The Great Debt Divergence and its Implications for the Covid-19 Crisis: Mapping Corporate Leverage as Power

Joseph Baines and Sandy Brian Hager

New Political Economy, 2021, vol. 26, issue 5, 885-901

Abstract: The COVID-19 pandemic has amplified longstanding concerns about mounting levels of corporate debt in the United States. This article places the current conjuncture in its historical context, analysing corporate indebtedness against the backdrop of increasing corporate concentration. Theorising leverage as a form of power, we find that the leverage of large non-financial firms increased in recent decades, while their debt servicing burdens decreased. At the same time, smaller firms experienced sharp deleveraging alongside increasing debt servicing costs. Crucially, smaller corporations also registered severe losses over this period, while large corporations remained profitable, and in fact doubled their net profit margins from the early-1990s to the present. Taken together, the results from our mapping exercise uncover a series of dramatic changes in the financial fortunes of large versus smaller firms in recent decades, a phenomenon we refer to as the great debt divergence. We explain this divergence with reference to the dynamics of power in the era of ‘shareholder capitalism’, and we argue that the US political economy in the post-COVID 19 world is likely to resemble the pre-COVID 19 one, only with more market turmoil, more concentration, more inequality, and even less investment.

Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://hdl.handle.net/10.1080/13563467.2020.1865900 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:cnpexx:v:26:y:2021:i:5:p:885-901

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/cnpe20

DOI: 10.1080/13563467.2020.1865900

Access Statistics for this article

New Political Economy is currently edited by Professor Colin Hay

More articles in New Political Economy from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().