Tom Saler

Special to the Journal Sentinel

Referring to a writers-blocked author in 1920s Paris, the American wordsmith Gertrude Stein lamented that the novelist “had the syrup, but it wouldn’t pour.”

The same might now be said of American-style capitalism, which has record amounts of wealth sloshing around its corporate coffers but a serious clog that’s preventing that wealth from pouring — or trickling? — down to workers doing the heavy lifting below.

The bottleneck, which has been forming for decades, has some economists wondering if capitalism needs a redesign.

It wouldn’t be the first time.

In the late 19th century, a handful of corporate behemoths that were first to capitalize on the industrial revolution underwrote the so-called Gilded Age, in which massive wealth flowed to a relatively small number of individuals and businesses. The extreme concentration of economic power led to a backlash that spawned competing progressive and populist movements, and eventually to the first efforts — albeit halfhearted — at antitrust legislation.

The technology revolution that took root in the mid-20th century is following a similar arc, first in its link to a second Gilded Age (the 1980s) and then to the concentration of economic and financial power in the hands of a small group of well-placed mega-corporations and individuals.

Stuck at the top

An essential tenet of capitalist economic theory is that worker incomes should closely track increases in worker output per hour, or productivity. According to a 2015 study by Josh Bivens and Lawrence Mishel published by the Economic Policy Institute, that’s what happened for a quarter century following World War II.

Between 1948 and 1973, productivity rose by 96.7 percent while hourly compensation rose by 91.3 percent. Those years mostly correspond to what Maurice Stucke and Ariel Ezrachi, writing in the Harvard Business Review, called “the Golden Era of Antitrust” enforcement. But over the ensuing four decades — during which antitrust actions fell sharply — productivity grew by 72.2 percent while hourly compensation increased by just 9.2 percent. Bivens and Mishel concluded that “the economy could afford higher pay, but was not providing it.”

Relative to their respective share of gross domestic income, employee compensation is down 10% since 1980 while corporate profits are up 65%.

Even assuming the tight link between productivity and incomes can be reestablished, the slowdown in productivity growth since the late 1990s could be another obstacle to a more equitable sharing of economic riches. Although potentially productivity-enhancing investments surged during the first half of 2018, roughly one-third of the increase was concentrated in a handful of companies. The pace of business investment has since cooled and the tax windfall deployed elsewhere. American companies will spend an estimated $1 trillion on share buybacks in 2018, an all-time high.

According to a recent survey of 127 businesses by the National Association of Business Economics, “the 2017 Tax Cuts and Jobs Act has not broadly impacted hiring and investment plans at panelists’ firms.” The survey reinforces a 2015 study by the Organisation for Economic Co-operation and Development (OECD) which found that “in developed economies, the shift in income away from labor towards capital has not produced the expected results on investment.”

Lack of competition

An emerging explanation for the disconnect between corporate profits and personal incomes echoes the late-19th century effects of monopoly power during the mature stage of a major economic transformation.

A 2015 study by professors Kathleen Kahle and Rene Stulz, published in the Journal of Economic Perspectives, found that “over the last 40 years, there has been a dramatic increase in the concentration of the profits and assets of U.S. firms.” In 1975, 109 companies accounted for half the earnings of all public firms; by 2015, that number had dropped to just 30.

The Economist newspaper recently described America’s economy as “a capitalist dystopia; a system of extraction by entrenched giants.”

Those just entering the job market have taken notice. A majority of Americans age 18 to 29 no longer support capitalism.

If populism of the right eventually yields to populism of the left, those entrenched giants — corporate and individual — might have only themselves to blame. As Michael Tomasky advised in a recent op-ed for The New York Times, “You want fewer socialists? Easy. Stop creating them.”

And let the good times pour.

Tom Saler is an author and freelance financial journalist in Madison. He can be reached at tomsaler.com.