The Thesis of Political Capitalism

It is as if the open theft, the corruption, the orgiastic excesses of the elite were so brazen that it would seem superficial, non-scientific, pre-theoretical to take them seriously. Surely, this line of thinking says, the real action lies elsewhere, behind the Technicolored phantasmagoria of the political scene, with its low-life boobies and con-men. But it is precisely this—the theoretical elucidation of the chaotic obscenity of our current moment—that is most required. What follows is the roughest and most telescopic of attempts to do just that.

There are, to begin with, three striking features of the post-2008 political economy: low growth rates, high levels of inequality, and a scrambled political landscape. A considerable proportion of workers—especially those who lack educational credentials—has shifted to the far right, while a corresponding share of the educated has shifted to the left. Any adequate critical social theory needs to begin from these basic realities. But how to explain them?

There are two main responses. One is to suggest that the new, post-2008 period is what “normal” capitalism looks like. The anomaly, from this perspective, was the high-growth, low-inequality period of the thirty glorious years. Now we’re returning to a low-growth system—which is how capitalism has operated for most of its history. So, as the work of Thomas Piketty has indicated, the new political economy is an old political economy: it’s just that our vision has been distorted by the experience of the twentieth century.¹

The second response is to ascribe these changes to technology—particularly to the ability of the owners of technology companies to extract rents from their users. The basic idea is that as more people come to use a specific piece of software or social media platform, its value increases without any technical improvement. This is either because the platform extracts more information as it accumulates more users, or because the utility of the platform increases for the individual user as the number of users increases. In either case, the platform’s owner can capture this increased value without being obliged to make any proportional investment. For the exponents of this position, this constitutes a new form of rent—in current jargon, “platform rents.”²

There is much to be learned from these interpretations. The first provides a series of correspondences between our period and the period prior to the rise of the welfare state. The second tells us that network effects and platform rents are real. But as global interpretations of the economy, both are unconvincing. The problem with the first interpretation is that it is hard to square with much of what we know about capitalism since the fifteenth century. The central claim that capitalism has generally been a low-growth economic system is simply not true. If it were, how could, say, the transition out of the Malthusian trap, or the First or Second Industrial Revolutions have happened?

The problem with the second interpretation is that it doesn’t account for the competitive nature of big tech companies. Certainly, platform rents exist, but how durable are they? Take Microsoft Word, an example of a platform that locks users in simply because so many others use it. That monopoly has proven vulnerable to competitive pressure from Google Docs in what seems a textbook example of competition. Furthermore, even if these rents were very durable, are they really a new economic phenomenon? How different is the rent collected by Amazon from that which used to be collected by the owners of brick-and-mortar shopping malls?³

Fortunately, there is an alternative approach: the thesis of political capitalism. The term was originally deployed by Max Weber to describe economic activity that is profit-oriented but relies predominantly on political means rather than on the reaping of productivity gains from investment.⁴ A diverse array of scholars now recognizes its usefulness to describe a range of cases including the contemporary United States and Western Europe, the Islamic Republic of Iran, and post-communist Eastern Europe.⁵

The term has been used in quite contrasting ways. For Public Choice neoliberals, it means something like crony capitalism, bound up with corruption and rent-seeking in a very general sense.⁶ On the left, it has almost the opposite meaning, linked as it is to the East Asian developmental states of China and Vietnam.⁷ To confuse matters even more, some scholars⁸ equate political capitalism with monopoly capitalism.

I use the term to refer to a specific sort of property relationship in which political power enters the process of value expansion. Historically, capitalism has been characterized as a circuit: money is used to purchase commodities (particularly means of production, raw materials, and labor-power), which are then combined in a production process to produce more commodities. These commodities are then sold to earn more money (M–C–M’). This is Marx’s general formula for capital, and it continues to operate in the current economy: money leads to commodities, which lead to more money.

The thesis of political capitalism suggests that a new form of value expansion—a new form of property—has emerged alongside M–C–M’ and entwined with it. In this new circuit, money is used to purchase assets and political influence, which, when properly combined (when an asset purchase is linked with an investment in politics), expand the value of the asset in question. The asset can then either be sold for a profit or used to make new asset purchases and new political investments. This new circuit can be described as M–A–M’ (or in its expanded form, M-(A+P)-M’). Profits derive from capturing a part of the politically engineered inflated price of assets.

There are two immediate objections to this scheme. The first is that political capitalism has always been around. Firms have always lobbied for government contracts. And governments, in turn, have always needed to promote investment and create economic growth to secure political legitimacy. Although it is generally true that capitalism is always political in the sense that capitalism requires a political system to enforce capitalist property, politically engineered asset price inflation only emerged in about 1980. Tax cuts—particularly on capital gains—meant that the value of stock ownership exploded without any underlying increase in profitability. This initial boost was further enhanced by the iron-clad commitment of central banks to maintain high stock valuations come what may. The basic strategy of asset price inflation was then extended out from stock toward other holdings, such as real estate.⁹ Under this new configuration, fiscal and monetary policy can no longer be conceptualized as policy interventions external to the process of value expansion. Rather, they are now central mechanisms through which profits are created.

The second objection is that the breakthrough of artificial intelligence has transformed the situation, and that we are on the cusp of renewed growth in GDP and labor productivity.¹⁰ A key piece of evidence would seem to be the recent data-center investment boom. At first glance, this appears to be irrefutable evidence that the era of what many economists call secular stagnation is over. In fact, the boom is an expression of the underlying problem: a massive pool of savings without attractive investment outlets. An initial difference between the dot-com bubble of the early 2000s and the current AI spending spree is that while the former was mostly driven by small, highly indebted startups with no plausible business model, the latter is mostly driven by companies that are highly profitable. However, because of their massive recent capital expenditures, this investment is now largely being financed through complexly structured debt and the new technology has yet to show any profitability.¹¹ While it may be premature to demand returns from AI, investor patience appears already to be wearing thin. Rather than a self-sustaining cycle of growth, this has all the characteristics of the latest bubble.

The objections on offer then—that nothing much has changed, and that everything is about to change—are not particularly compelling. Instead, the rise of the new M–A–M’ circuit of value expansion explains much of the character of contemporary capitalism: its high level of inequality, its form of inequality, its low growth rate, and its low rate of investment outside of the narrowly focused money dump on AI. Importantly, this new form of capitalism is not the expression of a technological transformation so much as it is the consequence of a specific political history: a pervasive, direct capture of political power and its deployment to continually promote asset price inflation.

What does the political landscape of the new capitalism look like? The macro-political facts are not in much dispute. Despite dizzying inequality of wealth and income, the class politics that initially created the welfare states of the postwar period are nowhere in evidence. Various attempts to re-energize social democracy have failed, and the revolt against the political establishment has mostly occurred on the far right. Why? And what is the connection to the new phase of capitalism?

It is useful first to discuss the general impact of political capitalism on the labor share of income, and then to analyze more closely the structure of inequality among wage earners themselves. Putting these two processes together explains why there is such deep discontent with liberal democracy, and why it is so difficult to organize a social democratic politics.

The distributional consequences of political capitalism are obvious and brutal. Since 1980, the labor share of income in the United States has declined by 7% while the profit share has increased sharply in a context of decreasing investment.¹² Initially, this might seem to be an obvious basis for a left-populist program aimed squarely against the increasingly parasitic profit-taking group. But such a conclusion would be wrong because it ignores the extremely uneven distribution of the shrinking wage-income pie.

One important element is a large increase in inter-firm inequality. While it is true that the economy has always been dominated by a relatively few highly successful firms,¹³ the way that this interacts with wage inequality is new. Firms used to employ a combination of skilled and unskilled labor or credentialed and uncredentialed workers. This is becoming less common as firms are split between those hiring mostly uncredentialed workers and those relying exclusively on the credentialed.¹⁴ The macro dynamics of increasing income inequality have thus not led to a broad splitting apart of the population between owners and non-owners. Rather, the process has fractured the working class.

A group of very profitable firms—largely those that benefit from asset price inflation—has shared some of its gains with a small, highly educated group, while the mass of low-profitability firms pays its employees little.¹⁵ Therefore, in the context of a generally declining wage-income share as a proportion of total income, workers with and without a college degree have had sharply different economic fates. The first group has done comparatively well, while the relative position of the second has deteriorated.¹⁶

Despite the declining share of labor income, politics has not been characterized by a renewal of class conflict, but rather by a status-group struggle in which those with a college education or credentials oppose those without. Entwined with this opposition is a conflict pitting white and native-born workers against people of color and immigrants.¹⁷ Why has politics assumed this form? There are no very good answers to this question. One group of scholars rather tautologically invokes a “cultural clash,” while another generally ascribes it to the misconceptions of the left and center-left.

But in the context of political capitalism, the reason our politics is shaped this way becomes clear. As political authority is ever more oriented to the interests of asset holders, the space for delivering benefits to the mass of wage earners has declined, while at the same time the space for a relatively small segment of the working class to share in these enormous gains has expanded. This has led wage earners to pursue different, non-class strategies to protect their material interests.

Two such strategies have been prevalent. The first, available mostly to the credentialed, is to try to secure some gains from the firms that have benefited, either directly or indirectly, from asset price inflation. This group of relatively privileged wage earners has been the basis of center-left politics, with its privileging of expertise and science. It is drawn spontaneously to the ideology of meritocracy, which is highly appropriate to its material circumstances. The second, available mostly to the non-credentialed, has been to turn to primary identities (race, citizenship status, gender) to defend what can be defended.¹⁸ This group has been the main support of right-wing politics in the current period. This sort of politics divides wage earners and delegitimizes democratic institutions. It is also deeply connected to the material realities of capitalism in its current phase.

The political upshot of this analysis is grim. Capitalism has been compatible with democracy to the degree that a relative separation emerged between the economy and the state. If the fundamental material interests of capitalists could be guaranteed, they could tolerate a range of political outcomes. Furthermore, to the extent that capitalism was a dynamic growth-oriented system, it created a working class with an interest in expanding rights and a capacity to push for them. This led to a system in which elections had consequences.

But political capitalism undermines democracy on both sides. From the capitalist side, it makes control over the state an economically decisive matter, thereby lowering the tolerance for electoral alternations. From the working-class side, it fragments the working class into privileged and less privileged groups, which undermines collective interest formation and social movement capacity. This political configuration tends to be self-reinforcing and deeply corrosive of electoral democracy.

The shotgun marriage between capitalism and democracy is likely to unravel over the coming decades if the fundamental structure of the political economy is not altered. The crisis of democracy cannot be ascribed to the strategic and messaging failures of center-left parties, or to a nebulous cultural transformation. Rather, it is the character of contemporary capitalism itself that is undermining it. That is a warning to us all.

Dylan Riley is Professor of Sociology at the University of California, Berkeley. He studies capitalism, socialism, democracy, authoritarianism, and knowledge regimes in comparative and historical perspective, and is the author or co-author of six books and numerous articles.

1. Thomas Piketty most famously documents three basic phases of inequality: a high inequality regime prior to the Second World War; a low inequality high growth regime during the thirties glorious years; and a return to higher levels of inequality and lower growth since about 1980. See Capital in the Twenty-First Century (Harvard University Press, 2014), at p. 368, and Capital and Ideology (Harvard University Press, 2020), at p. 16–20. ↩︎
2. See Cédric Durand, Techno-féodalisme: critique de l’économie numérique (Paris: Zones, 2020) and Yanis Varoufakis Technofeudalism: what killed capitalism (Brooklyn, NY: Melville House, 2023). ↩︎
3. For two sharp critiques of the techno-feudalist model see Yvegni Morozov, “Critique of Techno-Feudal Reason,” New Left Review, 133–134 (2022): 89–126, and “Le numérique nous ramène-t-il au Moyen Âge?”, Le Monde Diplomatique, No. 857, 72, August, (2025): 1, 8–9. ↩︎
4. Max Weber, Economy and Society: An Outline of Interpretive Sociology (University of California Press, 1978), at pp. 965–966 and Richard Holcombe, Political Capitalism: How Political Power is Made and Maintained (New York: Cambridge University Press, 2018), at p. 41. ↩︎
5. For an initial statement see Dylan Riley and Robert Brenner, “Seven Theses on American Politics,” New Left Review, 138 (2022): 5–27. A further elaboration of the model can be found in Dylan Riley “The Rise of Political Capitalism, the Crisis of Democracy, and the Strategic Tasks of the Left,” in Politics of Liberation: Conversations with Theory and History, edited by Rosa Vasilaki and George Souvlis (Athens, Greece: Rosa Luxemburg Stiftung, 2025), 79–103. Dylan Riley and Robert Brenner, “The Long Downturn and Its Political Results: A Reply to Critics,” New Left Review (2025), 25–70, responds to a series of objections. Mehrdad Vahabi in Destructive Coordination, Anfal and Islamic Political Capitalism: A New Reading of Contemporary Iran (Palgrave, Macmillan, 2022), 117 describes political capitalism as a form of profit-making based on political appropriation rather than through production. Péter Mihályi and Iván Szelényi. “The Place of Rent-Seeking and Corruption in Varieties of Capitalism Models,” in Market Liberalism and Economic Patriotism in the Capitalist World System, edited by T. Gerőcs and M. Szani (Palgrave, Macmillan, 2019), 67–97 extensively develop the concept of rents as an alternative explanation for Piketty’s evidence. Venelin I. Ganev in “Postcommunist Political Capitalism: A Weberian Interpretation,” Comparative Studies in Society and History, 51, 3 (2009), 648–674, develops the idea of political capitalism as a set of de facto political powers associated with state fragmentation and the violation of formal law. ↩︎
6. Vahabi defines political capitalism as a system in which “profit is extracted from [the] distribution sphere through appropriative activities,” Destructive Coordination, at p. 117, Randall G. Holcombe in Political Capitalism: How Economic and Political Power is Made and Maintained (Cambridge University Press, 2018), p. 41, suggests that political capitalism is a system in which “business profitability depends on connections and cronyism, businesses have to participate in that system to remain profitable.” ↩︎
7. Branko Milanovic in Capitalism Alone (Harvard University Press, 2019), at pp. 96–97, identifies three features of political capitalism: an efficient bureaucracy, the absence of the rule of law, and the autonomy of the state. Strangely, then, he doesn’t really discuss it as a type of capitalism but as a form of state. ↩︎
8. Stephen Maher and Scott Aquanno in “Profitable Immiseration: Finance Capital at the End of the World,” Socialist Register (2026):1–31, 1–2 mush together political capitalism with techno-feudalism and condemn both as rebooted “‘monopoly capital’ theory, which holds that capitalism’s inherent tendencies toward concentration and centralization diminish competition, enabling giant firms to fix prices and rake in ‘super-profits.’” ↩︎
9. Melinda Cooper, Counterrevolution: Extravagance and Austerity in Public Finance (Zone Books, 2024), at pp. 70–71, well explains the close relationship between tax policy and asset price explosion in the case of real estate. Thomas Piketty’s Capital in the Twenty-First Century, at p. 189, documents the historic increase in Tobin’s Q, the difference between the market value and the book value of firms since 1980. See also Jonathan Levy, Ages of American Capitalism: A History of the United States (Random House, 2021), 611–622. ↩︎
10. “Profitable Immiseration” 2 where Maher and Aquanno claim that “Trump did not arise from capitalist decline, but from a political and social crisis generated by the success of accumulation.” ↩︎
11. See Jared Bernstein and Ryan Cummings, “Updating Our AI Bubble Call,” Substack, July 8, 2026. As Fédéric Lordon puts the point, “OpenAI and Anthropic, haemorrhaging money, have yet to generate a single kopeck of profit.” See “Awaiting the Crash?,” Sidecar, July 9, 2026. ↩︎
12. For a good explanation of these dynamics see Jan Eeckhout, The Profit Paradox: How Thriving Firms Threaten the Future of Work (Princeton University Press, 2021), at pp. 10–11 and 76–77. ↩︎
13. Hendrik Bessembinder, “One Hundred Years in the US Stock Markets,” Unpublished Manuscript, March 21, 2026. ↩︎
14. The Profit Paradox, at pp. 9–10. ↩︎
15. Andrew Yamakura Elrod, “What Was Bidenomics,” Phenomenal World, September, 26, 2024 and Eeckhout The Profit Paradox, at p. 10. ↩︎
16. The Profit Paradox, at p. 8. ↩︎
17. Matt Grossman and David A. Hopkins, Polarized by Degrees: How the Diploma Divide and the Culture War Transformed American Politics (Cambridge University Press, 2024), at pp. 1–4. ↩︎
18. For an excellent account of this strategy see David Ost, Red Pill Politics: Demystifying the Far Right From Fascism to Right-Wing Populism (New Press, 2026) especially at page 14. ↩︎