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Dominant capital and the government

from Shimshon Bichler and Jonathan Nitzan

This note contextualizes the ongoing U.S. policy shift toward greater ‘regulation’ of large corporations. Cory Doctorow (2021) and Blair Fix (2021) are optimistic about this shift. We doubt it.

  1. The Limits of Power

Large U.S.-based corporations are extremely powerful, but the growth of their power has decelerated considerably.

Figure 1, updated from our ‘Corporate Power and the Future of U.S. Capitalism’ (Bichler and Nitzan 2021), shows the earnings before interest and taxes (EBIT) of the top 200 U.S.-based corporations, ranked by market capitalization, relative to those earned by the average U.S. corporation. The top series confirms that this differential – which proxies the relative power of the top 200 firms – has grown exponentially, rising from roughly 1,000 in 1950 to more than 15,000 in the 2000s. The bottom series, though, shows that the rate at which this differential power has grown trends downwards.

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This long-term deceleration is not accidental. In fact, it is built into the very nature of social power. In our capital-as-power research – or CasP, for short – we argue that power always elicits resistance from those on whom it is imposed; that this resistance tends to rise along with power; and that the greater the resistance the more difficult it is to augment power even further. In other words, power is self-limiting (Bichler and Nitzan 201220162020).

The twenty-first century revival of anti-corporate sentiments and anti-capitalist movements around the world is part of this resistance – as are some of the policy reforms emerging in their wake. But these reforms shouldn’t be over-hyped.

  1. The Capitalist Mode of Power

Our CasP analysis claims that, as capitalism develops, governments and large corporations become increasingly intertwined organs of the same capitalist mode of power. We call this mode of power the ‘state of capital,’ and we label the large government-backed corporate coalitions at its core ‘dominant capital’.

The coalescence of governments into the capitalist mode of power does not mean that ‘policymakers’ can no longer take an independent stance. They can. But the likelihood of them doing so, as well as the scope of their independence, tend to diminish as the capitalist mode of power creorders – or creates the order of – more and more aspects of social and private life. As this corporate-government integration unfolds, government organizations and officials, including ‘reformers’, not only get entangled in the web of capitalized power, but they also find themselves conditioned by its very concepts, symbols, ideologies and rituals. Consequently, most of them cannot even conceive of fundamental change, let alone bring it about.

From this broad perspective, a meaningful shift within capitalism – and certainly a shift away from it – is less and less likely to come from above. If this shift is to materialize – and in our view, the current prospects for it remain dim – it is likely to come not from reformist governments and soulful corporations, but from below or from without. It will be affected either by social movements mobilized by radical rethinking of capitalized power, or by environmental calamity. Finally, and importantly, this change is likely to materialize not peacefully, but conflictually.

  1. Why are Neoliberal Governments so Big?

Think of contemporary governments. Since the 1980s, neoliberal ideology has demanded that state ‘intervention’ and ‘regulation’ be scaled back. It has called for capitalist efficiency to substitute for bureaucratic red tape, for market transparency to replace state corruption, and for equal opportunity to displace hierarchical power. It insists that government should stop ‘crowding-out’ private investment and cease interfering with the so-called free market. It argues that for markets to expand, governments must shrink.

And yet, as Figure 2 shows, the victory of neoliberalism hasn’t made government any smaller. Not by a long shot. In high-income countries, the national income share of government consumption spending remains as large as it was before the onset of neoliberalism, while in low- and middle-income countries, it continues to grow bigger and bigger.

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And that shouldn’t surprise us. The capitalist mode of power and the dominant-capital coalitions that rule it do not require small governments. In fact, in many respects, they need larger ones.  

As a mode of power, capitalism thrives on multiple forms of ‘strategic sabotage’ – that is, on limiting and redirecting the energy of human beings toward the augmentation of capitalizing power. Dominant capital prevents most people from cooperating, democratically and directly, to improve the well-being of their society and environment. Instead, it forces them to fortify and amplify the very capitalized power that dominates them. And this forcing requires a whole slew of threats, limitations, and the open use of force – in other words, it begets strategic sabotage.

The thing is that, left unregulated, strategic sabotage can easily overbuild, causing the mode of power to implode under its own weight. And that’s where government spending comes in as a mitigating force. From this viewpoint, bigger government – particularly its sprawling social programs and transfer payments – mirrors not the failure of neoliberalism, but its very success.  

Figure 3 shows the changing importance of federal transfer payments in the United States. The dashed series depicts the level of current expenditures by the federal government, expressed as a share of U.S. national income. Note that these expenditures include purchases of goods and services, as well as transfer payments for which no goods and services are rendered in return. The solid series displays the share of transfer payments in overall current federal expenditures.


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The relationship between the two proportions is telling. Initially, the association was negative. During the 1930s and 1940s, when the national income share of current federal expenditures increased, the share of transfers in these expenditures declined – and vice versa when government expenditures fell. This inverse relationship means that transfers were relatively stable, and that most of the ups and downs in federal spending were due to ups and downs in current government consumption.

But soon enough the relationship flipped. From the 1950s onward, the national income share of current federal expenditures trended upward – and, for the most part, this uptrend was driven by a relentless increase in the share of transfers. All in all, during the postwar era, this share rose 13-fold – from less than 5 per cent in the early 1940s, to nearly 65 per cent presently.

With this observation in mind, it is perhaps worth noting that the 2020 Covid19-related surge in current federal spending – a surge that many like/hate to think of as active ‘Keynesianism’ – was accounted for mostly by passive transfers.

The gradual shift from discretionary expenditures on goods and services to reactive transfers is typical of many governments around the world, and it suggests that these governments are far less potent than their size might imply. In fact, one can argue that the bigger ‘transfer states’ of today are far weaker than the smaller ‘consumption states’ of the Keynesian era. Their apparent largess indicates not greater power but subjugation: a built-in deference to dominant capital, whose strategic sabotage must be offset, at least in part, by unemployment insurance benefits, welfare payments and the like.  

  1. Summary

 On paper, the U.S. government is free to legislate its path and determine its policies. In principle, there is little to prevent a resolute U.S. administration from challenging the power of the country’s dominant capital and clip the wings of its largest firms.

But it would be good to remember that the U.S. government – like most other governments – has become part and parcel of an increasingly global state of capital. This integration has undermined the de facto autonomy of governments everywhere. Whether willing or reluctant, many if not most policymakers have become pawns of a global mode of power they cannot control and that forces them to tranquilize the increasingly vulnerable population that dominant capital helps create. Government spending has inflated, but this inflation betrays weakness, not strength.

Larger-yet-weaker neoliberal governments are the alter-ego of bigger-and-meaner dominant capital. It is hard to think of any important sector or aspect of society, in the United States and elsewhere, where dominant capital does not dominate. It is true that, faced with increasing resistance, the rising power of dominant capital in the United States has slowed down significantly over the years and seems to have stalled completely in recent times (Figure 1). But the level of this power is still greater than ever, and it is yet to show any meaningful decline. Finally, and importantly, the stalling advance of U.S. dominant capital makes it extra vigilant against any serious challenge.

Prediction: if the current U.S. government delivers on its promise to curtail the might of the country’s largest corporations, it will face the wrath of the most powerful megamachine the world has ever seen.


[1] Shimshon Bichler and Jonathan Nitzan teach political economy at colleges and universities in Israel and Canada, respectively. All their publications are available for free on The Bichler & Nitzan Archives (http://bnarchives.net). Work on this note was partly supported by SSHRC.


 Bichler, Shimshon, and Jonathan Nitzan. 2012. The Asymptotes of PowerReal-World Economics Review (60, June): 18-53.

Bichler, Shimshon, and Jonathan Nitzan. 2016. A CasP Model of the Stock MarketReal-World Economics Review (77, December): 119-154.

Bichler, Shimshon, and Jonathan Nitzan. 2020. The Limits of Capitalized Power. A 2020 U.S. UpdateWorking Papers on Capital as Power (2020/06, December): 1-16.

Bichler, Shimshon, and Jonathan Nitzan. 2021. Corporate Power and the Future of U.S. CapitalismReal-World Economics Review Blog, January 4.

Doctorow, Cory. 2021. End of the Line for ReaganomicsCapital as Power Blog, September 26.

Fix, Blair. 2021. How Dominant are Big US Corporations? Economics from the Top Down, September 29.

  1. Ken Zimmerman
    October 10, 2021 at 8:16 am

    America  may  be  the  land  of  the  Market,  but with  the growth of American power  since  the  Second World War the  Market has  become  more  global.  One  way  this  has  occurred  is  through the  spread  of  financial  institutions  that  put  pressure  on  governments and  firms  to  conform to  the American Market model  of how  they ought to  operate.  Foreign  exchange  and  international  bond  markets  are obvious  examples  of these  institutions.  Less obvious  examples  are bodies  that  promulgate  international  standards  for  accounting, banking  and  stock  market  regulation and  the  like. Although many of  these  institutions  and the firms  that  operate  in  and  through them see  themselves  as  global,  it  is  also  true  that  they  are  oriented toward  the  United  States.  Equally,  American  government  policy has  helped  put  pressure  on  institutions  around  the  world  to conform  to  the American Market  model.  Sometimes  this  works  indirectly, through  bodies  dominated  by  the  United  States.  The  World  Bank is  per haps  the most obvious example. Often, however, there  is  direct  government  action.  The  North American  Free  Trade Agreement is  one  illustration; another  is  government  pressure  on  Japan and  the European Common Market to  change their internal  policies  to  make them conform to American standards.

    But since about 2010 there is another market model competing with the American market model for control of governments and indirectly societies around the world.  Including the US. That is the model from the People’s Republic of China. The socialist market economy (SME). The system is based on the predominance of public ownership and state-owned enterprises within a market economy. The term “socialist market economy” was introduced by Jiang Zemin during the 14th National Congress of the Communist Party of China in 1992 to describe the goal of China’s economic reforms.  Originating in the Chinese economic reforms initiated in 1978 that integrated China into the global market economy, the socialist market economy represents a preliminary or “primary stage” of developing socialism.[3] Many commentators describe the system as a form of state capitalism.

    The  socialist  market  economy  was  seen by  the  Communist  Party  of  China as  an early  stage  in the development  of  socialism (this  stage  is  variously  called  the  ‘primary’  or  ‘preliminary’  stage  of socialism),  where  public  ownership  coexists  alongside  a  diverse  range  of  non-public  forms  of ownership. The  Communist  Party  of  China maintained that  despite  the  co-existence  of  private capitalists  and  entrepreneurs  with  public  and  collective  enterprise,  China  is  not  a  capitalist  country because  the  party  retains  control  over  the  direction of  the  country,  maintaining  its  course  of socialist  development. Proponents  of  this  economic  model  distinguish  it  from market  socialism as market  socialists  believe  that  economic  planning  is  unattainable,  undesirable  or  ineffective  and  thus view  the  market  as  an integral  part  of  socialism whereas  proponents  of  the  socialist  market economy  view  markets  as  a temporary  phase  in development  of  a fully  planned  economy. (III  Conferencia  Internacional  La  Obra  de  Carlos  Marx  y  los  desafíos  del  Siglo  XXI  –  Duan  Zhongqiao)

    Cui  Zhiyuan  traces  the  theoretical  foundations  of  the  socialist  market  economy  to  British economist James  Meade’s (Nobel Prize 1977) model  of  liberal  socialism in  which  the  state  acts  as  a residual  claimant  on the  profits  generated  by state-owned  enterprises  that  are  operated  independent  of  government  management. (Making Sense of the Chinese “Socialist Market Economy:” A Note. Modern China,  Vol. 38, No. 6, “State Capitalism” or “Socialist Market Economy”? Dialogues amoung Western and Chinese Scholars, V (November 2012), pp. 665-676.)  Meade enumerated four possible solutions that could be used to prevent  immiserating the proletariat: (1) the Trade Union State, (2) the Welfare State, (3) Property-Owning Democracy, and (4) the Socialist State. He notes the pros and cons of each, observing that all of them have strengths and weaknesses, and ultimately ends up proposing a “mixed economy” borrowing from all four. Meade ends up synthesizing the conservative proposal of property-owning democracy (i.e., widespread distribution of private-ownership) and the progressive proposal of socialism (i.e., abolition of private property and replacement with public-ownership).

    Proponents  initially  advocated  a  socialist  market  economy  as  a  necessary  stage  for  the development  of  the  economy  to  a point  where  a planned  socialist  economy  would  become  possible. However, recent  Chinese  leaders  including  Xi Jinping  (General  Secretary  of  the  Party  from November  2012) have  described  the  building  of  the  “socialist  market  economy  with Chinese  characteristics”  as  the goal  without  any  reference  to  a post-market  socialist  economy. This new direction draws clearly the contrast between the American market model and the socialist market model. With the latter offering many of the more important advantages of capitalism without most of the deleterious consequences of capitalism.

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