OK this is US data, but the US is very like the UK in this respect:
Corporate profits just hit another all-time high.
Image: St. Louis Fed
Corporate profits as a percent of the economy are near a record all-time high. With the exception of a brief happy period in 2007 (just before the crash), profits are higher than they've been since the 1950s. And they are VASTLY higher than they've been for most of the intervening half-century.
Image: St. Louis Fed
Source: here
The evidence is unambiguous. We're not all in this together. Far from it. The current world is very good for the wealthiest and dire for the rest.
I worry, I really worry, about how long this can go on without major social breakdown. I just can't see how that is possible.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
This is exactly what you would expect: big corporations repair their balance sheets, while the shrinkage of the shadow banking sector leads to a lack of demand and thus lending, and the unemployed, their families, and the small businesses suffer. And as Shiller said, when the downturn comes, as price-to-earning-to-price feedback sees public confidence hit by asset price movements, fiscal stimlus is necessary.
The corporate profits after tax has to be read in conjunction with corporate tax receipts otherwise it gives a skewed impression.
http://research.stlouisfed.org/fred2/series/FCTAX?cid=107
I watched this documentary on you-tube by Bill Still. He is convinced that the corporations creaming off the most profits from society are the banks. They do this by creating money out of nothing, and charge interest on it, which creates the national debt when it is the government is borrowing. I would say government borrowing is increased with reduced tax receipts so the banks get a double benefit with neoliberal governments, they pay less tax and profit from the interest.
I would be interested in your opinion of his views.
http://www.youtube.com/watch?v=JXt1cayx0hs
http://www.youtube.com/watch?v=swkq2E8mswI
He is right
I explore the issue in my forthcoming book and suggest ways to tackle it
What’s missing from this analysis is that ever since lending rules were relaxed, and as a direct result, house prices have increased massively. And, let’s be clear, house prices are determined by the site (land) value, not the building materials. The main beneficiaries of house price inflation have been the banks via mortgage interest payments. In effect, the banks have become the main rent collectors. Take a look at Michael Hudson’s site.
What was going on in the early 80’s? That would have been Reagan’s first term, yet it saw profits sink to their low point (as a percentage – which would seem like the better measure, as it implicitly adjusts for inflation/money supply)
Per Carol’s point above, it would be interesting to see the data with financial services excluded.
[…] (5) http://www.taxresearch.org.uk/Blog/2011/10/13/whats-wrong-with-the-economy-in-two-graphs/ […]
Surely strong profits is a good sign, it means society can pay for the welfare programs and transfers in the economy. High profits also mean pensions will be doing well ensuring good living standards for the future pensioners The two graphs are good signs not things that are wrong. each corporation on the whole compete for business, If they do not provide things which people do not voluntarily decide to buy the corporations goes out of business. Perhaps the title should read “The Great Achievements of Capitalism”
Strong profits can also mean monopoly exploitation …. And very strongly does in this case and thatbis why I do not in any way agree with your hypothesis
Strong profits also mean weak wages, leading to weak demand.
Carol Wilcox I wonder if you have heard of Professor Ravi Batra, he speaks of the “wage gap” to explain a lot of the weakness in the US economy, He has written many excellent books and predicted much of what is happening today. His many interviews are available on youtube.
Surviving the Great Depression of 1990 by Raveendra N. Batra (publ .Oct 2, 1989)
What the charts never tell you is the proportion of GDP represented by land rent (self-evidently unearned, whilst many of us would maintain that profits are also unearned), much of which fills the coffers of the banks and other financial institutions.
Booming land prices are a good indicator of an economy about to bust, The “Cantillon effect” which shows that where ever you see record breaking tall skyscrapers being built a bust soons follows,