The Political Economy of Asset Manager Capitalism

Benjamin Braun

Global capitalism has shifted from capital scarcity to capital abundance. Other things being equal, the logic of supply and demand would suggest that in a world in which the resource they control is abundant, the structural power of wealth owners should decline. Paradoxically, the ultimate gauge of that power – the gap between the rate of return on capital (r) and the rate of economic growth (g) – has proven remarkably resilient since the 1980s. Why did this gap not shrink? The guiding hypothesis of this project is that the power of wealth owners is partly a function of the organization of finance. The accumulation of wealth has changed both the function and the form of the financial sector. While finance always does both, its primary function has shifted from financing to asset management, that is, the preservation of wealth over time. This functional shift has gone hand in hand with the rise to dominance of a new form of financial intermediary: asset management firms that pool and manage “other people’s money.” This project studies the history and evolution of these firms, and their impact on the economic and political determinants of the rate of return on capital.

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