Late Stage Capitalism Is Weird Capitalism
A planned economy run by Blackrock, Vanguard and State Street
We are living in an era of extremely weird capitalism. American capitalism is usually described as a system in which top managers are rewarded with stock options, which incentivizes them to maximize returns to shareholders, who are so dispersed that they struggle to control companies by voting their stock.
The potted history of this system goes like this: Gilded Age robber barons were horizontal tyrants, monopolizing single industries. Trustbusters broke this up, wealth was more dispersed, and households took the fore. These atomized, individual shareholders didn’t exercise much control, because voting their small holdings made little difference to companies.
This was the age of “managerialism” — where technocratic, “scientific” managers worked with strong unions and regulators to create “Fordism,” where experts from capital, labor and government structured the productive economy.
From there, we transitioned to the age of the pension fund, where pension managers began to diversify their portfolios and threaten companies with ruinous sell-offs if they failed to put their short-term profits first. This was the age of “shareholder primacy,” when executive compensation started to include large stock-grants to “align incentives.”
That’s the picture we tend to carry around in our heads today. But as the Max Planck Institute’s Benjamin Braun argues in a paper called “Asset Manager Capitalism as a Corporate Governance Regime,” we have moved past that stage, to a new, weirder capitalism: “Asset Manager Capitalism.”
What’s Asset Manager Capitalism? It’s a market dominated by the asset managers from three giant index funds: Blackrock, Vanguard and State Street, along with a few other giant funds that roll up pension funds and other funds (vast family fortunes, managed funds).
These funds are giant. Between them, they own an average of 22% of every S&P 500 company. They don’t just…