The rise of ethnonationalist, anti-immigrant, anti-system parties in rich OECD countries has economic roots in rising income inequality and relatively slow economic growth, and social roots in increasing geographic inequality of income and employment opportunities. What explains these politically salient problems? In this talk, Herman Mark Schwartz argues that the focus on rising income inequality ignores how even higher levels of profit inequality among businesses lowers individual consumption growth, productive investment, and government taxation, and thus spending capacity. Profit inequality, Schwartz suggests, flows from a shift in companies’ profit strategies and industrial organization towards the possession of intellectual property rights that generate monopoly rents but reduce the need for large investments and enable massive tax evasion.

This project is generously supported by the Robert Bosch Stiftung.