This book aims at examining the impact of the emergence and growth of the modern corporation – the joint stock company (hereafter JSC) – on advanced capitalist economies, in particular on corporate control and shareownership, consumers' choice, the mobilization of financial capital and the saving function, and capitalism's potential inherent tendency towards stagnation and crisis.

The principal feature of the modern corporation is that, unlike its predecessor – the small nineteenth-century firm – it is not owned by an individual tycoon or family but rather by the public at large through shareholding. The result of the historical emergence and dilution of shareownership is a tendency towards the socialization of corporate ownership (hereafter SOCO), or equivalently a tendency towards the socialization of the ownership of the means of production (hereafter SOMP) in advanced capitalist countries.

In this book, I identify two stages in the above tendency. First, direct or voluntary shareholding, i.e. the direct purchase of corporate shares by those households willing and able to do so. Second, indirect, often compulsory, shareholding. This is mainly associated with the so-called pension funds revolution, i.e. the introduction and expansion of compulsory funded occupational pension fund schemes. The role of such schemes is to ‘defer’ a part of the wage earners' income in order to finance their future retirement. In the meantime the income of the funds is invested by those who control them, mainly industrial firms or financial institutions, in the purchase of corporate shares, government securities, etc., at home or overseas.

At the microeconomic or individual level the tendency towards the socialization, of the ownership of the means of production (SOMP) and its associated possibility that not all shareholders are in control of firms raises the important question as to whether corporate policies represent a consensus outcome of all shareholders' preferences, or rather an imposition of the preferences of some controlling shareholders and/or managers on the rest, the non-controlling shareholders. Particularly important is the decision as to what proportion of profits to pay out as dividends to the shareholders, the pay-out ratio, which simultaneously determines the part of profit retained within the corporation, the retention ratio. The importance of this decision arises from the possibility that changes in the retention ratio may lead to changes in the proportion of private (personal plus corporate) income saved for the purpose of capital accumulation. In addition, given that, unless such changes are in line with the preferences of all shareholders, the location of control within the giant corporation may be directly linked with financial capital accumulation, through constraining the choices of the non-controlling shareholders as to what proportion of their private disposable income they will consume/save. This latter possibility has become the subject of debate between three different schools of thought in economics; the neoclassicals, the managerialists and the Marxists.

In the neoclassical tradition the possibility that corporate decisions on retentions may not reflect the preferences of all shareholders does not arise.

A necessary condition for the continuation of the process of capital accumulation in a capitalist economy is the availability of saving. Not surprisingly, the question of who ‘abstains’ from consumption so that financial capital accumulation can take place has assumed prominence in the history of economic thought.

According to the classical economists, the only source of saving was capitalists' profits. Workers were simply not earning enough to save, thus using all of their income to finance their subsistence level of consumption. The inequality in the ownership of the means of production and the associated existence of an owning class and a non-owning class is, according to the classical economists, the key to the accumulation of capital.

The classical view on saving has survived to-date in the writings of Kalecki as well as in the work of some economists in the Marxist tradition. In more recent years, however, a variation of the classical saving function was proposed by the followers of Keynes and became the subject of fierce debate between its proponents and critics. According to this neo-Keynesian Saving Function, both workers and capitalists save, but the proportion of saving out of (capitalists' income) profits is higher than that out of (workers' income) wages. An important reason for that is suggested to be the retention of profit within the corporations.

The neo-Keynesian interest in corporate retention, I suggest, represents a tendency towards a shift of emphasis on the issue of saving from the consumer to the corporation.