The evolution of American capitalism

In the United States over the longest period possible, we examine: The return on equity (RoE) and the gap between it and the long-term interest rate; The distribution of income between wages and profits; The share of the equity market owned by institutional investors; How companies finance themselves; Corporate share buybacks; Income inequality. We find that: The signs of financial capitalism (high return on equity, skewing of income distribution to the detriment of wage earners, share buybacks, widening income inequality) appeared in the mid-1980s; The transition to market-based corporate finance and the sharp rise in share ownership among institutional investors contributed to this shift towards financial capitalism.