CITYPERC Working Paper Series The Great Debt Divergence and its Implications for the Covid-19 Crisis: Mapping Corporate Leverage as Power Joseph Baines and Sandy Brian Hager CITYPERC Working Paper No. 2021-01 City Political Economy Research Centre
[email protected] / @cityperc City, University of London Northampton Square London EC1V 0HB United Kingdom The Great Debt Divergence and its Implications for the Covid-19 Crisis: Mapping Corporate Leverage as Power Joseph Baines Department of European and International Studies, King’s College London, London, United Kingdom Sandy Brian Hager Department of International Politics, City, University of London, London, United Kingdom,
[email protected] This is a pre-preprint of an article accepted for publication in New Political Economy https://doi.org/10.1080/13563467.2020.1865900 The Great Debt Divergence and its Implications for the Covid-19 Crisis: Mapping Corporate Leverage as Power 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.