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Begin New Search Topic Leverage Publishing Institution City Political Economy Research Centre (CITYPERC), University of London Publication Year within 25 Years Publication Year within 5 Years

1. The Invisible Leverage of the Top 1 Percent: Absentee Debtors and Their Hedge Funds

Author:
Stefano Sgambati
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
Abstract:
The existing literature on finance, debt and inequality depicts economic elites as a creditor class. According to a popular thesis, over the past four decades, the rich and ultra-rich households in the top 1 percent have experienced a saving glut (excess income), which they have invested in the debts of the poor and their governments. While it is undeniable that the rich have expanded their income share at the expenses of the poor, to refer to them as ‘creditors’ or ‘lenders’ is a misrepresentation of how they actually expand their wealth and income shares by financial means. For it conceals the fact that a great deal of their investments is leveraged, that is, carried out with borrowed money. This article shows that the debts generated by individuals and households in the top 1 percent easily surpass those of all other households and even exceed those of the most indebted states in the world. However, these debts are hard to estimate, and indeed they are not accounted for in statistics on household debt. This is because households in the top 1 percent do not borrow from banks, like normal households do, but they are instead absentee debtors who borrow through the hedge funds, private equity firms, personal investment trusts, and big banks of which they are dominant shareholders and ultimate beneficiaries. To gain an insight into their invisible leverage, the article looks at how much hedge funds borrow, and why their leverage matters.
Topic:
Debt, Political Economy, Inequality, Finance, Elites, Hedge Funds, and Leverage
Political Geography:
Global Focus

2. Financial eschatology and the libidinal economy of leverage

Author:
Amin Samman and Stefano Sgambati
Publication Date:
01-2022
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
Abstract:
Apocalyptic thinking has a long religious and political tradition, but what place does it occupy within the temporal universe of contemporary capitalism? In this essay, we use the figure of the eschaton to draw out the loaded and ambiguous character of the future as it emerges through the condition of indebtedness. This entails a departure from political economy accounts of capitalist futurity, which stress the structural logic of financial speculation, in favour of an existential account that begins instead with the cosmology of money and debt. We argue that finance capital’s fixation on the future has produced a very specific form of apocalyptic imagination, characteristic of financial society and built on a libidinal economy of leverage. Rather than offering an ecstatic end to the global process of financialization, financial eschatologies bind the contemporary subject to debt and indebtedness to the very end: an endless apocalypse, premised on the ends of finance itself.
Topic:
Debt, Finance, Money, Eschatology, Futurity, Leverage, and Libidinal Economy
Political Geography:
Global Focus

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

Author:
Joseph Baines and Sandy Brian Hager
Publication Date:
01-2021
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
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 µshareholder 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.
Topic:
Debt, COVID-19, Corporations, Power, Leverage, and Shareholder Value
Political Geography:
North America and United States of America

4. Who Owes? Class Struggle, Inequality and the Political Economy of Leverage as Power in the 21st Century

Author:
Stefano Sgambati
Publication Date:
08-2020
Content Type:
Working Paper
Institution:
City Political Economy Research Centre (CITYPERC), University of London
Abstract:
The prevalent consensus in critical social sciences is that finance articulates the world economy as a global hierarchy of creditor-debtor relations that reproduce and further aggravate existing income and wealth inequalities. Class struggle is conformingly understood as a conflict between elite creditors, members of the global top 1 percent of wealth holders, and mass debtors burdened by growing costs of servicing public and private debts. The article offers an alternative understanding of how debt, inequality and class relate to one another. At its basis is the recognition that over the past four decades finance has empowered upper class borrowers, including the top 1 percent, as it has magnified their capacity to generate capital gains and capture greater wealth and income shares via levered-up investments and other forms of ‘positioning’ in financial and property markets. The article thus provides a political economy of leverage as power and shows how contemporary global finance has not given shape to a distributional conflict between creditors and debtors as two distinct classes, but has set debtors against debtors, and namely the greater borrowers versus the lesser ones.
Topic:
Debt, Political Economy, Inequality, Finance, Class, Power, and Leverage
Political Geography:
Global Focus

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