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

Research output: Contribution to journalArticlepeer-review

Joseph Baines, Sandy Brian Hager

Original languageEnglish
Pages (from-to)885-901
Number of pages17
JournalNew Political Economy
Issue number5
Early online date6 Jan 2021
Accepted/In press15 Dec 2020
E-pub ahead of print6 Jan 2021
Published6 Jan 2021

Bibliographical note

Funding Information: Earlier versions of this article were presented at the fourth workshop of the Politics of Money Research Network, University of Amsterdam, 5?6 December 2019; the first workshop of the Ethics of Debt Network, University of York, 29 May 2020; the Department of European and International Studies Seminar Series, King?s College London, 7 October 2020; and the Department of International Politics Research Seminar, City, University of London, 14 October 2020. We would like to thank the participants at these workshops and seminars for their helpful feedback. Thanks are also due to Leah Downey, Rana Foroohar, Karsten Kohler, Etienne Lepers, Mike McCarthy, Amin Samman and Stefano Sgambati, as well as two anonymous referees, for reading and commenting on earlier drafts. Finally, we are grateful to Xuying Jiang for guidance on processing the data. Any mistakes or shortcomings are ours alone. Publisher Copyright: © 2021 Informa UK Limited, trading as Taylor & Francis Group. Copyright: Copyright 2021 Elsevier B.V., All rights reserved.


King's Authors


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.

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