The Capitalism We Cannot Name: Intangible Capital and the Politics of Classification

Our concepts for capital were built for the industrial age, not the post-industrial knowledge economy.

Every era of capitalism ends up described in the language of the one before it. The statistics we compile, the taxes we levy and the political economy we teach rest on concepts forged when capital meant factories, machines and warehouses, things that could be counted, located and, if necessary, seized.

Contemporary capitalism runs on intangible assets nobody can touch or see. The business of the world’s most valuable corporations now consists of naming, owning, renting, pricing and valuing things with no physical form, from software and algorithms to data and brands. Yet the vocabulary we use to describe “capital” has barely moved at all. The gap between the language and the thing is political and distributional, rather than stylistic. Whoever controls the categories of capital (lawyers and accountants) decides where profit appears, who pays tax on it, and who ends up accumulating the wealth.

Take the example of intellectual property (IP). It is one of the most widely used terms to describe the “knowledge-based economy” and global profit shifting, but as I will show, it is also deeply misleading. Intellectual property is a “legal” category (not an accounting one). Patents and trademarks are titles granted by states, filed at patent offices country by country, while copyright attaches automatically to software code or text the moment it is written. All are enforceable in court, and strikingly immobile.

In my ERC project at University College Dublin, we have matched millions of European patents to the corporate groups that own them, and almost all of them sit where they were first filed. The legal title is a poor guide to “value”, because much of what makes these corporations worth trillions, the code, the data, the know-how, the brand, is never registered anywhere at all. When commentators say that multinationals have moved their IP to low-tax jurisdictions, they are gesturing at something real while naming it wrongly, since the titles rarely move, and the most valuable assets have no titles to move at all.

A better term exists to describe IP-based profit shifting – “intangible capital”, which is an accounting category, not a legal one. An intangible asset is anything without physical form that a company has capitalised on its balance sheet, meaning recognised on its balance sheet at a “value”. Intangible capital is the stock of such assets. Within large multi-jurisdictional corporate groups (MJGs), profit-shifting, tax minimisation and wealth protection are played out around the accounting categories of intangible capital assets.

The shift from a legal term to an accounting one makes visible the internal plumbing of profit shifting and wealth protection within MJGs. A licence in an Irish subsidiary to exploit the patent held in the US is not “legal property”, but once capitalised it is an asset that can be turned into wealth like any other. Likewise for “goodwill”, the premium paid in an acquisition above the value of anything identifiable. The same applies to the rights a subsidiary acquires by paying a share of its parent’s research costs.

None of these are intellectual property, yet together they make up most of what now sits on corporate balance sheets. Intangible capital, in other words, names the economy we actually have. Naming it properly allows us to better understand the politics of profit allocation, and wealth concentration within trillion dollar multinational groups.

The relationship between the two terms is the old Aristotelian taxonomic one between “species” and “genus”. Intellectual property is the species, the subset of intangible capital that takes the form of state-granted legal title. Intangible capital is the genus, and most of it never passes through a patent office. Most of it is never registered anywhere; rather, it is held in different places, in different forms. The rough typology below makes the point.

Only the first row is intellectual property in the legal sense. Every row below it becomes intangible capital the moment an accountant gives it a value, and the giving of value is where the politics begins. It is when the capital becomes a wealth-creating asset.

The distinction between law and accounting matters most inside the modern corporate group, a multinational organised as hundreds of legal entities spread across dozens of tax jurisdictions. Within such a group, the entity that holds legal title to an asset and the entity that books the asset and its profit/income can be different companies in different countries. Stranger still, the capital asset itself is often created by the group’s own internal transactions. Or more precisely, its own internal “classifications”.

For example, under American accounting rules “research” is an expense, so the billions a Big Tech group spends on inventing things (such as developing LLMs and other AI tools) are deducted from profit as a cost, and never form an asset on the parent’s balance sheet. The asset only springs into existence at the moment the rights are sold to a subsidiary, at a price (value) the group writes for itself, in an internal hierarchical corporate deal with itself. The same technology that was worth zero in the parent’s accounts now sits in the subsidiary’s own statutory accounts valued at tens of billions, while in the group’s consolidated accounts the internal sale nets out to nothing, which is why the transaction is so hard to see. The highly lucrative intangible capital asset is not discovered or shipped anywhere; it is manufactured by lawyers and accountants through the act of classification.

Ireland is a living experiment in all of this. The American multinationals whose intangible capital sits in Ireland underpin a corporation tax boom the state has come to depend on. The intangible capital of Big Tech and Big Pharma distorts the national statistics so much that Ireland had to invent, in 2017, a new measure of national income, modified GNI, to strip out its effects. Likewise, economists now routinely report eurozone macroeconomic aggregates with Ireland excluded, because Irish accounting swings (driven by US multinationals) are so large they move the measured growth of the whole currency area.

The scale of what this means became visible in 2015, when Apple transferred the rights to exploit its technology outside America to its own Irish subsidiary and Irish GDP jumped by a quarter in a single year. No patents moved; they stayed where they were first filed. What moved was economic ownership, written into contracts between companies that share a parent, and once an Irish company holds, owns or licenses those rights, the profits earned on sales across Europe and beyond are booked in Ireland and taxed in Ireland.

When the national accountants recorded the relocation, the only category available to them was called “intellectual property products”, a label that performs the exact confusion this essay is trying to clear up, because the national accounts were designed in the age of factories. Asking them to measure intangible capitalism is like using Newtonian physics to describe the quantum world: the old instruments assume an object has one value in one place, and this capital holds two values in two places at once.

What the Irish balance sheets reveal is that intangible capital lives a triple life. An Irish subsidiary can be an owner, buying the rights outright and carrying them as assets, as Apple’s did. It can be a tenant, paying the American parent royalties (rent), or a share of its research costs, for technology it will never own, which is how Google operates in Ireland. And it can be a landlord, licensing the technology onwards to sister companies in Paris, Frankfurt and Madrid, so that the profit on a software product sold in France ends up booked in Dublin (this is Microsoft). The Big Pharma groups run two of these lives at once, “owning” the old medicines in Ireland while “renting” the pipeline from America.

Once the three lives of intangible capital are visible, datasets that appear to contradict one another turn out to agree: the patent records see the legal deeds, whereas the royalty flows can be understood as rent flowing out of a country. In our data, Ireland’s stock of patent titles has roughly doubled (registered) while its stock of intangible assets has quadrupled (assets held on a balance sheet). The growth is in the genus, that is, in intangible capital assets that were never intellectual property (a specific species) in any legal sense. Tax avoidance and the allocation of profit turn on this distinction between law and accounting: the company that holds legal title and the company entitled to the profit can be different entities in different countries, and it is that separation, rather than any headline tax rate, that decides where profits are booked and how lightly they are taxed.

What shapes all of this is a form of “pre-distributional” power that political science does not yet have a name for: power over who gets what, exercised before taxes and transfers ever arrive. The discipline knows two kinds of business power, the instrumental kind (lobbying and campaign money) and the structural kind (the threat to take investment elsewhere). The power at work in multinational accounts is a third kind, exercised through law and accounting, a politics of the balance sheet. We call it legal-accounting power: the capacity to decide what counts as a cost and what counts as capital, what is owned and what is rented, and what a thing is worth when a corporate group sells it to itself. Those classifications are where profit is allocated, wealth created, and tax avoided.

And the tax avoided is the one that matters most for democracy: corporate tax reaches a fortune while it is still being made, where a wealth tax arrives only after it exists.

Parliaments can only tax what their categories let them see. A democracy that cannot name what capital has become cannot measure it, and what it cannot measure it cannot tax. Until our concepts catch up with intangible capitalism, in the national accounts, in the tax code and in political economy itself, we will keep regulating the capitalism we used to have. And when a society loses the ability to name things properly, there is only one winner: the lawyers, accountants and corporations that already write the categories.

Aidan Regan is Professor of Political Economy at University College Dublin.

This column was polished and edited using Claude (Anthropic).

Feedback: aidan.regan@ucd.ie