Rate versus Mass…


Bloomberg is pretty giddy over the fantastic share of GDP falling to the coffers of the US national capital:

“U.S. corporations pulled in more profits in the three months ended in September than ever before. Not just in dollar terms—something that happens frequently—but as a share of the economy. According to initial estimates from the U.S. Bureau of Economic Analysis, third-quarter after-tax corporate profits from current production amounted to 11% of gross domestic product. The previous record of 10.7% was set in the second quarter of this year; before that the all-time high was 10.6%, in the first quarter of 2012.”

Awesome, right?

I mean, just look at this chart porn:


By historical standards the rate of profit is … well, almost off the chart.


And the mass of profits — literally obscene:


You would think that with all of this surplus value streaming to the bottom line, it might be time for the fascists to ease up a bit on all the fiscal and monetary stimulus they have been pouring on the so-called economy.

You would think that, but Bloomberg offers reason that this rosy view of things might not be so rosy after all:

“How high did [profits] get before that? In the quarterly data, which go back to 1947, after-tax profits never topped 9% of GDP before 2010. In annual data they did reach 9.1% in 1929. That ill-starred precedent has at times raised concerns that high profit shares are unsustainable, a sign of an economy tilted too far in favor of corporations and their shareholders.”


It turns out that profits are never higher than they are right before a massive crash.

Isn’t that peculiar?

One thing that might help to put all of this in perspective is to do with the Bureau of Economic Analysis and Federal Reserve Bank of New York‘s rate of profit numbers what we have already done to Andrew Kliman‘s rate of profit numbers: namely, subject them to the withering criticism of Marx’s Labor Theory of Value.

Once we apply Marx’s theory to the BEA/FRB-NY rate of profits numbers, we get this result:


It turns out that although the rate of profit is higher now than it has ever been in the postwar period, the mass of profits peaked some time in 2005 and then plunged until 2008. After that, the mass of profits have not recovered in the last thirteen years.

While the rate of profit appears to have dramatically recovered according to government figures, when measured in commodity money the mass of profits realized never recovered. In value terms, the mass of profits is basically where it was in the mid-1960s — just before the 1970s depression erupted.

Is this the reason why neoclassical economists, like Larry Summers, have been whining about stagnation?

Rate versus Mass…