Project at AIAS

How have changes in corporate strategy and structure led to today’s slow-growth, low inflation, income polarized economies in the rich OECD countries? Firms’ profit strategies once rested on control over physical capital embedded in vertically integrated structures with many employees. Firms’ profit strategies now rest on acquisition of intellectual property rights (IPRs – patent, trademark and copyright) embedded in vertically disintegrated structures, with as few employees as possible. Both strategies produced a highly unequal distribution of profit among firms, but success in the first era required firms to share those profits with workers, and invest continuously to maintain their power in the market. Today, IPRs generate monopoly rents shared with very few people, and IPR-based firms have no need to make large investments to maintain their monopolies. Put simply, firms with profits don’t need to invest while firms that might invest are starved of profits. This project documents the differences in profitability among firms and systematically links that to firms’ wage and investment behavior and thence to slow growth. Slow growth is a major factor in the rise of ethno-nationalist, anti-immigrant, anti-system parties in the OECD countries.

Short bio

Herman Mark Schwartz is a geographically oriented economic historian interested in how power shapes the economy. He has studied economic development, transformation of the welfare state, employment policy, housing markets, and, most recently, the information economy.