1 shows two indices of
aggregate
concentration - one based on market capitalization, the other on net profit.
Nitzan Bichler - 2012 - Capital as Power
To achieve a 5 per-cent profit growth during recession is success; to gain 15 per cent when others make 30 is failure.
Even declining profit can be a triumph, provided it 'outperforms' the average:
3 We have already seen in Chapter 12 that actual pricing methods have little to do with 'maximization'. Neoclassicists love to ignore these inconvenient facts - only that the situ- ation is hardly any better in their 'pure' theory. As it turns out, neoclassical profits can be 'maximized' only in the hypothetical cases of perfect competition and monopoly - but not anywhere in between. The problem, first identified by Cournot (1838), is one of oligopo- listic interdependence, which, in its unrestricted form (that is, without the game theorists), makes maximum profit indeterminate even in the mind of the economist (see footnote 4 in Chapter 5).
? 310
Accumulation of power
In normal circumstances, the results issued by Mr Dimon's firm [JPMorgan Chase] on Thursday - a halving in second-quarter profits, and a bleak outlook for the rest of the year - would have sent investors rushing for the exit. But, with fund managers' nerves jangled by almost a year of credit-related bad news, JPMorgan's ability to outperform most of its rivals and beat analysts' predictions was enough to send its shares 11 per cent higher at midday in New York.
(Guerrera 2008)
Maximizing profit for absolute accumulation is bordering on the occult. The only real thing is differential accumulation. 4
Unlike the impossible absolute and elusive maximum, the 'normal' and 'average' are everywhere. Numerous organs of the state of capital - from the news media listings of Fortune, Business Week, Far Eastern Economic Review, Euromoney, Financial Times and Forbes, to the private databases of Bloom- berg, Compustat, Datastream and Global Insight, to national and interna- tional organizations - keep churning new benchmarks at a neck-breaking pace. Soon enough, they'll have us swamped with more benchmarks than assets.
Every business and economic category is averaged across the world and over time. Indeed, so real is the zeal that even future projections of these magnitudes are now benchmarked against their own so-called 'consensus forecast'. The benchmarks are classified by every imaginable criterion, sepa- rately and in combination - including size, nationality, sector, duration, risk, liquidity and 'investability', among others. Indeed, the notion of 'normality' as a benchmark for action and achievement has been so thoroughly accepted that it now dominates numerous non-business spheres, from education and the arts to sports and foreign relations. To be real is to be relative.
Differential capitalization and differential accumulation
The capitalist creorder
The logic of this relative architecture was spelled out by the eighteenth- century invention of the metric system. The system was purposefully linked to the magnitude of the planet (setting the metre equal to 1/40,000,000th of the earth's circumference). This anchor, hoped its inventors, would be the benchmark for the measure of all things. '[A] meter based on the size of the
4 Peter Martin, a Financial Times columnist, is clearly sailing against the wind when he calls on fund managers to abandon their 'fetish' for relative performance in favour of absolute returns (Martin 1999). Some hedge funds have tried to do just that - i. e. achieve a pre-deter- mined rate of return - but as another Financial Times commentator explains, their strategy is tantamount to having their cake and eating it too. In the end, 'absolute return strategies' are attractive only insofar as they manage to beat the average. . . (Anonymous 2002).
? Differential accumulation and dominant capital 311
earth', marvelled Pierre-Simon Laplace, 'would entitle even the most humble landowner to say: "The field that nourishes my children is a known portion of the globe; and so, in proportion, am I a co-owner of the World"' (quoted in Alder 2002: 90).
Capitalization enables a similar partition of ownership - only in ways that are infinitely more complex and fluid than anything Laplace could have imag- ined, and not nearly as congenial or assuring. This latter partition is counted not in metres but in money prices, and it parcels the control not only of land but potentially of every aspect of human society. It is the mapping of capi- talist power at large.
Of course, not all power gets capitalized - but then all capitalization is power. And as more and more forms of power get capitalized, capitalization becomes the overarching architecture of power. This view helps us transcend the conventional separation between power and capital. From the hierar- chical perspective of Marx, the engine is productive capital. This is the basis on which the entire social structure of power gets built. The Weberians flatten the picture, arguing that control over the means of production is merely one of many different types of authority. 5 Our own framework fuses the two logics. Capital is still the starting point, as Marx correctly insisted. And ownership of the means of production indeed is merely one form of power, as the Weberians argue. But capital is not means of production; it is a mode of power. And although there are many different forms of authority and power, in principle they can all be subsumed by capital.
In this way, the structure of ownership encompasses and reflects the entire gamut of capitalized power. In Chapter 13 we described this mode of power as the 'state of capital', a mega-machine that comprises both corporations and government organs. The cogs of this mega-machine consist of factory workers, corporate accountants and chief executives, along with government employees, bureaucrats and top officials. All are part of the same process of capitalization and accumulation, and in that sense all are integrated into the same map of ownership.
In this framework, the total dollar value of capitalization maps the power that capitalists exert over society. Any given fraction of this totality denotes a corresponding, undifferentiated share of that power. Individual or groups of capitalists secure their claims through particular organizations, institutions and processes, so the content of their power is always qualitatively unique. But because this power is exercised over society as a whole, its form can be quantified in universal monetary units; that is, as claims on the entire process
5 'Control over the means of production is but a special case of authority, and the connection of control with legal property an incidental phenomenon of the industrializing societies of Europe and the United States. Classes are tied neither to private property nor to industry or economic structures in general, but as an element of social structure and a factor affecting change they are as universal as their determinant, namely, authority and its distribution itself' (Dahrendorf 1959: 136-37).
? 312 Accumulation of power
of social restructuring. This universality enables capitalists to gauge their power based on their relative stakes: an owner with 1 per cent of the total has twice the power of one with only 0. 5 per cent and half that of another with 2 per cent.
But capitalism isn't simply an order; it is a creorder. It involves the ongoing imposition of power and therefore the dynamic transformation of society. In this process the key is differential accumulation: the goal is not merely to retain one's relative capitalization but to increase it. And since relative capi- talization represents power, increases in relative capitalization represent the augmentation of power. The accumulation of capital and the changing power of capitalists to transform society become two sides of the same creorder.
This notion of capital as power and accumulation as changes in power stands in sharp contrast to received convention. Political economy keeps the two sets of concepts strictly distinct, and even the most astute observers can do no more than 'link' them. When Bowles, Gordon and Weisskopf (1986; 1990) offer to weigh capitalist power relative to that of workers, foreign suppliers and the country's citizenry, they take capital as a given - and then treat it as a 'source' of power. A similar distinction underlies Doug Henwood's assessment of the growing concentration of wealth. This concen- tration, he writes, yields 'extraordinary social power - the power to buy poli- ticians, pundits, and professors, and to dictate both public and corporate policy' (1997: 4). In this sequence, capitalists first accumulate 'wealth' and then use this wealth to acquire 'power'. The two categories, although inti- mately linked, are nonetheless separate.
The figurative identity
In our framework, capital accumulation and the changing power of capital- ists are one and the same. But this 'identity' is only figurative. It consists of converting quality into quantity, of translating and reducing the heter- ogeneous processes of capitalist power into the universal units of differential capitalization. And this conversion obviously is not an objective process.
First, the relative magnitude of capitalization, although readily observ- able, is based on the inter-subjective conventions of the capitalist nomos. Second, this relative magnitude cannot be inferred simply by observing the power aspects of the capitalist scene. The fact that a certain corporation was granted a patent, that it had the government move to its side, that it introduced a new technique, or that it acquired a competitor, cannot, in and of itself, tell us much about that company's rate of differential accu- mulation.
The way to understand this figurative identity is speculatively. Force is nothing apart from its effect, tell us Hegel and Marcuse; it is always a corre- spondence between form and content, quantity and quality. Therefore, the way to give capital meaning is by contrasting these two aspects, by juxta- posing the quantitative patterns of differential accumulation, on the one
Differential accumulation and dominant capital 313
hand, with the qualitative power institutions, organizations and processes that underlie this accumulation, on the other. 6
Clearly, any such attempt to jump from qualities to quantities cannot claim the rigour of natural science. But, then, we have seen what happened to liberal and Marxist analyses when they tried to imitate this rigour. They pretended that there is a strict quantitative correspondence between prices, production and accumulation on the one hand and utility and labour values on the other, and then fell flat on their faces when they tried to demonstrate this correspondence.
Capitalists constantly try to force life into a box, to harness creativity, to convert quality into quantity. This is the nature of their power. But they can achieve this conversion only speculatively and inter-subjectively, and there is no point in pretending otherwise. The task is to try to understand this specu- lative translation. And, in our opinion, the only way to do so is by telling a 'scientific story' - a systematic historical analysis that convincingly ties the quantities and qualities of capitalist power.
With these considerations in mind, we propose the following working defi- nition of accumulation:
? From a static perspective, the differential power possessed by a particular group of owners is measured by its differential capitalization (DK); that is, by comparing the group's combined capitalization to that of the average capital unit. If this average is $5 million, a capital worth $5 billion represents a DK of 1,000. This magnitude means that, as a group, the owners of that capital are 1,000 times more powerful than the owners of an average capital.
? From a dynamic viewpoint, the change in differential power is measured by the rate of differential accumulation (DA), defined as the rate of change of DK. To achieve differential accumulation, owners need to have their own capitalization grow faster than the average capitalization. Positive, zero or negative rates of DA imply rising, unchanging or falling differen- tial power, respectively.
? From a power stance, only capitalists with a positive DA are said to accu- mulate. These differential accumulators should be the centre of analysis.
The universe of owners
Who are the differential accumulators? To contextualize the answer, let's backtrack and first consider the universe of owners. In principle, anyone who
6 In this sense, our logic here is similar to Kalecki's 'degree of monopoly' (1943a), an already mentioned proxy that measures the consequence for relative profit margins of monopolistic institutions and forces. Our own notion here differs from Kalecki's, first, in that it focuses on capitalization rather than merely on profit margins, and second, in that it relates not to the narrow economic question of monopoly vs competition, but to the entire dynamics of capitalist power.
? 314 Accumulation of power
owns a capitalized asset can be thought of as a 'capitalist' to that extent. And since capitalization has penetrated nearly every corner of society, there are plenty of such 'capitalists' around. For our purpose, though, this formal generalization is overstretched and misleading.
We can think of two types of assets: those that are held for use and those that are held for accumulation. The vast majority of owners hold the first type. They own articles that they use, such as their family home, vehicle and other 'big-ticket' items; and they own assets that they intend to use - primarily savings and pensions. The aggregate magnitude of these assets could be substantial, but their individual size tends to be small. Most importantly, these assets give their owners little or no control over other people.
A small minority of owners holds the second type of assets. These assets are financial instruments, consisting mostly of equity and debt claims on corporations and governments. They are held not for use, but for accumula- tion. Their overall magnitude is large and so is their individual size. And, most importantly, they give their owners direct and indirect control over other people. 7
This classification narrows our search. It is obvious that the first group of people - namely, most of humanity - is pretty much out of the accumulation race. The vast majority of the population is simply trying to make ends meet - and, if they are lucky, also to save a bit for emergency and old age. Since they do not pursue power, they offer no reference point to accumulators and hence do not figure in the benchmark.
The relevant universe for differential accumulation comprises the second group: the owners of financial instruments. They are the capitalists. In our discussion, though, we focus not on individual owners, but on groups of owners. The reason is that the vendibility of capital creates centrifugal as well as centripetal forces, and the centrifugal forces limit the power of any single capitalist. In counteracting this effect, the elementary solution is the corpora- tion, and, eventually, the corporate-government coalition (overt or covert). For this reason we concur with Veblen that the corporation itself, regardless of who runs it, was historically necessary for the survival of capitalism. Without this institution, which for Marx signalled the immanent 'abolition of capital as private property within the framework of capitalist production itself' (1909, Vol. 3: 516), the centrifugal forces of competition and excess capacity would probably have killed the bourgeois order long ago. Hence, any analysis of contemporary capitalism must have the corporation as a central building block.
7 The two ownership groups overlap. The first may own some financial assets, while the second owns assets for use. But the overlaps are sufficiently small to be safely ignored. Even in the so-called 'people's capitalism' of the United States, most family holdings of stocks and bonds do not exceed a few thousand dollars. And although many of the big holders of finan- cial instruments have a lavish lifestyle, the assets they own for use tend to be small relative to those they hold for accumulation.
? Differential accumulation and dominant capital 315
As we have seen in Part IV, the underlying purpose of coalescing individual capitalists into a corporation, and corporations into corporate- government alliances, is exclusion. In non-capitalist systems, exclusion is usually embedded in relatively rigid customs, such as those preventing serfs from growing into kings, slaves from turning into masters and untouchables from becoming Brahmins. Capitalism does not have similar customs. Commodification makes upward mobility possible, and in principle there is nothing to prevent the son of a wandering vendor of quack medicine from assembling the Standard Oil of New Jersey, or a university dropout from incorporating Microsoft.
However, the possibility of upward mobility doesn't mean that capitalism has done away with exclusion. Far from it. Indeed, for John D. Rockefeller and William Gates to have acquired their power, others had to give it up. Because of the constant threat of 'equal opportunity', such exclusion requires relentless formation and reformation of 'distributional coalitions', to use the language of Mancur Olson (1965; 1982). The difference therefore is largely one of form: whereas in other modes of power exclusion is mostly static, built into the social code and yielding relatively stable groupings, in the capitalist creorder it has to be dynamically recreated through ever-shifting alliances.
Dominant capital
The upshot of these considerations is that the accumulation of capital in general depends on the accumulation of capital at the centre. The crucial group is dominant capital - a cluster that we equate with the leading corpo- rate-government coalitions at the core of the process. The periphery of capital, comprising the many firms outside the core, in fact constitutes a permanent threat to accumulation. Subject to the strong centrifugal forces of competition, these firms cannot help but undermine the collusive underpin- nings of business 'sabotage' and therefore the very possibility of accumula- tion. It is only to the extent that dominant capital can retain and augment its exclusive power against these lesser capitals, keeping them 'out of the loop', that the capitalization process can be sustained and extended.
This intra-capitalist conflict accentuates the differential underpinnings of accumulation. Whereas 'profit maximizers' concentrate only on their own gains, differential accumulators are also driven to undermine their rivals' gains. Their successful sabotage gives their relative performance a double boost: it raises their own earnings while cutting those that make up the bench- mark they try to beat.
The identity of dominant capital is bound up with the process of differen- tial accumulation. By definition, those who beat the average rise in the ranking, whereas those who trail it fall in the ranking. Given enough time, the fastest differential accumulators, regardless of their initial positions, will end up occupying the top ranks. So, as a first approximation, we can say that, at
316 Accumulation of power
any point in time, dominant capital consists of the largest corporations in the relevant universe of companies.
Note that this loose definition says nothing about the individual firms that comprise dominant capital. Differential accumulation does not have to be dominated by the same corporate entities throughout - and given the highly transformative nature of the process, neither should we expect it to be. However, at the most general level, what matters is the differential growth of dominant capital as a whole, regardless of its inner composition. As George Orwell aptly put it, 'A ruling group is a ruling group so long as it can nomi- nate its successors. . . . Who wields power is not important, provided that the hierarchical structure remains always the same' (Orwell 1948: 211, original emphasis). 8
How should we delineate dominant capital from the rest of the corporate universe? The most elegant solution is to not delineate it all, and instead use an integral index such as Gini or Herfindahl-Hirschman (HH). The advan- tage of these indices is that they take into account the entire distributional pattern of companies, so there is no need to set an arbitrary cut-off point. But integral indices also have two important deficiencies: they require detailed data that often do not exist, and they are difficult to reconcile intuitively with the binary notion of differential accumulation.
Therefore, in our presentation here we opt for the less elegant yet simpler cut-off method. There are two basic options. One is to choose a fixed propor- tion - for instance, the top 5 or 10 per cent of the firms in the corporate universe. The other is to select a fixed number of firms - for example, the top 50 or 100. The latter method is simpler and we use it here.
Aggregate concentration
So let's look at the numbers. We begin our exploration with standard measures of aggregate concentration, which we find useful but only up to a point. The next section sharpens the analysis by looking at our own differen- tial measures.
Our focus continues to be the United States - first, because of its central capitalist position over the past century and, second, because it has the best long-term statistics. Table 14. 1 lists some indicative magnitudes of the catego- ries we measure, contrasting the early 1950s with the early 2000s. The data pertain to three categories: (1) the top 100 corporations in the Compustat
8 Theory aside, the actual turnover among the leading corporations is slower than it looks - although it is sometimes necessary to read the fine print to see why. A 1989 Fortune comparison shows that, of the top 50 firms in 1954, only 28 were still in the top 50 in 1988. The rest 'disappeared' - though none because it became too small. Of the 22 firms that were no longer on the 1988 list, all remained very much at the top: 7 were still ranked in the top 300, 11 were acquired by other large firms, two went private, one was reclassified as a service firm and one was still on the list but under a new name (Anonymous 1989).
? Compustat Top 100 corporations
Listed corporations Capitalization
All corporations Net profit
Differential accumulation and dominant capital 317
Table 14. 1 US corporate statistics: average number of firms, average capitalization per firm and average net profit per firm
? ? ? ? Capitalization Number per firm
Period of firms ($mn)
Net profit per firm ($mn)
Number of firms
per firm ($mn)
Number of firms
per firm ($mn)
? 1950-54 100 694 60 1,579 107 617,994 0. 036 2002-06 100 95,943 5,243 6,175 2,749 5,566,044 0. 166
Source: See Figures 14. 1 and 14. 2
Industrial database, a cluster that we use as a proxy for dominant capital;9 (2) the universe of listed corporations; and (3) the universe of all corpora- tions. The table provides information on the number of firms in each group, the average capitalization per firm and the average profit per firm. We refer to these numbers in our description below.
Figure 14.
1 shows two indices of aggregate concentration - one based on market capitalization, the other on net profit. Each index measures the per cent share of the top 100 firms ranked by market capitalization in the relevant corporate universe. 10
The concentration index for market capitalization is computed from two sources. The numerator is the market capitalization of the top 100 firms from the Compustat database, ranked annually by market capitalization. The denominator is the combined market capitalization of all listed corporations on the NYSE, NASDAQ and AMEX (the number of listed corporations quadrupled from roughly 1,500 in the early 1950s to over 6,000 presently).
The second measure of concentration, based on net profit, is computed a bit differently. The numerator is the total net profit of the top 100 Compustat firms by capitalization. The denominator is the aggregate net profit of all US corporations, listed and unlisted (the total number of corporations increased nearly tenfold - from around 600,000 in the early 1950s to over 5. 5 million presently).
Both data series show high and rising levels of aggregate concentration. In the early 1950s, the top 100 firms accounted for 40 per cent of all market capi- talization. By the early 2000s their share was 60 per cent. The uptrend in the aggregate concentration of net profit, based on the entire corporate universe, is even more pronounced - particularly given the much faster growth in the total number of firms. During the early 1950s, the top 100 dominant-capital firms accounted for 23 per cent of all corporate profits. By the early 2000s, their share more than doubled to 53 per cent.
9 The term 'Industrial' here is misleading. The Compustat database includes firms from all sectors.
10 Unless otherwise noted, market capitalization denotes the market value of outstanding equity shares. It does not include bank debt and bonds.
? ? 318 Accumulation of power 90
per cent
? ? ? ? ? ? ? 80
70
60
50
40
30
20
10
Capitalization *
Top 100 / all listed corporations
? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Net Profit **
Top 100 / all corporations
? ? ? ? ? www. bnarchives. net
? ? 0
1940 1950 1960 1970 1980 1990 2000 2010 2020
Figure 14. 1 Aggregate concentration in the United States
* Ratio between the market capitalization of the top 100 Compustat corporations (ranked annu-
ally by market capitalization) and the overall market capitalization of all US listed corporations.
** Ratio between the net profit of the top 100 Compustat corporations (ranked annually by market capitalization) and the overall net profit of all US corporations (listed and unlisted).
Source: Compustat compann file through WRDS (series codes: data25 for common shares outstanding; data199 for share price; data172 for net income); U. S. Federal Reserve Board's Flow of Funds through Global Insight (FL893064105 for market value of corporate equities); U. S. Bureau of Economic Analysis through Global Insight (ZA for profit after taxes).
Measures of aggregate concentration are often used to approximate the overall power of big business. And the levels and trends in Figure 14. 1 indeed portray an ominous picture. But the situation in fact is far more alarming than this picture suggests. The difficulty lies in the definition of aggregate concentration and is fairly simple to explain. Let (s) denote the average size of a dominant capital firm (in terms of capitalization, profit, etc. ), (n) the fixed number of dominant capital firms, (S) the average size of a firm in the corpo- rate universe and (N) the number of firms in the corporate universe: The aggregate concentration ratio is then given by:
1. aggregate concentration = s * n = s * n 1. aggregate concentration = S * N = S * N
? ? ? ? ? Differential accumulation and dominant capital 319
As the equation makes clear, the rate of aggregate concentration depends not only on the differential size of dominant capital (s/S), but also on the ratio between the number of dominant-capital firms and the total number of firms (n/N). The problem is that over time these two ratios tend to trend in opposite directions. Whereas (s/S) tends to increase as large firms grow bigger while small firms do not, (n/N) tends to fall since the number of dominant-capital firms remains fixed while the overall number of firms keeps rising. In many instances, the rise in N is so fast that the aggregate concentration ratio ends up moving sideways or even down.
Now, this counter movement would have been inconsequential had the numerator and denominator of the concentration ratio represented compa- rable entities. But the entities they represent are very different. The numerator measures the overall size of dominant capital - a cluster that gets as close as one can to the ruling capitalist class. This group is subject to intra- distributional struggles, but on the whole it is probably the most cohesive - and often the only - class in society. Its members - owners and controllers - are connected and fused through numerous ownership, business, cultural and sometimes family ties; they are tightly linked to key government organs through a complex web of regulations, contracts, revolving doors and a shared world- view; and their accumulation trajectories often show close similarities.
The denominator, representing the corporate sector as a whole, is a very different creature. Excluding dominant capital, the vast majority of its firms are small. Unlike dominant capital, whose worldview was shaped by the twentieth century, the owners of smaller firms tend to entertain nineteenth- century ideals. They continue to swear by the 'free market' and the 'autono- mous consumer', they love to bedevil 'government intervention' and the higher-up 'lobbies', and they long for the good old days of 'equal opportu- nity' and a 'level playing field'. Their own corporate units are only loosely related through professional associations, if at all; they are removed from the high politics of organized sabotage; they have very little say in matters of formal politics; and, most importantly, they tend to act at cross purposes. In no way can they be considered a power block. 11
The fractured nature of this sector makes aggregate concentration ratios difficult to interpret: an increase in the number of small firms causes aggre- gate concentration to decline - yet that very increase fractures the sector even further, causing the relative power of dominant capital to rise.
Differential measures
The relevant measure of power, therefore, is not aggregate but disaggregate. What we need to compare are not the totals, but the 'typical' units that make
11 The different mindsets of the numerator and denominator were portrayed rather accurately in Jack London's The Iron Heel (1907) and further elaborated in C. W. Mills (1956) The Power Elite.
? 320 Accumulation of power
up those totals - i. e. the relevant (s/S) in Equation (1). This is what we do in Figure 14. 2 which displays two differential measures - one for capitalization, the other for net profit. 12
Begin with differential capitalization. This ratio is computed in three steps: first, by calculating the average capitalization of a dominant-capital firm (total capitalization of the top 100 Compustat firms divided by 100); then by
100
100,000
10,000
1,000
? ? ? ? ? ? ? ? log scale
log scale
? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 10
? ? ? ? ? Differential Net Profit **
? ? ? ratio of average net profit per firm (Top 100 / all corporations, right)
? ? ? ? ? ? ? Differential Capitalization *
? ? ratio of average market capitalization per firm (Top 100 / all listed corporations, left)
? ? ? ? 1 100 1940 1950 1960 1970 1980 1990 2000 2010 2020
www. bnarchives. net
? ? ? ? Figure 14. 2
Differential capitalization and differential net profit in the United States
* Ratio between the average market capitalization of the top 100 Compustat corporations (ranked annually by market capitalization) and the average market capitalization of all US listed corporations.
** Ratio between the average net profit of the top 100 Compustat corporations (ranked annually by market capitalization) and the average net profit of all US corporations (listed and unlisted). The number of US corporations for 2004-2006 is extrapolated based on recent growth rates.
Source: Compustat compann file through WRDS (series codes: data25 for common shares outstanding; data199 for share price; data172 for net income); Global Financial Data (number of listed corporations on the NYSE, AMEX and NASDAQ till 1989); World Federation of Exchanges (number of listed corporations on the NYSE, AMEX and NASDAQ from 1990); U. S. Internal Revenue Service (number of corporate tax returns for active corporations); U. S. Federal Reserve Board's Flow of Funds through Global Insight (FL893064105 for market value of corporate equities); U. S. Bureau of Economic Analysis through Global Insight (ZA for profit after taxes).
12 For a different approximation of differential capitalization, based on book value, see Nitzan (1998b).
? Differential accumulation and dominant capital 321
calculating the average capitalization of a listed company (total market capitalization divided by the number of listed companies); and finally by dividing the first result by the second.
3 We have already seen in Chapter 12 that actual pricing methods have little to do with 'maximization'. Neoclassicists love to ignore these inconvenient facts - only that the situ- ation is hardly any better in their 'pure' theory. As it turns out, neoclassical profits can be 'maximized' only in the hypothetical cases of perfect competition and monopoly - but not anywhere in between. The problem, first identified by Cournot (1838), is one of oligopo- listic interdependence, which, in its unrestricted form (that is, without the game theorists), makes maximum profit indeterminate even in the mind of the economist (see footnote 4 in Chapter 5).
? 310
Accumulation of power
In normal circumstances, the results issued by Mr Dimon's firm [JPMorgan Chase] on Thursday - a halving in second-quarter profits, and a bleak outlook for the rest of the year - would have sent investors rushing for the exit. But, with fund managers' nerves jangled by almost a year of credit-related bad news, JPMorgan's ability to outperform most of its rivals and beat analysts' predictions was enough to send its shares 11 per cent higher at midday in New York.
(Guerrera 2008)
Maximizing profit for absolute accumulation is bordering on the occult. The only real thing is differential accumulation. 4
Unlike the impossible absolute and elusive maximum, the 'normal' and 'average' are everywhere. Numerous organs of the state of capital - from the news media listings of Fortune, Business Week, Far Eastern Economic Review, Euromoney, Financial Times and Forbes, to the private databases of Bloom- berg, Compustat, Datastream and Global Insight, to national and interna- tional organizations - keep churning new benchmarks at a neck-breaking pace. Soon enough, they'll have us swamped with more benchmarks than assets.
Every business and economic category is averaged across the world and over time. Indeed, so real is the zeal that even future projections of these magnitudes are now benchmarked against their own so-called 'consensus forecast'. The benchmarks are classified by every imaginable criterion, sepa- rately and in combination - including size, nationality, sector, duration, risk, liquidity and 'investability', among others. Indeed, the notion of 'normality' as a benchmark for action and achievement has been so thoroughly accepted that it now dominates numerous non-business spheres, from education and the arts to sports and foreign relations. To be real is to be relative.
Differential capitalization and differential accumulation
The capitalist creorder
The logic of this relative architecture was spelled out by the eighteenth- century invention of the metric system. The system was purposefully linked to the magnitude of the planet (setting the metre equal to 1/40,000,000th of the earth's circumference). This anchor, hoped its inventors, would be the benchmark for the measure of all things. '[A] meter based on the size of the
4 Peter Martin, a Financial Times columnist, is clearly sailing against the wind when he calls on fund managers to abandon their 'fetish' for relative performance in favour of absolute returns (Martin 1999). Some hedge funds have tried to do just that - i. e. achieve a pre-deter- mined rate of return - but as another Financial Times commentator explains, their strategy is tantamount to having their cake and eating it too. In the end, 'absolute return strategies' are attractive only insofar as they manage to beat the average. . . (Anonymous 2002).
? Differential accumulation and dominant capital 311
earth', marvelled Pierre-Simon Laplace, 'would entitle even the most humble landowner to say: "The field that nourishes my children is a known portion of the globe; and so, in proportion, am I a co-owner of the World"' (quoted in Alder 2002: 90).
Capitalization enables a similar partition of ownership - only in ways that are infinitely more complex and fluid than anything Laplace could have imag- ined, and not nearly as congenial or assuring. This latter partition is counted not in metres but in money prices, and it parcels the control not only of land but potentially of every aspect of human society. It is the mapping of capi- talist power at large.
Of course, not all power gets capitalized - but then all capitalization is power. And as more and more forms of power get capitalized, capitalization becomes the overarching architecture of power. This view helps us transcend the conventional separation between power and capital. From the hierar- chical perspective of Marx, the engine is productive capital. This is the basis on which the entire social structure of power gets built. The Weberians flatten the picture, arguing that control over the means of production is merely one of many different types of authority. 5 Our own framework fuses the two logics. Capital is still the starting point, as Marx correctly insisted. And ownership of the means of production indeed is merely one form of power, as the Weberians argue. But capital is not means of production; it is a mode of power. And although there are many different forms of authority and power, in principle they can all be subsumed by capital.
In this way, the structure of ownership encompasses and reflects the entire gamut of capitalized power. In Chapter 13 we described this mode of power as the 'state of capital', a mega-machine that comprises both corporations and government organs. The cogs of this mega-machine consist of factory workers, corporate accountants and chief executives, along with government employees, bureaucrats and top officials. All are part of the same process of capitalization and accumulation, and in that sense all are integrated into the same map of ownership.
In this framework, the total dollar value of capitalization maps the power that capitalists exert over society. Any given fraction of this totality denotes a corresponding, undifferentiated share of that power. Individual or groups of capitalists secure their claims through particular organizations, institutions and processes, so the content of their power is always qualitatively unique. But because this power is exercised over society as a whole, its form can be quantified in universal monetary units; that is, as claims on the entire process
5 'Control over the means of production is but a special case of authority, and the connection of control with legal property an incidental phenomenon of the industrializing societies of Europe and the United States. Classes are tied neither to private property nor to industry or economic structures in general, but as an element of social structure and a factor affecting change they are as universal as their determinant, namely, authority and its distribution itself' (Dahrendorf 1959: 136-37).
? 312 Accumulation of power
of social restructuring. This universality enables capitalists to gauge their power based on their relative stakes: an owner with 1 per cent of the total has twice the power of one with only 0. 5 per cent and half that of another with 2 per cent.
But capitalism isn't simply an order; it is a creorder. It involves the ongoing imposition of power and therefore the dynamic transformation of society. In this process the key is differential accumulation: the goal is not merely to retain one's relative capitalization but to increase it. And since relative capi- talization represents power, increases in relative capitalization represent the augmentation of power. The accumulation of capital and the changing power of capitalists to transform society become two sides of the same creorder.
This notion of capital as power and accumulation as changes in power stands in sharp contrast to received convention. Political economy keeps the two sets of concepts strictly distinct, and even the most astute observers can do no more than 'link' them. When Bowles, Gordon and Weisskopf (1986; 1990) offer to weigh capitalist power relative to that of workers, foreign suppliers and the country's citizenry, they take capital as a given - and then treat it as a 'source' of power. A similar distinction underlies Doug Henwood's assessment of the growing concentration of wealth. This concen- tration, he writes, yields 'extraordinary social power - the power to buy poli- ticians, pundits, and professors, and to dictate both public and corporate policy' (1997: 4). In this sequence, capitalists first accumulate 'wealth' and then use this wealth to acquire 'power'. The two categories, although inti- mately linked, are nonetheless separate.
The figurative identity
In our framework, capital accumulation and the changing power of capital- ists are one and the same. But this 'identity' is only figurative. It consists of converting quality into quantity, of translating and reducing the heter- ogeneous processes of capitalist power into the universal units of differential capitalization. And this conversion obviously is not an objective process.
First, the relative magnitude of capitalization, although readily observ- able, is based on the inter-subjective conventions of the capitalist nomos. Second, this relative magnitude cannot be inferred simply by observing the power aspects of the capitalist scene. The fact that a certain corporation was granted a patent, that it had the government move to its side, that it introduced a new technique, or that it acquired a competitor, cannot, in and of itself, tell us much about that company's rate of differential accu- mulation.
The way to understand this figurative identity is speculatively. Force is nothing apart from its effect, tell us Hegel and Marcuse; it is always a corre- spondence between form and content, quantity and quality. Therefore, the way to give capital meaning is by contrasting these two aspects, by juxta- posing the quantitative patterns of differential accumulation, on the one
Differential accumulation and dominant capital 313
hand, with the qualitative power institutions, organizations and processes that underlie this accumulation, on the other. 6
Clearly, any such attempt to jump from qualities to quantities cannot claim the rigour of natural science. But, then, we have seen what happened to liberal and Marxist analyses when they tried to imitate this rigour. They pretended that there is a strict quantitative correspondence between prices, production and accumulation on the one hand and utility and labour values on the other, and then fell flat on their faces when they tried to demonstrate this correspondence.
Capitalists constantly try to force life into a box, to harness creativity, to convert quality into quantity. This is the nature of their power. But they can achieve this conversion only speculatively and inter-subjectively, and there is no point in pretending otherwise. The task is to try to understand this specu- lative translation. And, in our opinion, the only way to do so is by telling a 'scientific story' - a systematic historical analysis that convincingly ties the quantities and qualities of capitalist power.
With these considerations in mind, we propose the following working defi- nition of accumulation:
? From a static perspective, the differential power possessed by a particular group of owners is measured by its differential capitalization (DK); that is, by comparing the group's combined capitalization to that of the average capital unit. If this average is $5 million, a capital worth $5 billion represents a DK of 1,000. This magnitude means that, as a group, the owners of that capital are 1,000 times more powerful than the owners of an average capital.
? From a dynamic viewpoint, the change in differential power is measured by the rate of differential accumulation (DA), defined as the rate of change of DK. To achieve differential accumulation, owners need to have their own capitalization grow faster than the average capitalization. Positive, zero or negative rates of DA imply rising, unchanging or falling differen- tial power, respectively.
? From a power stance, only capitalists with a positive DA are said to accu- mulate. These differential accumulators should be the centre of analysis.
The universe of owners
Who are the differential accumulators? To contextualize the answer, let's backtrack and first consider the universe of owners. In principle, anyone who
6 In this sense, our logic here is similar to Kalecki's 'degree of monopoly' (1943a), an already mentioned proxy that measures the consequence for relative profit margins of monopolistic institutions and forces. Our own notion here differs from Kalecki's, first, in that it focuses on capitalization rather than merely on profit margins, and second, in that it relates not to the narrow economic question of monopoly vs competition, but to the entire dynamics of capitalist power.
? 314 Accumulation of power
owns a capitalized asset can be thought of as a 'capitalist' to that extent. And since capitalization has penetrated nearly every corner of society, there are plenty of such 'capitalists' around. For our purpose, though, this formal generalization is overstretched and misleading.
We can think of two types of assets: those that are held for use and those that are held for accumulation. The vast majority of owners hold the first type. They own articles that they use, such as their family home, vehicle and other 'big-ticket' items; and they own assets that they intend to use - primarily savings and pensions. The aggregate magnitude of these assets could be substantial, but their individual size tends to be small. Most importantly, these assets give their owners little or no control over other people.
A small minority of owners holds the second type of assets. These assets are financial instruments, consisting mostly of equity and debt claims on corporations and governments. They are held not for use, but for accumula- tion. Their overall magnitude is large and so is their individual size. And, most importantly, they give their owners direct and indirect control over other people. 7
This classification narrows our search. It is obvious that the first group of people - namely, most of humanity - is pretty much out of the accumulation race. The vast majority of the population is simply trying to make ends meet - and, if they are lucky, also to save a bit for emergency and old age. Since they do not pursue power, they offer no reference point to accumulators and hence do not figure in the benchmark.
The relevant universe for differential accumulation comprises the second group: the owners of financial instruments. They are the capitalists. In our discussion, though, we focus not on individual owners, but on groups of owners. The reason is that the vendibility of capital creates centrifugal as well as centripetal forces, and the centrifugal forces limit the power of any single capitalist. In counteracting this effect, the elementary solution is the corpora- tion, and, eventually, the corporate-government coalition (overt or covert). For this reason we concur with Veblen that the corporation itself, regardless of who runs it, was historically necessary for the survival of capitalism. Without this institution, which for Marx signalled the immanent 'abolition of capital as private property within the framework of capitalist production itself' (1909, Vol. 3: 516), the centrifugal forces of competition and excess capacity would probably have killed the bourgeois order long ago. Hence, any analysis of contemporary capitalism must have the corporation as a central building block.
7 The two ownership groups overlap. The first may own some financial assets, while the second owns assets for use. But the overlaps are sufficiently small to be safely ignored. Even in the so-called 'people's capitalism' of the United States, most family holdings of stocks and bonds do not exceed a few thousand dollars. And although many of the big holders of finan- cial instruments have a lavish lifestyle, the assets they own for use tend to be small relative to those they hold for accumulation.
? Differential accumulation and dominant capital 315
As we have seen in Part IV, the underlying purpose of coalescing individual capitalists into a corporation, and corporations into corporate- government alliances, is exclusion. In non-capitalist systems, exclusion is usually embedded in relatively rigid customs, such as those preventing serfs from growing into kings, slaves from turning into masters and untouchables from becoming Brahmins. Capitalism does not have similar customs. Commodification makes upward mobility possible, and in principle there is nothing to prevent the son of a wandering vendor of quack medicine from assembling the Standard Oil of New Jersey, or a university dropout from incorporating Microsoft.
However, the possibility of upward mobility doesn't mean that capitalism has done away with exclusion. Far from it. Indeed, for John D. Rockefeller and William Gates to have acquired their power, others had to give it up. Because of the constant threat of 'equal opportunity', such exclusion requires relentless formation and reformation of 'distributional coalitions', to use the language of Mancur Olson (1965; 1982). The difference therefore is largely one of form: whereas in other modes of power exclusion is mostly static, built into the social code and yielding relatively stable groupings, in the capitalist creorder it has to be dynamically recreated through ever-shifting alliances.
Dominant capital
The upshot of these considerations is that the accumulation of capital in general depends on the accumulation of capital at the centre. The crucial group is dominant capital - a cluster that we equate with the leading corpo- rate-government coalitions at the core of the process. The periphery of capital, comprising the many firms outside the core, in fact constitutes a permanent threat to accumulation. Subject to the strong centrifugal forces of competition, these firms cannot help but undermine the collusive underpin- nings of business 'sabotage' and therefore the very possibility of accumula- tion. It is only to the extent that dominant capital can retain and augment its exclusive power against these lesser capitals, keeping them 'out of the loop', that the capitalization process can be sustained and extended.
This intra-capitalist conflict accentuates the differential underpinnings of accumulation. Whereas 'profit maximizers' concentrate only on their own gains, differential accumulators are also driven to undermine their rivals' gains. Their successful sabotage gives their relative performance a double boost: it raises their own earnings while cutting those that make up the bench- mark they try to beat.
The identity of dominant capital is bound up with the process of differen- tial accumulation. By definition, those who beat the average rise in the ranking, whereas those who trail it fall in the ranking. Given enough time, the fastest differential accumulators, regardless of their initial positions, will end up occupying the top ranks. So, as a first approximation, we can say that, at
316 Accumulation of power
any point in time, dominant capital consists of the largest corporations in the relevant universe of companies.
Note that this loose definition says nothing about the individual firms that comprise dominant capital. Differential accumulation does not have to be dominated by the same corporate entities throughout - and given the highly transformative nature of the process, neither should we expect it to be. However, at the most general level, what matters is the differential growth of dominant capital as a whole, regardless of its inner composition. As George Orwell aptly put it, 'A ruling group is a ruling group so long as it can nomi- nate its successors. . . . Who wields power is not important, provided that the hierarchical structure remains always the same' (Orwell 1948: 211, original emphasis). 8
How should we delineate dominant capital from the rest of the corporate universe? The most elegant solution is to not delineate it all, and instead use an integral index such as Gini or Herfindahl-Hirschman (HH). The advan- tage of these indices is that they take into account the entire distributional pattern of companies, so there is no need to set an arbitrary cut-off point. But integral indices also have two important deficiencies: they require detailed data that often do not exist, and they are difficult to reconcile intuitively with the binary notion of differential accumulation.
Therefore, in our presentation here we opt for the less elegant yet simpler cut-off method. There are two basic options. One is to choose a fixed propor- tion - for instance, the top 5 or 10 per cent of the firms in the corporate universe. The other is to select a fixed number of firms - for example, the top 50 or 100. The latter method is simpler and we use it here.
Aggregate concentration
So let's look at the numbers. We begin our exploration with standard measures of aggregate concentration, which we find useful but only up to a point. The next section sharpens the analysis by looking at our own differen- tial measures.
Our focus continues to be the United States - first, because of its central capitalist position over the past century and, second, because it has the best long-term statistics. Table 14. 1 lists some indicative magnitudes of the catego- ries we measure, contrasting the early 1950s with the early 2000s. The data pertain to three categories: (1) the top 100 corporations in the Compustat
8 Theory aside, the actual turnover among the leading corporations is slower than it looks - although it is sometimes necessary to read the fine print to see why. A 1989 Fortune comparison shows that, of the top 50 firms in 1954, only 28 were still in the top 50 in 1988. The rest 'disappeared' - though none because it became too small. Of the 22 firms that were no longer on the 1988 list, all remained very much at the top: 7 were still ranked in the top 300, 11 were acquired by other large firms, two went private, one was reclassified as a service firm and one was still on the list but under a new name (Anonymous 1989).
? Compustat Top 100 corporations
Listed corporations Capitalization
All corporations Net profit
Differential accumulation and dominant capital 317
Table 14. 1 US corporate statistics: average number of firms, average capitalization per firm and average net profit per firm
? ? ? ? Capitalization Number per firm
Period of firms ($mn)
Net profit per firm ($mn)
Number of firms
per firm ($mn)
Number of firms
per firm ($mn)
? 1950-54 100 694 60 1,579 107 617,994 0. 036 2002-06 100 95,943 5,243 6,175 2,749 5,566,044 0. 166
Source: See Figures 14. 1 and 14. 2
Industrial database, a cluster that we use as a proxy for dominant capital;9 (2) the universe of listed corporations; and (3) the universe of all corpora- tions. The table provides information on the number of firms in each group, the average capitalization per firm and the average profit per firm. We refer to these numbers in our description below.
Figure 14.
1 shows two indices of aggregate concentration - one based on market capitalization, the other on net profit. Each index measures the per cent share of the top 100 firms ranked by market capitalization in the relevant corporate universe. 10
The concentration index for market capitalization is computed from two sources. The numerator is the market capitalization of the top 100 firms from the Compustat database, ranked annually by market capitalization. The denominator is the combined market capitalization of all listed corporations on the NYSE, NASDAQ and AMEX (the number of listed corporations quadrupled from roughly 1,500 in the early 1950s to over 6,000 presently).
The second measure of concentration, based on net profit, is computed a bit differently. The numerator is the total net profit of the top 100 Compustat firms by capitalization. The denominator is the aggregate net profit of all US corporations, listed and unlisted (the total number of corporations increased nearly tenfold - from around 600,000 in the early 1950s to over 5. 5 million presently).
Both data series show high and rising levels of aggregate concentration. In the early 1950s, the top 100 firms accounted for 40 per cent of all market capi- talization. By the early 2000s their share was 60 per cent. The uptrend in the aggregate concentration of net profit, based on the entire corporate universe, is even more pronounced - particularly given the much faster growth in the total number of firms. During the early 1950s, the top 100 dominant-capital firms accounted for 23 per cent of all corporate profits. By the early 2000s, their share more than doubled to 53 per cent.
9 The term 'Industrial' here is misleading. The Compustat database includes firms from all sectors.
10 Unless otherwise noted, market capitalization denotes the market value of outstanding equity shares. It does not include bank debt and bonds.
? ? 318 Accumulation of power 90
per cent
? ? ? ? ? ? ? 80
70
60
50
40
30
20
10
Capitalization *
Top 100 / all listed corporations
? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Net Profit **
Top 100 / all corporations
? ? ? ? ? www. bnarchives. net
? ? 0
1940 1950 1960 1970 1980 1990 2000 2010 2020
Figure 14. 1 Aggregate concentration in the United States
* Ratio between the market capitalization of the top 100 Compustat corporations (ranked annu-
ally by market capitalization) and the overall market capitalization of all US listed corporations.
** Ratio between the net profit of the top 100 Compustat corporations (ranked annually by market capitalization) and the overall net profit of all US corporations (listed and unlisted).
Source: Compustat compann file through WRDS (series codes: data25 for common shares outstanding; data199 for share price; data172 for net income); U. S. Federal Reserve Board's Flow of Funds through Global Insight (FL893064105 for market value of corporate equities); U. S. Bureau of Economic Analysis through Global Insight (ZA for profit after taxes).
Measures of aggregate concentration are often used to approximate the overall power of big business. And the levels and trends in Figure 14. 1 indeed portray an ominous picture. But the situation in fact is far more alarming than this picture suggests. The difficulty lies in the definition of aggregate concentration and is fairly simple to explain. Let (s) denote the average size of a dominant capital firm (in terms of capitalization, profit, etc. ), (n) the fixed number of dominant capital firms, (S) the average size of a firm in the corpo- rate universe and (N) the number of firms in the corporate universe: The aggregate concentration ratio is then given by:
1. aggregate concentration = s * n = s * n 1. aggregate concentration = S * N = S * N
? ? ? ? ? Differential accumulation and dominant capital 319
As the equation makes clear, the rate of aggregate concentration depends not only on the differential size of dominant capital (s/S), but also on the ratio between the number of dominant-capital firms and the total number of firms (n/N). The problem is that over time these two ratios tend to trend in opposite directions. Whereas (s/S) tends to increase as large firms grow bigger while small firms do not, (n/N) tends to fall since the number of dominant-capital firms remains fixed while the overall number of firms keeps rising. In many instances, the rise in N is so fast that the aggregate concentration ratio ends up moving sideways or even down.
Now, this counter movement would have been inconsequential had the numerator and denominator of the concentration ratio represented compa- rable entities. But the entities they represent are very different. The numerator measures the overall size of dominant capital - a cluster that gets as close as one can to the ruling capitalist class. This group is subject to intra- distributional struggles, but on the whole it is probably the most cohesive - and often the only - class in society. Its members - owners and controllers - are connected and fused through numerous ownership, business, cultural and sometimes family ties; they are tightly linked to key government organs through a complex web of regulations, contracts, revolving doors and a shared world- view; and their accumulation trajectories often show close similarities.
The denominator, representing the corporate sector as a whole, is a very different creature. Excluding dominant capital, the vast majority of its firms are small. Unlike dominant capital, whose worldview was shaped by the twentieth century, the owners of smaller firms tend to entertain nineteenth- century ideals. They continue to swear by the 'free market' and the 'autono- mous consumer', they love to bedevil 'government intervention' and the higher-up 'lobbies', and they long for the good old days of 'equal opportu- nity' and a 'level playing field'. Their own corporate units are only loosely related through professional associations, if at all; they are removed from the high politics of organized sabotage; they have very little say in matters of formal politics; and, most importantly, they tend to act at cross purposes. In no way can they be considered a power block. 11
The fractured nature of this sector makes aggregate concentration ratios difficult to interpret: an increase in the number of small firms causes aggre- gate concentration to decline - yet that very increase fractures the sector even further, causing the relative power of dominant capital to rise.
Differential measures
The relevant measure of power, therefore, is not aggregate but disaggregate. What we need to compare are not the totals, but the 'typical' units that make
11 The different mindsets of the numerator and denominator were portrayed rather accurately in Jack London's The Iron Heel (1907) and further elaborated in C. W. Mills (1956) The Power Elite.
? 320 Accumulation of power
up those totals - i. e. the relevant (s/S) in Equation (1). This is what we do in Figure 14. 2 which displays two differential measures - one for capitalization, the other for net profit. 12
Begin with differential capitalization. This ratio is computed in three steps: first, by calculating the average capitalization of a dominant-capital firm (total capitalization of the top 100 Compustat firms divided by 100); then by
100
100,000
10,000
1,000
? ? ? ? ? ? ? ? log scale
log scale
? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 10
? ? ? ? ? Differential Net Profit **
? ? ? ratio of average net profit per firm (Top 100 / all corporations, right)
? ? ? ? ? ? ? Differential Capitalization *
? ? ratio of average market capitalization per firm (Top 100 / all listed corporations, left)
? ? ? ? 1 100 1940 1950 1960 1970 1980 1990 2000 2010 2020
www. bnarchives. net
? ? ? ? Figure 14. 2
Differential capitalization and differential net profit in the United States
* Ratio between the average market capitalization of the top 100 Compustat corporations (ranked annually by market capitalization) and the average market capitalization of all US listed corporations.
** Ratio between the average net profit of the top 100 Compustat corporations (ranked annually by market capitalization) and the average net profit of all US corporations (listed and unlisted). The number of US corporations for 2004-2006 is extrapolated based on recent growth rates.
Source: Compustat compann file through WRDS (series codes: data25 for common shares outstanding; data199 for share price; data172 for net income); Global Financial Data (number of listed corporations on the NYSE, AMEX and NASDAQ till 1989); World Federation of Exchanges (number of listed corporations on the NYSE, AMEX and NASDAQ from 1990); U. S. Internal Revenue Service (number of corporate tax returns for active corporations); U. S. Federal Reserve Board's Flow of Funds through Global Insight (FL893064105 for market value of corporate equities); U. S. Bureau of Economic Analysis through Global Insight (ZA for profit after taxes).
12 For a different approximation of differential capitalization, based on book value, see Nitzan (1998b).
? Differential accumulation and dominant capital 321
calculating the average capitalization of a listed company (total market capitalization divided by the number of listed companies); and finally by dividing the first result by the second.
