salomonna
27.02.05, 00:42
Capitalists are grabbing a rising share of national income at the expense of
workers
WOODY ALLEN once quipped “If my films don't show a profit, I know I'm doing
something right.” For most other people, in most other circumstances, profit
is a mark of success, and in most countries corporate profits are currently
booming. Last year, America's after-tax profits rose to their highest as a
proportion of GDP for 75 years; the shares of profit in the euro area and
Japan are also close to their highest for at least 25 years. UBS, a Swiss
bank, estimates that in the G7 economies as a whole, the share of profits in
national income has never been higher. The flip side is that labour's share
of the cake has never been lower. So are current profit margins (and hence
equity values) sustainable? Are they fair?
Corporate profits may be inflated in various ways. If firms made full
provision for the future cost of pensions, their earnings would be smaller.
And especially in America, the share of profits in national income has been
bolstered by the surging profits of the financial sector which have benefited
hugely from falling interest rates. Even so, the impressive efforts of
American firms to boost productivity and cut costs are genuine (see article).
Firms elsewhere, notably in Japan and Germany, are also restructuring
aggressively. The share of profit in GDP always rises sharply after a
downturn, but in the United States a bigger slice of the increase in national
income this time has gone to profits than in any previous post-war recovery.
Over the past three years American corporate profits have risen by 60%, wage
income by only 10%.
