Bichle , Shimshon; Ni zan, Jona han
Con e ence Pape
The Asymp o es o Powe
P o ided in Coope a ion wi h:
The Bichle & Ni zan A chi es
Sugges ed Ci a ion: Bichle , Shimshon; Ni zan, Jona han (2012) : The Asymp o es o Powe , The
Bichle and Ni zan A chi es, To on o,
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The Asymp o es o Powe
Shimshon Bichle and Jona han Ni zan1
Je usalem and Mon eal, Feb ua y 2012
www.bna chi es.ne
Re ised ansc ip o a p esen a ion by Jona han Ni zan
The 2nd Annual Con e ence o he Fo um on Capi al as Powe
The Capi alis Mode o Powe : Pas , P esen , Fu u e
Oc obe 20-21, 2011, Yo k Uni e si y, To on o
Con e ence Page: www.bna chi es.ne /320
C ea i e Commons
In oduc ion
My p esen a ion oday is a ollow-up o a alk I deli e ed las yea a he 2010
inaugu al con e ence o he Fo um on Capi al as Powe . Bo h p esen a ions a e pa
o my join esea ch wi h Shimshon Bichle on he cu en c isis. Las yea , my
pu pose was o cha ac e ize his c isis. I a gued ha i was a ‘sys emic c isis’, and
ha capi alis s we e g ipped by ‘sys emic ea ’. This yea , my goal is o explo e why.2
Begin wi h sys emic ea . This ea , we a gue, conce ns he e y exis ence o
capi alism. I causes capi alis s o shi hei a en ion om he day- o-day
mo emen s o capi alism o i s e y ounda ions. I makes hem wo y no abou he
sho - e m ups and downs o g ow h, employmen and p o i , bu abou ‘losing hei
g ip’. I o ces on hem he ealiza ion ha hei sys em is no e e nal, and ha i may
no su i e – a leas no in i s cu en o m.
Las yea , many in he audience ound hese claims s ange, i no p epos e ous.
Capi alism was ob iously in ouble, hey conceded. Bu he c isis, hough deep, was
by no means sys emic. I h ea ened nei he he exis ence o capi alism no he
con idence o capi alis s in hei powe o ule i . To a gue ha capi alis s we e losing
hei g ip was i olous.
1 Shimshon Bichle eaches poli ical economy a colleges and uni e si ies in Is ael. Jona han
Ni zan eaches poli ical economy a Yo k Uni e si y in To on o. All o hei publica ions a e
a ailable om The Bichle & Ni zan A chi es (bna chi es.ne ). The p esen ex con ains se e al
e isions o he empi ical indings p esen ed by Ni zan a he 2011 con e ence. The o e all
s uc u e and conclusions emain unchanged.
2 Ou esea ch on sys emic ea was i s a icula ed in Ni zan and Bichle (2009b) and Bichle
and Ni zan (2010b), and i was la e elabo a ed on in Kliman, Bichle and Ni zan (2011). Fo
ou ea lie analyses o he c isis, see Bichle and Ni zan (2008; 2009).
BICHLER & NITZAN The Asymp o es o Powe
Tha was wel e mon hs ago.
Nowadays, he no ions o sys emic ea and sys emic c isis a e no longe
a e ched. In ac , hey seem o ha e become commonplace. Public igu es – om
dominan capi alis s and co po a e execu i es, o Nobel lau ea es and inance
minis e s, o jou nalis s and TV hos s – know o wa n us ha he ‘sys em is a isk’,
and ha i we ail o do some hing abou i , we may ace he ‘end o he wo ld as we
know i ’.
The e is, o cou se, much disag eemen on why he sys em is a isk. The
explana ions span he ull ideological spec um – om he a igh , o he libe al, o
he Keynesian, o he a le . Some blame he c isis on oo much go e nmen and
o e - egula ion, while o he s say we don’ ha e enough o hose hings. The e a e
hose who speak o specula ion and bubbles, while o he s poin o al e ing
undamen als. Some blame he excessi e inc ease in deb , while o he s quo e c edi
sho ages and a seized-up inancial sys em. The e a e hose who single ou
weaknesses in pa icula sec o s o coun ies, while o he s emphasize he ole o
global misma ches and imbalances. Some analys s see he oo cause in insu icien
demand, whe eas o he s eel ha demand is excessi e. While o some he cu se o
ou ime is g eedy capi alis s, o o he s i is he en i lemen s o he unde lying
popula ion. The lis goes on.
Bu he disag eemen is mos ly on he su ace. S ipped o hei echnical de ails
and poli ical inclina ions, all exis ing explana ions sha e wo common ounda ions:
(1) hey all adhe e o he wo duali ies o poli ical economy: he duali y o ‘poli ics s.
economics’ and he duali y wi hin economics o ‘ eal s. nominal’; and (2) hey all
look backwa d, no o wa d.
As a consequence o hese common ounda ions, all exis ing explana ions,
ega dless o hei o ien a ion, seem o ag ee on he ollowing h ee poin s:
1. The essence o he cu en c isis is ‘economic’: poli ics ce ainly plays a ole
(good o bad, depending on he pa icula ideological iewpoin ), bu he oo
cause lies in he economy.
2. The c isis is ampli ied by a misma ch be ween he ‘ eal’ and ‘nominal’ aspec s o
he economy: he eal p ocesses o p oduc ion and consump ion poin in he
nega i e di ec ion, and hese nega i e de elopmen s a e u he agg a a ed by
he undue in la ion and de la ion o nominal inancial bubbles whose
unsynch onized expansion and con ac ion make a bad si ua ion wo se.
3. The c isis is oo ed in ou pas sins. Fo a long ime now, we ha e allowed hings
o de e io a e: we’ e le he ‘ eal economy’ weaken, he ‘bubbles o inance’
in la e and he ‘dis o ions o poli ics’ pile up; in doing so, we ha e commi ed
he ca dinal sin o unde mining he g ow h o he economy and he
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BICHLER & NITZAN The Asymp o es o Powe
accumula ion o capi al; and since, acco ding o he p ies s o economics, sinne s
mus pay o hei e il deeds, he e is no way o us o escape he punishmen we
jus ly dese e – he sys emic c isis.
Wha i ?
Bu , hen, wha i hese ounda ional assump ions a e w ong?
Libe als and Ma xis s iew capi alism as a mode o p oduc ion and
consump ion, and i is his iew ha de e mines he assump ions hey make, he
ques ions hey ask and he answe s hey gi e. Now, wha would happen i we
depa ed om hei iew? How would ou assump ions, ques ions and answe s
change i , ins ead o a mode o p oduc ion and consump ion, we hough o
capi alism as a mode o powe ?3
The sho answe is ha hey would change adically. The bi u ca ion o
‘economics’ and ‘poli ics’ would become un enable, he eby ende ing he no ion o
economic c isis meaningless. The sepa a ion o he ‘ eal’ and he ‘nominal’ would
become unwo kable, he eby lea ing inance wi h no hing o ma ch o misma ch.
And he backwa d-looking o ien a ion o he analysis would ha e o gi e way o a
o wa d-looking s ance, oo ing he c isis no in he sins o he pas bu in he
misgi ings o he u u e.
Ou simple ‘wha -i ’ ques ion – and he adical ami ica ions i ca ies – is no
unlike he ones aised by Cope nicus, Spinoza and Da win, among o he s.
They oo ques ioned he old assump ions: ‘Wha i he sun a he han he ea h
is a he cen e?’ asked Cope nicus. ‘Wha i eligion was c ea ed no by God, bu by
me e mo als who use i o impose hei powe on o he mo als?’ asked Spinoza.
‘Wha i humans we en’ c ea ed by he Almigh y, bu e ol ed om o he li ing
c ea u es?’ asked Da win.
And hey oo ied o p o ide answe s. Thei answe s may ha e been en a i e,
incomple e o e en w ong – bu hese sho comings a e en i ely seconda y. The
impo an hing is ha hey asked he ques ions in he i s place. They s a ed om
sc a ch. Thei ques ions wen o he e y oo , and his adical depa u e al e ed he
en i e o ien a ion: i opened up he ho izon, led o o ally new indings and
e en ually culmina ed in en i ely new amewo ks.
The cu en sys emic c isis o e s a simila C l-Al -Del oppo uni y. By cas ing
doub on he con en ional c eed, i opens he doo o undamen al ques ions:
ques ions abou wha capi alism is, how i should be analyzed and o wha end.
3 On modes o powe in gene al and he capi alis mode o powe in pa icula , see Ni zan and
Bichle (2009a: Ch. 13).
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BICHLER & NITZAN The Asymp o es o Powe
So le ’s hi he keys. Ins ead o consump ion and p oduc ion, he amewo k
Bichle and I o e ocuses on powe .4 In ou amewo k, capi al is powe , and mo e
speci ically, o wa d-looking powe . When capi alis s expec hei powe o inc ease,
capi aliza ion ises: mo e powe equals posi i e accumula ion. And when he
ou look in e s and capi alis s expec hei powe o dec ease, accumula ion goes in o
e e se: less powe equals decumula ion.
F om his iewpoin , an o dina y capi alis c isis means ha capi alis s expec a
signi ican dec ease in hei powe – bu ha hey also expec hei powe o eco e
e en ually. By con as , a sys emic c isis means ha capi alis s ea ha hei powe is
abou o d op p ecipi ously, o e en disin eg a e, and ha his disin eg a ion migh
be i e e sible – a leas wi hin he exis ing pa ame e s o capi alism.
Pending Collapse
The ele an ques ion o us oday conce ns he la e ype o c isis: when a e
capi alis s likely o expec hei en i e sys em o powe o collapse, and wha
condi ions may igge such a d as ic change in ou look?
Because we a e dealing he e no only wi h his o ical condi ions, bu also wi h
capi alis expec a ions ega ding he u u e de elopmen o hose condi ions, i is no
easy o answe his ques ion. Howe e , he e a e ce ain ex eme si ua ions in which
he answe becomes mo e appa en , and hese si ua ions a e desc ibed by he i le o
my alk: capi alis s a e mos likely o expec hei powe o all p ecipi ously o disin eg a e
when his powe app oaches i s asymp o e.
Ma hema icians use he e m ‘asymp o e’ o deno e a quan i a i e limi ,
some hing like a ‘ceiling’ o a ‘ loo ’ ha a cu e app oaches bu ne e qui e eaches.
And he same e m can be used o desc ibe he limi s o powe .
Capi alis powe a ely i e e eaches i s uppe limi . The eason can be
explained in e e ence o he ollowing dialec ical in e play: he close powe ge s o
his limi , he g ea e he esis ance i elici s; he g ea e he esis ance, he mo e
di icul i is o hose who hold powe o inc ease i u he ; he mo e di icul i is o
inc ease powe , he g ea e he need o o ce and sabo age; and he mo e o ce and
sabo age, he highe he likelihood o a se ious backlash, ollowed by a decline o
e en disin eg a ion o powe .5
4 Succinc p esen a ions o his amewo k a e gi en in Bichle and Ni zan (2011; 2012
o hcoming). Fo a mo e de ailed accoun ed, see Ni zan and Bichle (2009a).
5 This in e play is by no means uni e sal. In ce ain modes o powe – he Megamachines o
he ancien i e del as, Ma x’s ‘o ien al despo ism’, o O well’s 1984 – he h ea and exe cise
o o ce a e so ex eme ha hei subjec s g adually lose he abili y o e en con empla e
esis ance, le alone o ganize i . The Indian cas e sys em, o ins ance, has been welded o e
millennia by a powe akin o he ‘s ong o ce’ in he a om. The e is eno mous pen -up ene gy
in ha sys em; bu once his ene gy has been locked in, u ning i agains he egime can only
be achie ed h ough a chain eac ion igge ed by a c i ical social mass.
- 4 -
BICHLER & NITZAN The Asymp o es o Powe
I is a his la e poin , when powe app oaches i s asymp o es, ha capi alis s
a e likely o be s uck by sys emic ea – he ea ha he powe s uc u e i sel is
abou o ca e in. And i is a his c i ical poin , when capi alis s ea o he e y
su i al o hei sys em, ha hei o wa d-looking capi aliza ion is mos likely o
collapse.
The A gumen
Ou claim in his p esen a ion is ha he sys emic ea ha cu en ly g ips capi alis s
is well g ounded in he conc e e ac s.
The p oblem ha capi alis s ace oday, we a gue, is no ha hei powe has
wi he ed, bu , on he con a y, ha hei powe has inc eased. Indeed, no only has
hei powe inc eased, i has inc eased by so much ha i migh be app oaching i s
asymp o e. And since capi alis s look no backwa d o he pas bu o wa d o he
u u e, hey ha e good eason o ea ha , om now on, he mos likely ajec o y o
his powe will be no up, bu down.
Be o e leshing ou his a gumen , hough, a ew wo ds abou he me hod and
s uc u e o he p esen a ion. Ou analysis he e is limi ed o he Uni ed S a es, bu
his limi a ion isn’ eally a d awback. The chie pu pose o his analysis is
me hodological. Fo us, he impo an ques ion is how we should s udy capi alis
powe – and in his espec he Uni ed S a es may o e he bes s a ing poin . Fi s ,
al hough he global impo ance o U.S. capi alism may ha e diminished o e he
pas hal cen u y, i s ecen his o y is s ill cen al o unde s anding he dynamics o
con empo a y capi alis powe . And second, o answe he kind o ques ions ha
we’ll be asking equi es de ailed da a ha a e no eadily a ailable o many o he
coun ies.
Wi h his emphasis in mind, I will begin by se ing up ou gene al amewo k
and key concep s. I will con inue wi h a s ep-by-s ep decons uc ion o key powe
p ocesses in he Uni ed S a es, a emp ing o assess how close hese p ocesses a e o
hei asymp o es. And I will conclude wi h b ie obse a ions abou wha may lie
ahead.
The e is no eason o assume ha capi alism is immune om such a a e. I is ce ainly
possible, a leas logically, o capi alis powe o e en ually ump, c ush and o ally elimina e
he opposi ion i elici s – in a manne an icipa ed by Jack London’s The I on Heel (1907). Bu
his elimina ion would c ea e a new mode o powe al oge he : ha ing des oyed he will o i s
subjec s, he new egime could no longe ely on he open buying and selling o commodi ied
powe ; wi hou endible powe , capi aliza ion would cease; and wi hou capi aliza ion, he
mode o powe could no longe be called ‘capi alis ic’ – a leas no in he p esen sense o he
e m.
- 5 -
BICHLER & NITZAN The Asymp o es o Powe
Majo Bea Ma ke s
Le ’s s a wi h he con ex . Figu e 1 and Table 1 po ay he his o y o U.S.
capi alism as seen om he iewpoin o capi alis s. The ul ima e in e es o
capi alis s is capi aliza ion: he o wa d-looking alue o hei asse s. And he main
ya ds ick o ha alue is he s ock ma ke .
Figu e 1 shows he his o y o U.S. s ock p ices. On he s ock ma ke , p ices a e
denomina ed in ac ual dolla s and cen s. Howe e , ‘nominal’ measu es can be
a ec ed g ea ly by he ups and downs o he gene al p ice le el, so economis s like o
di ide, o ‘de la e’, hem by he consume p ice index in o de o ob ain wha hey
call a ‘cons an dolla ’ measu e. And ha is wha we do in Figu e 1: we show he
s ock-p ice index wi hou he e ec o in la ion.
As you can see, he o e all his o ical end o s ock p ices is up. You can also
see, hough, ha his up end is ac u ed by pe iods o sha p declines o 50-70 pe
cen , ma ked by he shaded a eas. These shaded a eas deno e wha we call ‘majo
bea ma ke s’, whose de ini ion is gi en in Table 1.
Con empo a y c i iques o capi alism o en dismiss such cha s as a e ish o
‘ inance’. The magni udes o inance, hey say, a e no mo e han ic i ious symbols.
They dis o he ‘ eal’ na u e o capi al and mislead us in o he w ong conclusions. In
ou iew, hough, his ashionable dismissal is w ongheaded. The s ock ma ke is no
only he cen al ba ome e o mode n capi alism; i is also he key powe algo i hm
h ough which capi alis s c eo de – o c ea e he o de – o hei wo ld.
To illus a e his poin , conside he las ou majo bea ma ke s. Each o hese
pe iods signalled a majo c eo de ing o capi alis powe .
1. The bea ma ke o 1906-1920 ma ked he closing o he Ame ican on ie and
he shi om obbe -ba on capi alism o la ge-scale business en e p ise and he
beginning o synch onized inance.
2. The c isis o 1929–1948 signalled he end o ‘un egula ed’ capi alism and he
eme gence o la ge go e nmen s and he wel a e-wa a e s a e.
3. The c isis o 1969–1981 ma ked he closing o he Keynesian e a, he esump ion
o wo ldwide capi al lows and he onse o neolibe al globaliza ion.
4. And he cu en c isis – which began no in 2008, bu in 2000, and is s ill
ongoing – seems o ma k ye ano he shi owa d a di e en o m o capi alis
powe , o pe haps a shi away om capi alis powe al oge he .
Wha is he na u e o he cu en c isis? How is his c isis ela ed o capi alis
powe ? And wha a e he asymp o es o ha powe ?
- 6 -
BICHLER & NITZAN The Asymp o es o Powe
Figu e 1
U.S. S ock P ices in ‘Cons an ’ Dolla s
www.bna chi es.ne
NOTE: G ey a eas indica e majo bea ma ke s, as de ined in
Table 1. The U.S. s ock-p ice index splices he ollowing ou
sub-se ies: a combina ion o bank, insu ance and ail oad s ock
se ies weighed by Global Financial Da a (1820-1870); he
Cowles/S anda d and Poo ’s Composi e (1871-1925); he 90-
S ock Composi e (1926-1956); and he S&P 500 (1957-p esen ).
The cons an -dolla se ies is compu ed by di iding he s ock-
p ice index by he Consume P ice Index. Da a a e ebased wi h
1929=100.0. The las da a poin is o Oc obe 2011.
SOURCE: Global Financial Da a (se ies codes: _SPXD o
s ock p ices; CPUSA o consume p ices); S anda d and Poo ’s
h ough Global Insigh (se ies codes: [email p o ec ed] and
SP500.D7 o s ock p ices); IMF h ough Global Insigh (se ies
code: L64@C111 o consume p ices).
- 7 -
BICHLER & NITZAN The Asymp o es o Powe
Table 1
Majo U.S. Bea Ma ke s*
(cons an -dolla calcula ions)
PERIOD
DECLINE FROM PEAK
TO TROUGH (%) **
1835–1842 –50%
1851–1857 –62%
1906–1920 –70%
1929–1948 –56%
1969–1981 –55%
2000–? –50%
* A majo bea ma ke is de ined as a
mul iyea pe iod du ing which: (1) he 10-yea
cen ed mo ing a e age o s ock p ices,
exp essed in cons an dolla s, ends
downwa d; and (2) each successi e sub-peak o
he unde lying p ice se ies, exp essed in
cons an dolla s, is lowe han he p e ious
one.
** The peak occu s one yea p io o he onse
o a majo bea ma ke .
NOTE: The mos ecen sub- ough o he
cu en majo bea ma ke occu ed in 2008. I
is no ye clea whe he his sub- ough ma ks
he end o his bea ma ke .
SOURCE: See Figu e 1.
Capi al as Powe
The bes place o begin is Johannes Keple , one o he key a chi ec s o he
mechanical wo ld iew. P io o Keple , o ce (o powe ) had wo p incipal ea u es:
i was hough o as an en i y in and o i sel , on a pa wi h he elemen s; and i was
concei ed o quali a i ely, no quan i a i ely. Keple in e ed his iew. In his
me hod, o ce is no a s and-alone en i y, bu a ela ionship be ween en i ies; in o he
wo ds, i is no absolu e bu di e en ial. And his ela ionship is no quali a i e, bu
quan i a i e.6
6 On he Keple wa e shed and i s impo ance o science in gene al and he concep o o ce in
pa icula , see Jamme (1957: Ch. 5).
- 8 -
BICHLER & NITZAN The Asymp o es o Powe
Asymp o es o Powe
One impo an ea u e o dis ibu ional powe is ha i clea ly bounded. Gi en ha
no g oup o capi alis s can e e own mo e han he e is o own in socie y,
dis ibu ional powe can ne e exceed 100 pe cen . Simila ly, since no owne can
own less han no hing, dis ibu ional powe canno all below 0 pe cen .10 The
mo emen be ween hese lowe and uppe bounds, hough, can ollow many
di e en pa e ns.
Th ee such pa e ns a e illus a ed in Figu e 4. The pa e ns hemsel es a e
gene a ed by ma hema ical unc ions, bu we can easily endow hem wi h conc e e
social meaning. Assume ha each o he lines 1a, 2a and 3a a he uppe pa o he
igu e (plo ed agains he le scale) ep esen s a pa icula ajec o y o he a e - ax
p o i sha e o he Top 0.01% in na ional income, and ha each o he lines 1b, 2b
and 3b a he bo om (plo ed agains he igh loga i hmic scale) ep esen s he
co esponding a e o change o ha ajec o y.11
The ch onological s a ing poin in ou hypo he ical illus a ion is he yea 1900,
in which all h ee lines show an a e - ax p o i sha e o a ound 1 pe cen . F om his
poin onwa d, he pa e ns di e ge. Line 1a, o example, shows he esul o a
cons an , 4-pe -cen g ow h a e pe annum. This g ow h a e inc eases he a e - ax
p o i sha e o 1.04 pe cen in 1901, o 1.082 in 1902, o 1.125 in 1903, and so on.
Since he a e - ax p o i sha e g ows a an unchanging a e, he co esponding
g ow h- a e se ies 1b a he lowe pa o he cha is a la line. The a e - ax p o i
sha e ises exponen ially, and some ime be o e 2020 i eaches 100 pe cen o
na ional income. This is he ‘glass ceiling’. F om his poin onwa d, he sha e can no
longe inc ease: i ei he s ays he same o d ops. (In his igu e, we le i unchanged
a 100 pe cen ; no ice ha once line 1a a he op hi s he glass ceiling, line 1b a he
bo om, ep esen ing he g ow h a e, ge s ‘ unca ed’, since he g ow h a e d ops o
ze o.)
Now, capi alis s ope a e agains he opposi ion o non-capi alis s (as well as o
o he capi alis s). In o de o ea n p o i s, hey need o exe enough powe o
o e come his esis ance. As we no ed ea lie , hough, he esis ance i sel is no
ixed: i ends o inc ease as he income sha e o capi alis s ises while he income
sha e o o he s sh inks. And his g owing esis ance means ha he highe he p o i
sha e o he capi alis s, he g ea e he powe hey need o exe in o de o make i
e en bigge .
10 Al hough deb can be conside ed a ‘nega i e’ asse , a deb o canno own less han no hing.
The ne deb o a deb o (liabili ies less asse s) is a claim on he deb o ’s u u e income. As long
as he p esen alue o his u u e income is g ea e han o equal o he deb o ’s ne deb , he
deb o ’s asse s a e non-nega i e. I he p esen alue o he u u e income is smalle han he
ne deb , he deb o is echnically bank up , ha ing ze o asse s.
11 A log scale, shown he e in mul iples o 10, is a con enien way o plo ing se ies ha change
exponen ially.
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BICHLER & NITZAN The Asymp o es o Powe
Figu e 4
Dis ibu i e Sha es: A Hypo he ical Exposi ion
o Le els and Ra es o Change
www.bna chi es.ne
(le )
( igh )
(exponen ial)
(linea )
(asymp o ic)
These powe ela ions can be aced in Figu e 4. The lines a he op, deno ing
he a e - ax p o i sha e o income o he Top 0.01%, ep esen he powe o
dominan capi al ope a ing agains esis ance, while he lines a he bo om show he
a e a which his p o i -sha e- ead-powe changes o e ime.
In e ms o ou i s example, line 1a shows capi alis powe g owing
exponen ially. I umps he opposi ion a an annual a e o 4 pe cen (line 1b), un il
he esis ance is o ally c ushed and capi alis s app op ia e he en i e na ional
income. The end esul i sel is socially impossible ( he non-capi alis s, ha ing los
hei income, pe ish) o non-capi alis ic ( he lose s end up li ing on handou s om
he winne s; see oo no e 5). Bu he pa e n o accele a ing powe leading owa d
ha end is ce ainly possible, a leas o e a limi ed pe iod o ime.
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BICHLER & NITZAN The Asymp o es o Powe
Ano he hypo he ical illus a ion is gi en by lines 2a and 2b. He e, oo, we see
capi alis powe ising, bu esis ance o ha powe ises as well. And as a esul , he
g ow h a e o his powe declines: a he beginning o he p ocess, du ing he ea ly
1900s, he a e o g ow h is 100 pe cen pe annum; by he 1950s i alls o abou 2
pe cen ; and by he end o he wen ie h cen u y i declines o 1 pe cen . Howe e ,
moun ing esis ance isn’ enough o s op he inc ease in capi alis powe , and
some ime du ing he 2060s capi alis s end up app op ia ing he en i e na ional
income. As in he p e ious example, om his poin onwa d capi alis powe can
ei he emain unchanged o d op. And al hough he end ou come i sel , as be o e, is
socially impossible o non-capi alis ic, he pa e n o linea ly g owing powe ha
leads o ha ou come is pe ec ly plausible.
The las pa e n, which we label ‘asymp o ic’, is illus a ed by lines 3a and 3b.
Ini ially, he sha e o p o i inc eases apidly, bu he g ow h a e ape s o e y
quickly. Unlike in he p e ious wo cases, in his one esis ance g ows oo as o
capi alis s o ump i comple ely. And, as a esul , al hough he p o i sha e ises, i
ne e eaches he 100 pe cen ceiling. I me ely app oaches i asymp o ically.
Now emembe ha hese lines a e no mo e han ideal ypes ha illus a e
al e na i e pa e ns. In p ac ice, he p o i sha e is ne e ha s ylized: i goes up o
down, i luc ua es a ound i s own end and i s asymp o e need no be 100 pe cen –
o any o he pa icula le el, o ha ma e . I can be any hing. As we shall soon see
wi h he ac ual da a, he hypo he ical pa e ns illus a ed he e combine o p oduce
agged and occasionally wa e-like ajec o ies o a ious du a ions. These ajec o ies
show powe inc easing a a ious a es, eceding, ising again, app oaching i s
asymp o e, and occasionally collapsing.
The key poin , hough, is ha hese pa e ns o dis ibu ion and edis ibu ion,
wha e e hey may be, quan i y unde lying powe p ocesses. And his quan i ica ion
o powe makes dis ibu ional pa e ns – and he limi s embedded in hem – c ucial
o unde s anding capi al accumula ion and capi alis de elopmen .
Much o my wo k wi h Bichle o e he pas h ee decades has been conce ned
wi h making sense o such his o ical pa e ns. O en, he oscilla ions ep esen
a ia ions in powe wi h a gi en o de . Bu occasionally, hey poin o deeply
ans o ma i e momen s, ones ha c eo de he en i e mode o powe . One example
o such c eo de ing is he ela ionship be ween di e en ial oil p o i s and ene gy
con lic s in he Middle Eas (Ni zan and Bichle 1995; Bichle and Ni zan 1996).
Ano he example is he egime pa e n o di e en ial accumula ion, whe e dominan
capi al oscilla es be ween b ead h and dep h as i b eaks h ough i s successi e social
en elopes (Ni zan 2001; Ni zan and Bichle 2001). And a hi d illus a ion is he
ela ionship be ween majo bea ma ke s shown in Figu e 1 and Table 1 and he
co esponding ansmu a ions o he capi alis mode o powe ha accompany hem
(Bichle and Ni zan 2008).
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BICHLER & NITZAN The Asymp o es o Powe
My p esen a ion oday is nes ed in his la e ela ionship. Focusing on he mos
ecen and s ill ongoing majo bea ma ke , my pu pose is o iden i y he powe
unde pinnings o he c isis, o assess he limi s imposed on hem and o specula e on
wha hose limi s may imply o he nea u u e o he capi alis mode o powe .
Na ional Income Sha es
The nex s ep in his jou ney is o unpack he s a is ical ca ego y o ‘na ional
income’. Table 2 shows he unde lying componen s o his agg ega e. No e ha he
able is no d awn o scale. Ou conce n a his poin is me ely he ela ionship
be ween he di e en componen s, no hei ela i e size.
Table 2
Decons uc ing Na ional Income
Na ional Income
Labou Income Non-Labou Income
Non-Capi al
Income Capi al Income
Ne
In e es P e ax P o i
Co p.
Tax A e -Tax
P o i
The
Res Top
0.01%
- 18 -
BICHLER & NITZAN The Asymp o es o Powe
Line 1 is na ional income. This line ep esen s he o al income, measu ed in
dolla s and cen s, ea ned in a socie y du ing a gi en yea . Line 2 shows ha na ional
income comp ises wo sub-ca ego ies: labou and non-labou income. In line 3, we
see ha non-labou income consis s o wo componen s: he income o capi alis s and
he income o non-capi alis s o he han employees (i.e. p op ie o s, en ie s and he
go e nmen ). Line 4 shows ha capi alis income includes wo ypes o income: ne
in e es and p e ax p o i . Line 5 shows ha p e ax p o i consis s o co po a e axes
ha go o he go e nmen and a e - ax p o i ha belongs o he capi alis s. Finally,
in line 6 we see ha a e - ax p o i can be b oken down o he p o i o he
Top 0.01% and he p o i o all o he i ms.
This s uc u e o e s a guideline on how o in es iga e he edis ibu ion o
powe .12
Recall ou s a ing poin . In Figu e 3, we saw ha he s ock-ma ke boom o he
1990s was unde w i en no by ‘economic g ow h’, bu by a massi e c eo de ing o
powe : a edis ibu ional p ocess in which he Top 0.01% managed o mo e han
double i s a e - ax p o i sha e in na ional income. The igu e also showed ha he
c isis o he pas en yea s has been un olding wi h capi alis powe ho e ing a ound
his o ic highs. These obse a ions, along wi h he o wa d-looking ou look o
capi alis s, sugges ha he cu en c isis may be he esul o capi alis s becoming no
weake , bu s onge ; and ha capi alis powe may be app oaching i s social
asymp o e – a le el oo high o sus ain, le alone inc ease.
A his poin , hen, he ques ion we need o ask is wo old. Fi s , wha we e he
conc e e powe p ocesses ha made his massi e edis ibu ion o income possible in he
i s place? And, second, wha migh be he speci ic limi s on his powe o
edis ibu e?
The emainde o he p esen a ion ies o answe hese ques ions by looking a
he ollowing nes ed ans o ma ions. No e ha , all else emaining he same, each o
hese ans o ma ions wo ks in a ou o he Top 0.01%:
• Wi hin na ional income, he shi om labou o non-labou income (line 2 in
Table 2).
• Wi hin non-labou income, he shi om non-capi al o capi al income (line 3).
• Wi hin capi al income, he shi om ne in e es o p e ax p o i (line 4).
• Wi hin p e ax p o i ,
he shi om co po a e ax o a e - ax p o i (line 5).
12 The guideline he e is e y udimen a y and by no means exhaus i e. Needless o say, i does
no p eclude di e en and/o mo e de ailed analyses o powe .
- 19 -
BICHLER & NITZAN The Asymp o es o Powe
• Wi hin a e - ax p o i , he shi o a e - ax p o i om smalle i ms o he
Top 0.01% (line 6).
Figu e 5
Sha es o U.S. Na ional Income
www.bna chi es.ne
Non-Labou Income
Capi al Income
P e ax P o i
A e -Tax P o i
A e -Tax P o i o
he Top 0.01% co ps.
(since he 1950s)
NOTE: Se ies a e smoo hed as 10-yea mo ing a e ages. Non-
labou income is equal o na ional income less compensa ion o
employees. Capi al income is p e ax p o i and ne in e es . The
Top 0.01% o co po a ions comp ises, o e e y yea , he op 0.01%
o U.S.-inco po a ed i ms in he Compus a No h Ame ica
uni e se, anked by ma ke capi aliza ion (see Figu e 3 o
de i a ion and compu a ions). The las da a poin s a e o 2010.
SOURCE: U.S. Bu eau o Economic Analysis h ough Global
Insigh (se ies codes: YN o na ional income; YPCOMP o
compensa ion o employees; ZB o p e ax p o i [wi hou CCAdj &
IVA]; INTNETAMISC o ne in e es ; ZA o a e - ax p o i
[wi hou CCAdj & IVA]); His o ical S a is ics o he Uni ed S a es,
Ea lies Times o he P esen : Millennial Edi ion (online) (se ies codes:
Ch13 o he numbe o ax e u ns o ac i e co po a ions [ ill
1997]); U.S. Depa men o Comme ce, S a is ical Abs ac o he
Uni ed S a es 2012, Table 744, p. 491 ( he numbe o ax e u ns o
ac i e co po a ions [1978-2008]); Compus a ‘ unda’ ile h ough
WRDS (se ies codes: NI o a e - ax p o i o he Top 0.01% o
co po a ions).
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BICHLER & NITZAN The Asymp o es o Powe
Figu e 5 p o ides a bi d’s-eye summa y o hese ans o ma ions, acing he
his o ical ajec o ies o he a ious na ional income sha es since he 1930s (no e ha
he da a a e exp essed as 10-yea mo ing a e ages, so e e y obse a ion deno es he
a e age o he p eceding en yea s). The cha shows ha , despi e ha ing isen since
he ea ly 1980s, he sha e o non-labou income emains 13 pe cen below wha i
was in he 1930s. Howe e , he cha also shows ha , wi hin non-labou income, he
abo e-lis ed shi s ha e been posi i e and la ge: he na ional income sha e o capi al
income inc eased by 48 pe cen ; o p e ax and a e - ax p o i by 120 pe cen ; and o
he a e - ax p o i o he Top 0.01% by 134 pe cen ( he las inc ease is measu ed
since he 1950s). Le us now u n o a close examina ion o each o hese p ocesses.
Componen s o Na ional Income
Figu e 6 p o ides he mos basic b eakdown o na ional income, be ween labou and
non-labou income. The cha ells he quan i a i e his o y o line 2 in Table 2 – and
on he ace o i , he s o y doesn’ seem oo ascina ing.
We can see ha compensa ion o employees, exp essed as a sha e o na ional
income, ose om a low o 54 pe cen in 1929 o a high o 68 pe cen in 1980, and
ha om hen onwa d i declined g adually, eaching 62 pe cen in 2010. As
expec ed, his g adual shi is mi o ed by he mo emen o non-labou income,
whose sha e o na ional income declined om he 1930s o he ea ly 1980s and ose
he ea e .
Now, a naï e assessmen o his p ocess may lead one o conclude ha he ising
sha e o non-labou income has much mo e oom o go. E en a e a h ee-decade
dec ease, labou income s ill amoun s o nea ly wo- hi ds o na ional income.
Mo eo e , his sha e emains highe han i was in he ea ly pa o he cen u y, and
ha ac sugges s ha i could be squeezed u he in a ou g oups o he han
wo ke s, including he Top 0.01%.
Bu ha would be a has y conclusion o d aw. In ac , looking o wa d,
squeezing he sha e o labou income u he is bound o p o e di icul .
This s a emen may seem coun e in ui i e, bu he easons behind i could be
explained wi h a simple decomposi ion. Conside Equa ion 6, whose inal line
exp esses he sha e o employees in na ional income as a p oduc o wo dis inc
ac o s: (1) he sha e o employees in he o al adul popula ion, and (2) he a io
be ween compensa ion pe employee and he na ional income pe adul . The i s
ac o gauges he numbe o employees ela i e o all po en ial employees. The
second ac o con as s he a e age income o an employee wi h he a e age income
gene a ed by he adul popula ion as a whole.
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BICHLER & NITZAN The Asymp o es o Powe
Figu e 6
Compensa ion o Employees and Non-Labou Income
www.bna chi es.ne
(P e ax P o i , Ne In e es , P op ie o s' Income,
Ren & Indi ec Taxes less Subsidies)
as a Sha e o U.S. Na ional Income
NOTE: Non-labou income is na ional income less compensa ion
o employees. The las da a poin s a e o 2010.
SOURCE: U.S. Bu eau o Economic Analysis h ough Global
Insigh (se ies codes: YN o na ional income; YPCOMP o
compensa ion o employees).
6. popula ionadul
employeeso numbe
employeeso numbe
employeeso oncompensa i
incomena ional
employeeso oncompensa i
incomena ional
popula ionadul
popula ionadul
incomena ionalemployeeso numbe
employeeso oncompensa i
popula ionadul
employeeso numbe
adul pe incomena ional
employeepe oncompensa i
popula ionadul
employeeso numbe
- 22 -
BICHLER & NITZAN The Asymp o es o Powe
Figu e 7
Numbe o Employees and Compensa ion pe Employee
in he Uni ed S a es
www.bna chi es.ne
(le )
( igh )
NOTE: The las da a poin s a e o 2010.
SOURCE: His o ical S a is ics o he Uni ed S a es, Ea lies Times o
he P esen : Millennial Edi ion (online) (se ies codes:
Age_16AndOlde _Aa141_Numbe o he adul popula ion, 16
yea s and o e [ ill 1946];
Ci ilianLabo Fo ce_Employed_To al_Ba471_Thousand o he
numbe o employees [ ill 1947]; U.S. Bu eau o he Census
h ough Global Insigh (se ies codes: ANPCTTGE16 o he
adul popula ion, 16 yea s and o e [ om 1947] [email p o ec ed] o
he numbe o employees [ om 1948]). U.S. Bu eau o Economic
Analysis h ough Global Insigh (se ies codes: YN o na ional
income; YPCOMP o compensa ion o employees).
The his o ical da a o hese wo componen s a e plo ed in Figu e 7, and, unlike
in Figu e 6, he e he pic u e is e y in e es ing.
No e ha labou income can be edis ibu ed in a ou o o he g oups in one o
wo ways. The i s me hod is o con e wo ke s in o capi alis s o p op ie o s o
a ious so s, and in so doing e-designa e hei income. In his way, wha was once
called a wage becomes p o i , in e es , en , en ep eneu ial income, e c. – all
depending on he new iden i y o he o me wo ke . Bu as he op se ies in he cha
- 23 -
BICHLER & NITZAN The Asymp o es o Powe
shows, his o ically he con e sion has gone he o he way: o e he pas cen u y o
so, a g owing sha e o he adul popula ion has been compelled o become wo ke s.
The second me hod is o squeeze he a e age income o wo ke s, and in so doing
inc ease he income o non-wo ke s. Acco ding o he end depic ed in he bo om
se ies, his is exac ly wha has happened since he 1930s: he a e age wo ke ’s
income, measu ed ela i e o he na ional income pe adul , has gone down.13
Is his ela i e down end ‘sus ainable’? Be ween he 1970s and he ea ly 2000s,
employee compensa ion ela i e o na ional income pe adul ell by abou 17 pe
cen ; can his a io be squeezed by ano he 17 pe cen in he nex 30 yea s?
The answe is p obably posi i e: ela i e wages can be educed u he . Bu gi en
ha his measu e is al eady low by his o ical s anda ds, squeezing i u he is likely
o p o e inc easing di icul . I will equi e g ea e h ea s, la ge doses o iolence
and he inci emen o mo e ea . And since a g ea e exe ion o powe in i es g ea e
esis ance, he e is also he p ospec o a powe ul backlash. So all in all, i seems ha
he powe o capi alis s ela i e o employees is much close o i s asymp o es han
Figu e 6 would o he wise imply.
Componen s o Non-Labou Income
The nex s ep in ou decomposi ion is depic ed in Figu e 8, which d ills deepe in o
non-labou income. Following line 3 in Table 2, Figu e 8 decomposes non-labou
income in o wo componen s. The i s componen , depic ed by he hick se ies, is
he income o capi alis s, comp ising p e ax p o i and ne in e es .14 The second
componen , depic ed by he hin se ies, measu es he income o hose who a e
nei he wo ke s no capi alis s – namely p op ie o s, en ie s and he go e nmen .
The igu e shows ha , o e he pas cen u y, he e has been a signi ican
edis ibu ion om hose who a e nei he wo ke s no capi alis s o capi alis s:
capi alis s’ sha e in na ional income has isen o oughly 20 pe cen , up om 12 pe
cen in he 1930s, while he sha e o non-wo ke s/non-capi alis s has allen o 20 pe
cen , down om 30 pe cen .
13 Ou emphasis he e is on he long- e m ends o he wo se ies. The cyclical oscilla ions end
o co ela e wi h he business cycle. To illus a e, conside he downswing since 2008. Falling
employmen du ing ha pe iod has caused he a io o employees o he adul popula ion ( op
se ies) o all, while ising unemploymen has made na ional income pe adul all as e han
compensa ion pe employee, causing he bo om se ies o ise. The same logic, only in e e se,
ope a es du ing an upswing.
14 The na ional income accoun s p o ide wo measu es o p o i – wi h and wi hou capi al
consump ion adjus men (CCAdj) and in en o y alua ion adjus men (IVA). In his pape we
use he o me measu e (wi hou CCAdj and IVA), because i s de ini ion is close o he one
used by co po a ions. The quan i a i e di e ence be ween he wo measu es is negligible o
ou pu poses he e.
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BICHLER & NITZAN The Asymp o es o Powe
Figu e 12
Ne In e es as a Sha e o U.S. Na ional Income:
A Decomposi ion
www.bna chi es.ne
( igh )
(le )
NOTE: The ca ego y ‘en e p ise’ comp ises businesses as well as
mo gaged home owne s. Impu ed ne en e p ise deb as a sha e o
na ional income is de i ed by di iding he sha e o ne in e es in
na ional income by he long- e m co po a e bond yield (exp essed
as a decimal). The las da a poin s a e 2010 o he impu ed ne
en e p ise deb and 2012 o he long- e m bond yield.
SOURCE: U.S. Bu eau o Economic Analysis h ough Global
Insigh (se ies codes: YN o na ional income; INTNETAMISC
o ne in e es ); Moody’s h ough Global Insigh
(RMMBCAAANS o he co po a e bond yield, AAA, seasoned
issue, 20-yea -o -longe ma u i y).
Nex , conside he a e o in e es , measu ed he e by he yield on AAA co po a e
bonds wi h 20-yea -o -longe ma u i y. This a e inc eased om less han 3 pe cen
in he 1940s o 14 pe cen in he 1980s, be o e d opping below 4 pe cen in ea ly
2012 – oscilla ions ha owe much o he ise and decline o in la ion.
Now, no e ha since he 1980s, he a io o deb o na ional income and he a e
o in e es mo ed in opposi e di ec ions, bu ha he decline o he la e was as e
han he ise o he o me , causing he o e all sha e o ne in e es in na ional
income o decline.
- 31 -
BICHLER & NITZAN The Asymp o es o Powe
Wha can we say abou his p ocess looking o wa d? A decline in ou s anding
deb is ce ainly possible – bu such a decline, we e i o occu , would likely be
e ec ed h ough a massi e c isis ha would also c ush p o i . Ba ing such a c isis,
he likely ajec o y is o he a io o deb o na ional income o emain high o
inc ease u he .
In o he wo ds, any u he decline in he sha e o ne in e es in na ional income
has o come om lowe in e es a es. Bu since in e es a es a e al eady low by
his o ical s anda ds, he bene i o p o i s om such a educ ion is bound o be
limi ed. So he e oo we can see he asymp o e.
Componen s o Co po a e P o i
Now, his isn’ he end o he s o y. So a , we ha e deal wi h p e ax p o i . Bu o
capi alis s, he p e ax is jus a means o an end. Thei eal goal is he ‘bo om line’:
he p o i hey a e le wi h a e ax. And he e we come o ano he e y in e es ing
pa o he puzzle, illus a ed in Figu e 13.
The wo se ies a he op, plo ed agains he le scale, a e exp essed as a sha e o
na ional income: he hin se ies measu es he sha e o p e ax p o i and he hick
se ies he sha e o a e - ax p o i . No e ha he cyclical ups and downs o he wo
se ies a e e y simila , bu ha hei long- e m ends a e no . I we ake he 2000s as
ou e e ence poin , we can see ha al hough bo h se ies ha e isen since he ea ly
1980s, he na ional income sha e o p e ax p o i is s ill lowe han i was du ing he
1940s and 1950s, whe eas he income sha e o a e - ax p o i is highe .
The eason o his long- e m di e gence is explained by he bo om se ies,
which plo s he e ec i e co po a e ax a e agains he igh scale. The da a show ha
du ing he 1920s and 1930s co po a ions ha dly paid any co po a e axes. Bu he
G ea Dep ession and he e o ms ha ollowed ended his ee ide, pushing he
e ec i e co po a e ax a e om 20 o nea ly 55 pe cen . Ob iously, his was a
massi e se back o he powe o owne s. I hamme ed a e - ax p o i mo e han
any hing else – bu gi en he poli ical clima e o he ime, co po a ions ound i
di icul o p o es .
Capi alis s, hough, we en’ abou o gi e up, and o e he nex se en y yea s,
hey ha e managed o claw back wha hey el was igh ly hei s. Thei e o s we e
highly success ul – so much so ha by he ea ly wen y- i s cen u y, he co po a e
ax a e is oughly he same as i was in he 1920s, be o e he wel a e-wa a e s a e
had been concei ed.
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BICHLER & NITZAN The Asymp o es o Powe
Figu e 13
Co po a e P o i as a Sha e o U.S. Na ional Income
and he E ec i e Co po a e Tax Ra e
www.bna chi es.ne
(le )
(le )
( igh )
* The e ec i e ax a e is he di e ence be ween p e ax and a e -
ax p o i exp essed as a pe cen o p e ax p o i .
NOTE: In 1931, he ax was g ea e han p e ax p o i , while in
1932, he p e ax p o i was nega i e. Fo p esen a ion pu poses,
he e ec i e ax a e obse a ions o hese wo yea s a e omi ed.
P o i is measu ed wi hou CCAdj & IVA. The las da a poin s a e
o 2010.
SOURCE: U.S. Bu eau o Economic Analysis h ough Global
Insigh (se ies codes: YN o na ional income; ZB o p e ax p o i
[wi hou CCAdj & IVA]; ZA o a e - ax p o i [wi hou CCAdj &
IVA]).
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BICHLER & NITZAN The Asymp o es o Powe
The impac o his educ ion has been s agge ing: by ha ing hei co po a e ax
a e educed om 55 o 20 pe cen , owne s ha e managed o boos hei a e - ax
p o i by 78 pe cen . Bu , as we ha e seen, he g ea e he powe – in his case, he
powe o no pay axes – he ha de i is o augmen his powe . The cu en poli ical
clima e makes u he co po a e ax cu s di icul o achie e. And e en i such
educ ions we e o be implemen ed, hei e ec on he bo om line would be small.
Gi en ha he cu en e ec i e co po a e ax a e is only 20 pe cen , he mos
capi alis s could hope o is a 25 pe cen inc ease in hei a e - ax p o i – and ha
inc ease would equi e he elimina ion o co po a e axes al oge he ! So once again
in ou jou ney, we see capi al as powe app oaching i s asymp o es.
Componen s o A e -Tax P o i
Guided by Table 2, we ha e one mo e s ep o conside , and ha is he a e - ax p o i
sha e o he Top 0.01%. This sha e is examined in Figu e 14. The op pa o he
cha shows wo se ies plo ed agains he le scale. The hin se ies is he sha e o
o al a e - ax p o i in na ional income (we call his he ‘NIPA’ se ies, o ma k i s
ela ion o he na ional income and p oduc accoun s). The hick se ies is he ne
p o i o he Top 0.01%, exp essed as a sha e o na ional income (co po a e epo s
commonly deno e a e - ax p o i as ‘ne p o i ’ o ‘ne income’). The bo om o he
igu e shows ano he wo se ies, plo ed agains he igh scale. The dashed se ies is
he a io o he wo op se ies: i exp esses he sha e o he Top 0.01% in NIPA a e -
ax p o i . The solid line going h ough his se ies exp esses his a io as a 10-yea
mo ing a e age o show he long- e m end.
The ela ion be ween o al NIPA p o i and he p o i o he Top 0.01% se es o
his o icize he p ocess o co po a e cen aliza ion. As we can see om he bo om
se ies, du ing he ea ly 1950s he Top 0.01% accoun ed o sligh ly mo e han 20 pe
cen o o al a e - ax p o i . Ongoing me ge s and acquisi ions pushed his sha e
upwa d, o 85 pe cen by he mid 1980s: a ha poin , he Top 0.01% app op ia ed
nea ly all o he na ional p o i o he Uni ed S a es.
Bu ha was he peak. Since hen, he sha e o he Top 0.01% in NIPA a e - ax
p o i has oscilla ed widely, bu he o e all end is no longe up, bu sideways,
ho e ing a ound 60 pe cen o he o al.
This pa e n may seem puzzling. Why did he a e - ax p o i sha e o he
Top 0.01% s op g owing in he ea ly 1990s? Wha has hal ed he p ocess o co po a e
cen aliza ion a ound 60 pe cen ? Can he leading U.S.-based co po a ions eigni e
he engine o cen aliza ion o inc ease hei p o i sha e u he , o a e hey b ushing
up agains hei asymp o e?
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BICHLER & NITZAN The Asymp o es o Powe
Figu e 14
U.S. A e -Tax P o i :
NIPA s. he Top 0.01% o Co po a ions
www.bna chi es.ne
(le )
(le )
( igh )
NOTE: NIPA p o i s a e measu ed wi hou CCAdj & IVA. The
Top 0.01% o co po a ions comp ises, o e e y yea , he op 0.01%
o U.S.-inco po a ed i ms in he Compus a No h Ame ica
uni e se, anked by ma ke capi aliza ion (see Figu e 3 o
de i a ion and compu a ions). The las da a poin s a e o 2010.
SOURCE: U.S. Bu eau o Economic Analysis h ough Global
Insigh (se ies codes: YN o na ional income; ZA o a e - ax
p o i ). His o ical S a is ics o he Uni ed S a es, Ea lies Times o he
P esen : Millennial Edi ion (online) (se ies codes: Ch13 o he
numbe o ax e u ns o ac i e co po a ions [ ill 1997]); U.S.
Depa men o Comme ce, S a is ical Abs ac o he Uni ed S a es
2012, Table 744, p. 491 ( he numbe o ax e u ns o ac i e
co po a ions [1998-2008]); Compus a ‘ unda’ ile h ough WRDS
(se ies codes: NI o he a e - ax p o i o he Top 0.01% o
co po a ions).
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BICHLER & NITZAN The Asymp o es o Powe
Res o he Wo ld
No e ha so a ou amewo k has been limi ed o he ‘Uni ed S a es’ p ope
(abs ac ing om he ambigui ies associa ed wi h his s a is ca ego y). We ha e
ocused speci ically on na ional income, dissec ing he a ious componen s in which
he ne p o i o he Top 0.01% is nes ed. Howe e , bo h he agg ega e a e - ax p o i
o he NIPA and he ne p o i o he Top 0.01% a e ea ned, a leas in pa , ou side
he Uni ed S a es – in wha he s a is icians call ROW ( es o he wo ld).
The g owing impo ance o ROW p o i is shown in Figu e 15. The aw da a
ha unde lie his igu e a e augh wi h haza ds o es ima ion and in e p e a ion, bu
he o e all long- e m ends hey po ay a e p obably alid.17 The hick se ies a he
uppe pa o he igu e plo s he p opo ion o U.S. a e - ax p o i (NIPA) coming
om ou side he Uni ed S a es (including bo h he o eign di idends and ein es ed
ea nings o U.S.-based co po a ions). The da a show ha du ing he 1940s and
1950s, ROW p o i amoun ed o less han 10 pe cen o he o al, bu ha i s g ow h
has been apid and now ho e s a ound 50 pe cen o he o al!
And he e a ises an in e es ing ques ion: wha is o p e en U.S. co po a ions
om using o eign in es men (g een ield o me ge s and acquisi ions) o ea n mo e
and mo e o hei a e - ax p o i om ROW, and by so doing push hei p o i sha e
o na ional income abo e i s cu en le el o 11 pe cen ? Indeed, wha is o p e en
hem om pu suing his in e na ional pa h un il hei ne p o i app oaches 100 pe
cen o he U.S. na ional income?18 Won’ his solu ion pos pone he asymp o ic day
o eckoning deep in o he u u e?
The answe is wo old. Fi s , unlike du ing he i s hal o he wen ie h cen u y,
when U.S.-based co po a ions eined sup eme, hese days hey ace moun ing
challenges om co po a ions based in o he coun ies. These challenges a e
mani es ed in many di e en ways – o example, in he downwa d ajec o y o he
global p o i sha e o U.S.-based co po a ions, which ell om 60 pe cen in he
1970s o 30 pe cen in he 2010s19 – and hey make i mo e di icul o U.S.-based
i ms o ake o e o eign p o i s eams ha we e p e iously hei s o he picking.
17 On he di icul ies associa ed wi h o eign asse and income da a, see o example G ie e ,
Lee and Wa nock (2001), Boswo h, Collins and Chodo ow-Reich (2007) and Cu cu u,
D o ak and Wa nock (2008). On he ex ensi e use o ax ha ens by la ge U.S.-based i ms
and he accoun ing unce ain ies caused by his use, see Whi e (2008).
18 ROW p o i s a e, by de ini ion, pa o U.S. na ional income (al hough no o domes ic
income), so ega dless o how la ge hey become, hey can ne e cause o e all p o i o exceed
na ional income.
19 See Bichle and Ni zan (2010a: 19, Figu e 3). These da a pe ain o lis ed co po a ions only.
Inso a as he p opo ion o o eign i ms lis ed in he Uni ed S a es (in e ms o bo h numbe s
and p o i ) is la ge han he compa able global a e age, and i his di e en ial has isen o e
he pas hal cen u y, he numbe s we epo he e could e y well o e s a e he p o i sha e o
U.S.-based i ms while unde s a ing he pace o i s empo al decline.
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BICHLER & NITZAN The Asymp o es o Powe
Figu e 15
Res o he Wo ld:
Receip s and Paymen s o A e -Tax P o i
www.bna chi es.ne
(Sha e o U.S. Na ional
A e -Tax P o i , le )
(Sha e o U.S Domes ic
A e -Tax P o i , le )
(Sha e o U.S. Na ional
A e -Tax P o i , igh )
NOTE: A e - ax p o i is measu ed wi hou CCAdj & IVA.
Receip s om ROW a e pa o na ional p o i and income, while
paymen s o ROW a e pa o domes ic p o i and income. Bo h
eceip s om ROW and paymen s o ROW comp ise di idends
and ein es ed ea nings. The las da a poin s a e o 2010.
SOURCE: U.S. Bu eau o Economic Analysis h ough Global
Insigh (se ies codes: ZA o a e - ax p o i ; XFYADIV o
di idends eceip s om ROW; XFYAREONUSDI o ein es ed
U.S. ea nings in ROW; MFYADIV o di idends paymen s o
ROW; MFYAREONFDI o ein es ed ROW ea nings in he
U.S.).
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BICHLER & NITZAN The Asymp o es o Powe
Second, and pe haps mo e impo an ly, in o de o ROW o open up o U.S.
o eign in es men , he Uni ed S a es has o ecip oca e by opening up o o eign
in es men om ROW. And ha is exac ly wha has happened, pa icula ly since he
1990s. The hin se ies in he uppe pa o Figu e 15 plo s he sha e o domes ic U.S.
ne p o i ha is paid o ROW-based owne s.20 Un il he onse o neolibe alism, his
sha e was e y small. Bu he opening up o he Uni ed S a es o o eign in es men
changed his si ua ion, causing his sha e o ise ou old: i inc eased om oughly 5
pe cen in he 1990s o 20 pe cen p esen ly.
The in e ac ion o hese inwa d and ou wa d powe p ocesses is illus a ed by he
dashed se ies a he bo om o he cha . The se ies shows he ne con ibu ion o
ROW o U.S. a e - ax p o i : i measu es he di e ence be ween he a e - ax p o i
ecei ed om ROW and he a e - ax p o i paid o ROW, exp essed as a sha e o
U.S. na ional a e - ax p o i .
And as wi h Figu e 14, he e oo i seems ha U.S.-based capi alis s ha e
app oached hei powe asymp o e. The con ibu ion o ROW o he sha e o a e -
ax p o i in na ional income ose i e old – om 5 pe cen in he 1950s o abou 25
pe cen in he la e 1980s – and hen i decele a ed sha ply, o pe haps s alled. While
U.S.-based i ms ha e con inued o ea n mo e and mo e o hei income om ROW,
i ms om ROW ha e done he same, abso bing a g owing sha e o U.S. domes ic
p o i (see Appendix).
This in lux o i ms om ROW may se e o explain he s alling sha e o he
Top 0.01% depic ed in Figu e 14. The sha e o la ge i ms in o e all p o i con inues
o ise. Bu since he 1980s, he bulk o his inc ease is accoun ed o by i ms om
ROW, lea ing he sha e o U.S.-inco po a ed i ms s agnan .
Summa y and Ex apola ion
Today’s alk has, like he one I ga e las yea , p esen ed my join wo k wi h Bichle
on he p esen c isis. Las yea , I a gued ha his c isis is a sys emic one, and ha
capi alis s we e s uck by sys emic ea – a p imo dial cons e na ion o he e y
exis ence o hei sys em. My pu pose oday has been o explain why.
In o de o do so, I ha e se aside he libe al-democ a ic açade ha economis s
label ‘ he economy’ and ins ead concen a ed on he nes ed hie a chies o o ganized
powe . The nominal quan i y o capi al, I’ e a gued, ep esen s no ma e ial
consump ion and p oduc ion, bu commodi ied powe . In mode n capi alism, he
quan i ies o capi alis powe a e exp essed dis ibu ionally, as di e en ial a ios o
nominal dolla magni udes. And he key o unde s anding capi al as powe is o
20 Whe eas na ional ne p o i is ea ned by U.S. na ionals ega dless o he geog aphic e i o y
in which hey a e gene a ed, domes ic ne p o i is ea ned on U.S. e i o y, ega dless o he
na ionali y o he owne .
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BICHLER & NITZAN The Asymp o es o Powe
deciphe he connec ion be ween he quali a i e p ocesses o powe on he one hand,
and he nominal dis ibu ional quan i ies ha hese p ocesses engende on he o he .
I ha e dissec ed, s ep by s ep, he na ional income accoun s o he Uni ed S a es,
om he mos gene al ca ego ies down o he ne p o i s o he coun y’s la ges
co po a ions. I ha e shown ha , om he iewpoin o he leading co po a ions,
mos o he edis ibu ional p ocesses – om he agg ega e o he disagg ega e – a e
close o being exhaus ed. By he end o he wen ie h cen u y, he la ges U.S.
co po a ions, app oxima ed by he Top 0.01%, ha e eached an unp eceden ed
si ua ion: hei ne p o i sha e o na ional income ho e s a ound eco d highs, and i
seems ha his sha e canno be inc eased much u he unde he cu en poli ical-
economic egime.
This asymp o ic si ua ion, Bichle and I belie e, explains why leading capi alis s
ha e been s uck by sys emic ea . Pee ing in o he u u e, hey ealize ha he only
way o u he inc ease hei dis ibu ional powe is o apply an e en g ea e dose o
iolence. Ye , gi en he high le el o o ce al eady being exe ed, and gi en ha he
exe ion o e en g ea e o ce may b ing abou heigh ened esis ance, capi alis s a e
inc easingly ea ul o he backlash hey a e abou o unleash. The close hey ge o
he asymp o e, he bleake he u u e hey see.
I is o cou se ue ha no one knows exac ly whe e he asymp o e lies, a leas
no be o e he ami ica ions o app oaching i become appa en . Bu he ac ha ,
o e he pas decade, capi alis s ha e been p icing down hei asse s while hei p o i
sha e o income ho e s a ound eco d highs sugges s ha , in hei minds, he
asymp o e is nigh.
How much mo e o ce and iolence a e needed o keep he cu en capi alis
egime going? This o cou se is a subjec in and o i sel . Bu gi en i s c ucial
impo ance, I hink i is wo h a leas a b ie , closing illus a ion.
One impo an mani es a ion o he dis ibu ional p ocesses we ha e explo ed
oday is illus a ed in Figu e 16. The igu e shows he income sha e o he op 10 pe
cen o he U.S. popula ion (no e ha , unlike he income sha e o co po a e p o i
ha ocuses on o ganiza ions, his measu e ocuses on indi iduals). The shaded a eas
deno e wo his o ical ex emes, pe iods in which he income sha e o he op 10 pe
cen o he popula ion exceeded 45 pe cen .
Du ing he 1930s and 1940s, his le el p o ed o be he asymp o e o capi alis
powe : i igge ed a sys emic c isis, he comple e c eo de ing o he U.S. poli ical
economy, and a sha p decline in capi alis powe , as indica ed by he la ge d op in
inequali y. The p esen si ua ion is ema kably simila – and, in ou iew, so a e he
challenges o he uling class.
In o de o ha e eached he peak le el o powe i cu en ly enjoys, he uling
class has had o in lic g owing h ea s, sabo age and pain on he unde lying
popula ion. One key mani es a ion o his in lic ion is illus a ed in ou las cha ,
Figu e 17.
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BICHLER & NITZAN The Asymp o es o Powe
Figu e 16
Income Sha e o he Top 10% o he U.S. Popula ion
www.bna chi es.ne
NOTE: Income is de ined as ‘ma ke income’, including capi al
gains; i excludes go e nmen ans e s. G ey a eas indica e
pe iods du ing which he 5-yea mo ing a e age o he da a se ies
exceeded 45%. The las da a poin is o 2008.
SOURCE: Pike y, Thomas, and Emmanuel Saez. 2004. Income
Inequali y in he Uni ed S a es, 1913-2002. Monog aph, pp. 1-92.
Upda ed ill 2008 om
h p://www.econ.be keley.edu/~saez/TabFig2008.xls; da a
shee : da a-Figu e1 ( e ie ed on Feb ua y 7, 2011).
- 40 -
