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This is fascinating work from @MadisonECondon on how the rise of "asset manager capitalism" shifts the politics of firm ownership in favor of long-term resilience and against competition.
I want to tease out two implications. 1/n https://bostonreview.net/science-nature/madison-condon-climate-change%E2%80%99s-new-ally-big-finance
I want to tease out two implications. 1/n https://bostonreview.net/science-nature/madison-condon-climate-change%E2%80%99s-new-ally-big-finance
The first is that, as Madison points out, accounting for asset manager capitalism seems to require separating out the standard conflation between shareholder power and maximization of (short-term) shareholder value. 2/n
Investors seeking a maximally diversified portfolio with steady returns are less likely to be distracted by quarterly earnings, especially if they come at the expense of other firms (which they also own a piece of) or longer-term stability. 3/n
But that does not mean that these investors have everybody's best interest at heart. These investors are "universal owners", but they are still owners. They want the lowest possible wages, the highest possible prices. 4/n
That brings up interesting questions: why would asset manager capitalism correspond with rise in short-termism?The reduction of long-term investment? With the rise of political instability and nationalism? Obviously the changed incentives don't explain everything. 5/n
(Hobson might have something to tell us - https://phenomenalworld.org/interviews/trade-wars-are-class-wars - but asset managers are more global, so it would seem that there are countervailing forces) 6/n
This work also helps think through debates on the left btwn seizing commanding heights and distributing dividends more equally (asset manager socialism?) vs. decentralizing control over the economy (left anti-monopolists). 7/n
Setting aside (disputed) efficiency questions, centralized ownership might facilitate more long-term thinking. But it might also mean more ruthless exploitation and less dynamism. In any case, universal ownership does not resolve contradictions--it just creates new ones. 8/n
The second implication is kind of in the weeds of legal theory. In particular, it's about a famous article on the law&econ of K by Alan Schwartz and Robert Scott ( https://digitalcommons.law.yale.edu/fss_papers/308/ ).
Legal theorists tune in! Political economists tune out!
cc @DSMarkovits
Legal theorists tune in! Political economists tune out!
cc @DSMarkovits
In the article, S&S argue that K theory should be understood from the perspective of universal owners--from those holding a fully diversified portfolio. These owners, they argue, will favor K rules that balance the interests of all parties. 10/n
But if universal owners do not have everybody's interests at heart, they will not devise rules that balance all interests. Most obviously, non-owners will be excluded. So rules for employment Ks might present some problems. 11/n
More fundamentally, if universal owners are designing rules that will maximize their portfolio (talk about the exec. comm. of the bourgeoisie!), why should they design rules for arm's length contracting? Why not just consolidate ownership claims?
And even if they do (one could tell some Williamsonian trans. costs story, perhaps), universal owners would have no interest in facilitating the competition or hard bargaining. Rather, they would pursue a cross-industry strategy to which all firms' interests would be subordinated
Either way, there's a deep contradiction. If universal owners are in control of the K rules and the K bargaining process, then there's no work for the mkt to do! Price is not manifestation of the prefs/costs of each agent--it is an accounting tool for owners. /fin
