Business Matters: The Power of Finance and US Income Concentration

• In Event: 20812 - Wealth, Debt, and Financialization

Abstract

How has the sociopolitical power of the financial sector – both its “instrumental” and “structural” power dimensions – contributed to the striking income concentration that has come to characterize the United States since the 1980s? A growing literature has assessed the determinants of US income concentration over time at the national level and in comparative perspective. Yet existing studies, often guided by Power Resources Theory are limited in the groups they consider as arbiters of distributive power, namely, political parties and labor unions. Despite these clear importance of these groups, existing analyses exclude a crucial social-political force. Business, and specifically, in the contemporary age of financial capitalism, finance—remains relatively understudied. This lacuna persists despite a sizable literature on financialization and inequality and sociologists’ longstanding concern with business power. This paper advances a theoretical framework centering the importance of financial sector power on inequality, weaving together sociological perspectives of power in capitalist democracies with research on inequality, financialization, and corporate networks and political activity. As noted above, national and comparative research has produced important findings, but less work has explored inequality’s driving forces over time within and across U.S. states. State-level variation over time can be modeled with greater statistical power than variation at the national level. This research supplements the close qualitative work predominant in the business power literature by operationalizing both “instrumental” and “structural” dimensions of financial sector power for quantitative analysis. Panel data analyses estimate the effects of finance power across and within US states over a 70-year period. Results reveal a strong role of financial power on state-level one-percent income shares, distinctive from labor and partisan power and net of alternative inequality determinants. Statistical mediation by financial regulation and especially tax policy sharpen support for the role of finance’s sociopolitical clout over the distribution of income.

Author

• Robert R Murphy, CUNY-Graduate Center