-
in ensi e companies o which he ou sou cing o co e inal assembly ac i i ies is limi ed
(S u geon e al., 2008).
How do we piece he da a oge he and econs uc ou indings along he lines o ou
concep ual amewo k ega ding en ie iza ion and in ellec ual monopoliza ion? Figu es 8–
10 display in colou -coded ashion whe he i ms wi hin each sec o and size g ouping ose
o ell along he pa ame e s o in e es —p o i ma gins, inancial payou s ela i e o capi al
in es men , ma ke capi aliza ion ela i e o GDP and in angible in ensi y— o each decade
compa ed o he las . Blue cells egis e an inc ease in e ms o he pa ame e in ques ion,
and ed cells egis e a all. The only excep ion o his p ocedu e is o p o i ma gins: whe -
e e he p o i ma gin is nega i e i is colou coded ed i espec i e o he di ec ion o
change. Fo ease o iden i ica ion, whe e companies on a e age exhibi an inc ease in bo h
p o i abili y and inancial payou s ela i e o capi al in es men hey a e colou ed in ligh
u quoise o indica e en ie iza ion, whe e hey exhibi inc eased in angible in ensi y and
ma ke alue ela i e o GDP, he wo cells o hese pa ame e s a e colou ed in ligh blue
o indica e in angible accumula ion, and whe e hey exhibi inc eases in all ou pa ame e s,
all ou cells a e shaded in a da ke blue o indica e in ellec ual monopoliza ion.
The igu es show ha be o e he 1980s, only he op 10% o pha ma companies exhib-
i ed sus ained endencies owa ds in ellec ual monopoliza ion acco ding o ou heu is ic.
Bu since his decade, in ellec ual monopoliza ion has become ela i ely widesp ead in he
USA. Howe e , i is concen a ed among he op 10% o companies. Pe haps su p isingly,
he op 10% o ech i ms only acco d o ou heu is ic o in ellec ual monopoliza ion in he
2010s. The la e showing o hese i ms as ascenden in ellec ual monopolis s la gely de i es
22 J. Baines and S. B. Hage
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om no only he do -com c ash in he ea ly 2000s bu also o he de elopmen s in ha de-
cade which e oded p o i ma gins. These include he con inued commodi iza ion o PCs
and PC componen s, and compe i ion om wha we e mo e success ul lead i ms om
ab oad such as Nokia and Resea ch in Mo ion ( he make o BlackBe y). T ends wi hin
he ech sec o ab up ly shi ed wi h he apid expansion o pla o ms and social media in
he la e 2000s. This se in ain dynamics a ound da a cen aliza ion and g owing ne wo k
e ec s which p opelled some o he la ges US ech companies o he apex o he co po a e
hie a chy (Du and and Milbe g, 2020; Bi ch e al., 2021).
5. The mac o-economic implica ions o a iega ed in ellec ual
monopoliza ion
As we emphasized a he beginning o his a icle, schola ship on en ie iship and in ellec-
ual monopoliza ion has been in aluable in add essing a cen al puzzle wi hin he li e a u e
on i m-le el inancializa ion: he coincidence o low capi al in es men and high p o i abil-
i y wi hin high-income coun ies. We con end ha he amewo k we de elop allows us o
empi ically speci y he mechanisms behind he p o i -in es men gap wi hin high-income
coun ies such as he USA. Table 1 summa izes some o he main indings o ou analysis.
The angible-in ensi e sec o s ha we e cen al o he social compac ha eme ged in he
USA in he pos -wa pe iod—au omo i es and hea y indus y—a e he only sec o s ha ex-
pe ienced a decline in hei agg ega e capi aliza ion ela i e o GDP in he ollowing se en
decades. Du ing hei heyday in he mid- wen ie h cen u y, leading companies in hese sec-
o s had high head coun s and s ong commi men s o capi al in es men . This a angemen
was in eg al o he p eca iously balanced pos -wa indus ial acco d whe eby he gains o
economic ou pu we e ela i ely widely sha ed be ween capi al and a p i ileged segmen o
labou h ough sec o al and pa e n wage ba gaining in which deals s uck wi h wo ke s
wi hin he la ges companies would edound o he bene i o wo ke s in smalle i ms
(Schwa z, 2022).
The sec o s which ha e expe ienced he sha pes ise in ela i e capi aliza ion—pha ma
and ech—a e among he mos in angible-in ensi e. Unlike he legacy indus ies o he mid-
wen ie h cen u y, pha maceu ical and ech i ms a e much mo e selec i e in ec ui ing
employees wi h high le els o ‘human capi al’ and much less ocused on inc easing angible
asse s and o e all employee headcoun s (Schwa z, 2022). This has geog aphical implica-
ions as ech and pha ma i ms chase syne gies and spillo e s by in es ing in a eas whe e
he e is al eady a dense agglome a ion o educa ional, inancial and social ne wo ks such as
he San F ansisco Bay A ea in Cali o nia, Bos on-Camb idge in Massachuse s and New
Yo k-New Je sey. These in es men pa e ns se in ain employmen and house p ice dy-
namics ha ein o ce egional inequali ies in weal h and income ac oss he USA (Haskel
and Wes lake, 2017, pp. 136–139). Mo eo e , as in angible-in ensi y has isen so has he
emune a ion o hose highly educa ed and well-connec ed indi iduals wo king in co po a e
law, inance, consul ancy and lobbying o help companies a iously p o ec , le e age and
augmen hei in angible asse s— hus u he exace ba ing household inequali y (Pis o ,
2019; Ch is ophe s, 2021).
Ou analysis o he a iega ed dynamics o en ie iza ion and in ellec ual monopoliza-
ion wi hin sec o s also has impo an mac o-economic implica ions. The mos highly capi-
alized sec o s—pha ma and ech—a e ma ked by ex emely high in e - i m inequali y. The
Ren ie ship and in ellec ual monopoly 23
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Table 1. Summa y o indings.
Change in sec o al capi aliza ion ela i e
o GDP, 1950s 2010s
(pe cen age poin s)
Di e ence in p o i abili y be ween he
op 10% and bo om 50% i ms,
2010s (pe cen age poin s)
Di e ence in payou - o-in es men a io
be ween he op 10% and bo om
50% i ms, 2010s
(pe cen age poin s)
Di e ence in in angible in ensi y
be ween he op 10% and bo om
50% i ms, 2010s
(pe cen age poin s)
La ge inc ease La ge i ms much mo e p o i able La ge i ms much mo e inancialized La ge i ms much less
in angible-in ensi e
Tech (þ29.1) Pha ma (þ4397.5) Pha ma (þ4.1) Pha ma (−33.5)
Pha ma (þ9.2) Ex ac i e (þ77.4)
Tech (þ53.6)
Mode a e inc ease La ge i ms mode a ely mo e p o i able La ge i ms mode a ely mo e
inancialized
La ge i ms mode a ely less
in angible-in ensi e
Re ail (þ4.3) Hospi ali y (þ14.6) Hospi ali y (þ2.3) Tech (−3.1)
Food & be e age (þ3.0) Food & be e age (þ11.2) De ence (þ2.2) Au o (−1.2)
Ex ac i e (þ1.9) Fashion (þ5.9) Food & be e age (þ2.0) Re ail (−1.1)
Hospi ali y (þ1.9) Au omo i e (þ5.4) Fashion (þ1.5) Fashion (−0.9)
Fashion (þ1.5)
De ence (þ1.4)
Decline La ge i ms sligh ly mo e p o i able La ge i ms sligh ly mo e inancialized La ge i ms mo e in angible-in ensi e
Hea y Indus y (−0.2) Hea y Indus y (þ4.8) Hea y indus y (þ0.9) De ence (þ2.3)
Au omo i e (−1.8) De ence (þ2.2) Re ail (þ0.8) Food & be e age (þ1.4)
Re ail (þ1.7) Tech (þ0.6) Hea y indus y (þ0.5)
Ex ac i e (þ0.4) Hospi ali y (þ0.4)
Ex ac i e (þ0.1)
La ge i ms less inancialized
Au omo i e (−0.4)
Sou ce: Compus a and Pe e s and Taylo To al Q Se ies h ough WRDS.
24 J. Baines and S. B. Hage
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