The US rate of profit in 2020

Once again, it is time to look at what is happening to the rate of profit on capital in the US.  I do this every year and the official US data are now available to measure the rate of profit up to and including 2020 – the year of the COVID.

As I have said before, there are many ways to measure the rate of profit (for the various ways, see http://pinguet.free.fr/basu2012.pdf) a la Marx.  I prefer to measure the rate of profit by looking at total surplus value in an economy against total private capital employed in production; to be as close as possible to Marx’s original formula of s/C+v, where s = surplus value; C = constant capital – which should include both fixed assets (machinery etc) and circulating capital (raw materials and intermediate components); and v = wages or employee costs.  My calculations can be replicated and checked by referring to the excellent manual explaining my method, kindly compiled by Anders Axelsson from Sweden. 

I call my calculation a ‘whole economy’ measure, as it is based on total national income after depreciation and after employee compensation to calculate surplus value; net non-residential private fixed assets for constant capital (this excludes housing and real estate); and employee compensation for variable capital. But as said above, the rate of profit can be measured just on corporate capital or just on the non-financial sector of corporate capital.  Profits can be measured before or after tax and the fixed part of constant capital can be measured based on ‘historic cost’ (the original cost of purchase) or ‘current cost’ (what it is worth now or what it would cost to replace the asset now).

Most Marxist measures actually exclude any measure of variable capital on the grounds that ‘employee compensation’ (wages plus benefits) is not a stock of invested capital but a flow of circulating capital turning over more than once in a year – and this rate of turnover cannot be measured easily from available data.  So most Marxist measures of the rate of profit are just s/C.  But some Marxists have made attempts to measure the turnover of circulating capital and variable capital (wages) so that these can be added to the denominator, thus restoring Marx’s original formula s/C+v. 

Brian Green has done some important work in measuring circulating capital and its rate of turnover for the US economy, in order to incorporate it into the measure of the rate of profit. He considers this vital to establishing the proper rate of profit and as an indicator of likely recessions.  Here is Green’s recent post on this: https://theplanningmotivedotcom.files.wordpress.com/2021/11/1997-2020-various-rates.pdf

On his formula, Green finds there is an average turnover of circulating capital of around 4 (Graph 2) and he shows in Graph 10 that circulating capital averages (over nearly 25 years) about 22% compared to fixed assets with little variation.  Green’s work is valuable in showing the short-term variations in rates of surplus value and profit caused by changes in circulating capital, but it does not alter significantly the longer-term trends in the rate of profit.  Moreover, if you include circulating capital and variable capital in the measurement of the rate of profit, this will make a difference to the level of the rate of profit, but not much difference to the trend and turns in the rate of profit. 

Anyway, here is my ‘whole economy’ measure of the US rate of profit on the stock of capital from 1945-2020.

HC means the historic cost measure and CC means the current cost measure of fixed assets in C.  It used to be a big discussion over which measure of fixed assets to use to get closer to the Marxian view. For an explanation of this debate, see my previous posts and my book, The Long Depression (appendix).  The two measures differed in the 1960s particularly and from the 1990s. The difference is caused by inflation. If inflation is high, as it was between the 1960s and late 1980s, then the divergence between the changes in the HC measure and the CC measure will be greater – see http://pinguet.free.fr/basu2012.pdf.  When inflation drops off, the difference in the changes between the two HC and CC measures will narrow. From 1965 to 1982, the US rate of profit fell 23% on the HC measure, but 37% on the CC measure.  From 1982 to 1997, the US rate of profit rose just 15% on the HC measure, but rose 35% on the CC measure. But over the whole post-war period up to 2019, there was a secular fall in the US rate of profit on the HC measure of 33% and on the CC measure 33%!

What you do notice from my ‘whole economy’ measure is that the US rate of profit appears to have risen from 1982 up to a peak in 2006 to reach a level not seen since the ‘golden age’ of the 1960s.  Does this mean that the US capitalist economy was doing okay after all?  I think not, because the ‘whole economy’ measure includes profits from the financial sector which have rocketed as a share of total profits in the US since the 1990s, in particular.  Indeed, the rise in the share of financial sector profits since 2014 and particularly in the year of the COVID 2020, has been staggering.  This has been driven by Federal Reserve injections of near zero-cost credit to the banks and financial institutions, enabling them to speculate in financial markets and reap net interest income and huge commissions.

The financial sector does not create new value; it takes a cut from the profit extracted from labour in the non-financial sector.  And if we look just at the non-financial corporate sector (NFC), a proxy for what we might call the ‘productive’ part of the capitalist economy (where workers create new value for capitalists), then it is a different story.  Here I use the measure of the rate of profit for the US non-financial sector that has been carefully calculated by Deepankur Basu and Evan Wasnur.  I have replicated their results and highlighted where the rate of profit fell and rose. https://dbasu.shinyapps.io/Profitability/

The profitability (P1) measure from Basu-Wasner above is based on the current cost of fixed non-residential assets.  And it does not deduct taxes, interest and dividend payments.  I have replicated this version because it shows the overall ‘health’ of the US productive sector, before government subsidies or monetary support.  What P1 shows is that there has been a secular fall in the US rate of profit on non-financial capital over the last 75 years.  Basu-Wasner calculate the average annual fall in the rate of profit at -0.43%.  Between 1945 and 2020, the rate of profit fell 46%. 

But this was not in a straight line. In the so-called ‘golden age’ of post-war US capitalism, the rate of profit was very high, averaging around 20% on this measure and the level rose 6% from 1945-1965.  But then came the profitability crisis period between 1965 and 1982, when the rate of profit fell 44%.  This provoked two major slumps in 1974-5 and 1980-2, and led to capitalism trying to restore the rate of profit with the neo-liberal policies of privatisation, the crushing of unions, the deregulation of finance and globalisation from the early 1980s.  The neoliberal period 1982-97 saw the rate of profit in the non-financial sector rise by 34%, although at the 1997 peak, the rate was still below the average in the golden age.  Then came a new period of profitability crisis, which I have dubbed the Long Depression.  In this period, which includes the Great Recession of 2008-9 and, of course, the COVID slump of 2020, the rate of profit fell 33%, with a 21% fall in 2020 alone!  In 2020, the US rate of profit in its non-financial sector reached a 75-year low.

This brings us to the causes of the changes in the rate of profit. According to Marx, changes in profitability depend primarily on the relative movement of two Marxian categories in the accumulation process: the organic composition of capital (C/v) and the rate of surplus value (exploitation) (s/v). On the Basu-Wesnan current cost measure, since 1945, there has been the secular rise in the organic composition of capital of 50%, while the main ‘counteracting factor’ in Marx’s law of the tendency of the rate of profit to fall, the rate of surplus value, has actually fallen over 25%. So the rate of profit fell 32% from 1945.

Conversely, in the so-called ‘neo-liberal’ period from 1982 to 1997, the rate of surplus value rose 14%, more than the organic composition of capital (9%), so the rate of profit rose 34%. Since 1997, the US rate of profit has fallen around 33%, because the organic composition of capital has risen nearly 30%, outstripping the rise in the rate of surplus value (3%).  The results for the latter dates are slightly misleading because in the first 14 years of the 21st century, the US rate of surplus value rose nearly 60%, easily outstripping a 23% rise in the organic composition of capital, and so leading to a sharp rise in profitability of 22%.  Most of this rise in the rate of exploitation took place in the credit-fuelled boom of 2002-7.  But since 2014, there has been a significant fall in profitability leading up to the COVID slump of 2020.

One of the compelling results of the data is that each post-war economic recession in the US has been preceded by (or coincided with) a fall in the rate of profit and then by a fall in the mass of profits. This is what you would expect cyclically from Marx’s law of profitability. https://thenextrecession.wordpress.com/2021/08/25/the-rate-and-the-mass-of-profit/

I have argued in many places that the profitability of capital is key to gauging whether the capitalist economy is in a healthy state or not. If profitability persistently falls, then eventually the mass of profits will start to fall and that is the trigger for a collapse in investment and a slump. https://thenextrecession.wordpress.com/2015/11/24/marxians-marxists-profitability-investment-and-growth/

The COVID slump took non-financial corporate profits down 20% in 2020.  In percentage terms, according to the latest official quarterly figures, profits could have bounced back 25% in 2021.  If that is right then, the NFC rate of profit in 2021 will be about 14%, or about a 20% recovery.  But that would mean a profit rate still near historic lows and still lower than pre-pandemic in 2019.

36 thoughts on “The US rate of profit in 2020

  1. “What you do notice from my ‘whole economy’ measure is that the US rate of profit appears to have risen from 1982 up to a peak in 2006 to reach a level not seen since the ‘golden age’ of the 1960s. Does this mean that the US capitalist economy was doing okay after all? I think not, because the ‘whole economy’ measure includes profits from the financial sector which have rocketed as a share of total profits in the US since the 1990s, in particular.”

    This is a crucial observation, because many First World leftists today say Marx was only correct “for 19th Century industrial revolution capitalism”. They often degenerate to Postmodern “theories” (immaterial value, work that creates “intangible value” etc.) and outright right-wing traps in doing so.

    The truth is much more prosaic: isolated nation-state data do not reflect the state-of-the-art of capitalism anymore, because capitalism is more globalized and specialized alongside international borders than ever. In the case of the USA, it is patent that the nation is specializing into the financial sector, thus consolidating itself more and more as the financial superpower. When a country specializes, it is self-evident it doesn’t represent the totality of capitalist sociometabolic reproduction anymore. Put in other words, if a nation-state is mainly a finance economy, then it is obvious it won’t follow the traditional TPRF pattern (see the extreme cases of economies like Luxembourg, Qatar, UAE, Monaco etc.).

    If we could take a true global OCC, RoSV and RoP data, then Marx’s LTPRF will be proven to be scientifically correct beyond all reasonable doubt.

    The irony of modern-day Postmodern critique of Marxism lies in the fact that they use an internationalist narrative/rhetoric/façade to defend a strongly nationalist view of the laws of capitalist economy, while Marx’s theory is the true internationalist take on it. When we go to politics, the whole thing gets even more hilarious, as they often accuse Marx of being “Eurocentric” – when that’s actually a disease of modern-day Trotskyism (and, alongside the Postmoderns, of the so-called “Social-Imperialists”/”NGO capitalists”), not Marxism.

    1. Think if you break it down, the improved profitability is concentrated in the 1993-1998 period. After the Volcker double dip recession, say 1983, profitability did bounce off its low, like a dead cat bounces when thrown out the window.

  2. Where is are the tech giants in all this? Facebook, Apple, Amazon, Netflix, Google, Microsoft, etc. Are they financial or industrial or? Seems they are part retail, part production, part communications…

    1. The tech giants are in the non-financial sector according to the BEA official sources. And that is right because their revenues from financial sources are small compared to their revenues from the main operations.

      1. Correct. And the irony is that nearly 40% of the Value Added by the Tech companies mentioned above is value transferred from the non-financial sector primarily in the form of advertising revenue.

      2. Amazon has a huge internet services area, as well as a large warehouse and communications hardware systems network. Very different from Blackrock or most financial banks, which employ few and have little static capital. Apple manufactures products all over the world, then supplies the software. Microsoft is similar. I’ll take your word for it, but it seems some of these firms straddle sectors in reality.

    2. «Where is are the tech giants in all this? Facebook, Apple, Amazon, Netflix, Google, Microsoft, etc. Are they financial or industrial or?»

      There is a difficulty here, that they are quite different as to that, even if ostensibly they are not in the financial sector because they sell products (goods and services) that are not financial in nature; the problem is “vendor financing”: a lot of the sales of the tech giants are financed by debt, whether directly arranged by the vendors, or just sloshing around. In particular consider Apple:

      * Steve Jobs defined it as the “BMW” of computing, that is a luxury niche brand.

      * So the market for ultra-luxury mobile phones with a price of $800 each should be quite small, confined to rather affluent customers.

      * But actually the market for $800 iPhones is a mass market, it is huge, and that is because of vendor financing: very few people who purchase an iPhone can afford to pay $800 up-front, they buy them on instalment plans, via debt-financed mobile plans where most of the plan cost is very-high-interest rate instalments for the phone rather than the communication service.

      * That the true price of an iPhone is obfuscated by the debt financing of a plan also makes the price higher, as consumers become less keen to negotiate it down.

      * Compare with Apple’s other products: by comparison with iPhones they are not mass-market, because you cannot buy a MacBook etc. on a debt-financed instalment plan.

      Except that of course MacBooks and much else can be bought on credit cards…
      This is not limited to tech companies that sell consumer products: lots of businesses buy stuff if the vendor can arrange a financing plan, which boosts both units sales and price as the buyer becomes less price-sensitive. CFOs are very keen to improve their short-term metrics and their tax avoidance with various forms of leasing.

      So even if the tech giants are not directly part of finance, the level and margins of sales depend *a lot* on the availability of lots of cheap vendor financing. And it was ultra-leveraged vendor financing that was at the root of GFC, and much else, since the Fed etc. bailed out the stockmarket after the dot.com bust of 2001 (which coincided with the entry into the WTO of China…).

  3. I just find strange, Michael, that after more than 10 years and one cannot find a couple of articles on the political economy of the Middle East and North Africa and Africa. The most one gets across is a poorly-researched piece on Palestine and it came because of an event.

    If one can write about Japan and South Africa, what does prevent you from writing about a region that has been more crucial for global capitalism in the last 40 years than the aforementioned countries?

    I have tried to find a reason behind this in the last few years, especially after the the theme of ‘the falling rate of profit’ has become repetitive, narrowing the scope of research. I cannot find any when I look at the tens upon tens of books published about the region since 2011.

    1. Well Nad, I am sorry that I have not done enough posts on the Middle East apart when there is ‘an event’. But I cannot do everythingn and actually this blog is mainly about Marxist economics, not about events in various regions. I apologise for my repetition of the falling rate of profit theory – if it bores you so much and there is nothing about the Middle East, perhaps it is time you moved on to another more interesting and useful site.

  4. Hi Michael, thank you for the reference. I wish I could join you in being able to choose an economy wide rate of profit rather than confining it to the corporate sector. But there are very good reasons why not to. I draw your readers attention to NIPA Table 7.12 where the BEA lists its imputations. Lines 40 and 42 detail the Net Operating Surpluses with and without imputations. The raw Surplus (line 40) amounts to $5.135 trillion while the imputed adjusted figure comes in at $3.788 trillion. One of the reasons for this huge discrepancy is the issue of owner occupied rents which in this case is taken to be $0.555 trillion.

    In fact when we look at line 154 we find that Owner Occupied Rents adds $1.754 trillion to national income or 8.7% of the total. Generally owner occupied rents will add both to the size of the financial sector where it is found under Real Estate as well as to its surplus. That is why the surplus of the Real Estate sector is three times bigger than the Banking surplus and why it is so large relative to worker compensation. Similarly the income and surplus of the Federal Reserve is found under Finance. As of 2020 the FED boosted the financial sector by $1.053 trillion or 5%. (As an aside strip what amounts to nearly 14% of National income from Finance and we find it has hardly grown as a share of national income.)

    And this is before we have to discuss the issues relating to the non corporate sector which includes sole proprietors and partnerships. For example the income of a worker forced to be self-employed, typical of the geek economy, is treated as surplus not as a wage.

    From this small extract we can see how inflated the economy wide surplus becomes. This is the primary reason your rate of profit is about a quarter higher on average than the rate obtained using the net surplus divided by fixed and circulating capital in the non-financial corporate sector. But yes you are right the trends are duplicated because both rates use the same numerator – profits – which changes with the phasing of the cycle. Only the denominator varies between the rates leading to different relative values.

    In the end of course we agree that the rate of profit is the pulse of capitalism describing the health of the system. This is what is so important. By 2019, prior to the outbreak of the pandemic, the after tax non-financial corporate profit rate had fallen to the point where it barely covered the cost of capital (primary bank rates).

    Brian Green.

  5. re: Profit Margins: The Death of a Chart

    “Philosophical Economics” did an article on the increased profits in one of those time periods and found it to be a measurement problem due to globalization. Here is a quote from that article:

    [quote]
    CPATAX/GDP: Identifying the Mistake

    The expression CPATAX/GDP contains an obvious distortion. CPATAX is a “national” term–it refers to the after-tax profit of all U.S. resident corporations, whether that profit is earned domestically, or from operations in a foreign country. GDP, in contrast, is a “domestic” term–it refers to the total gross output (and therefore the total gross income) produced (and earned) inside the United States, whether that income is earned by U.S. residents or by foreign entities.

    Notice that if a U.S. corporation earns a profit from affiliate operations abroad, the profit will be added to the numerator of CPATAX/GDP, but the costs will not be added to the denominator, as they should be in a “profit margin” analysis. Those costs, the compensation that the U.S. corporation pays to the entire foreign value-added chain–the workers, supervisors, suppliers, contractors, advertisers, and so on–are not part of U.S. GDP. They are a part of the GDP of other countries. Additionally, the profit that accrues to the U.S. corporation will not be added to the denominator, as it should be–again, it was not earned from operations inside the United States. In effect, nothing will be added to the denominator, even though profit was added to the numerator.

    General Motors (GM) operates numerous plants in China. Suppose that one of these plants produces and sells one extra car. The profit will be added to CPATAX–a U.S. resident corporation, through its foreign affiliate, has earned money. But the wages and salaries paid to the workers and supervisors at the plant, and the compensation paid to the domestic suppliers, advertisers, contractors, and so on, will not be added to GDP, because the activities did not take place inside the United States. They took place in China, and therefore they belong to Chinese GDP. So, in effect, CPATAX/GDP will increase as if the sale entailed a 100% profit margin–actually, an infinite profit margin. Positive profit on a revenue of zero.
    [end quote]

    source: https://www.philosophicaleconomics.com/2014/03/foreignpm/

    1. I have just read your linked article. The author misunderstands how the System of National Accounts is constructed. It is constructed on the basis of value added by domestic industry using the value of final sales (with opening and closing inventories netted out), as Marx first proposed in Volume 2 to avoid duplications. In turn this value added is the sum of past labour passed on (depreciation or the consumption of capital) plus labour newly added in the form of necessary and surplus labour, or c + v + s which translates into gross surplus plus remuneration. While it is true that Table 1.14 incorporates profits produced outside the USA, the rest of the Tables do not especially the vital GDP-by-Industry KLEMS series. The real problem is somewhat different. It is caused by the transfer of value between countries especially the upward transfer of value from say China to the USA which when realised in the USA boosts the value of final sales within the USA and therefore its GDP. All I will say is that it is possible to gauge that transfer using the Import Price Index and the Producer Price Index based on their divergence. Simply put the divergence is between underpriced inputs and fully priced outputs in the USA.

      Actually I do approve of Table 1.14 because it provides a true picture of the profitability of US corporations. Of course this could obscure what is going on in the USA itself, but given that the preponderance of profits are produced within the USA itself, this confounding factor is not highly significant.

      1. Just a quick correction. The final sales within the USA. PPI represents prices after the discounts given to the distribution sphere such as retailers which forms their margin which is why PPI & CPI differs.

  6. Wow! Not only you mispresented my comment, but you expressed intolerance. Do you mean Marxist economics doesn’t cover MENA region? Is there not rate of profit in the economy of MENA? Is not the region a very integrated part in global capitalism? Are not the Gulf states important players in the global finance circuit? Is there not a Marxist analysis of the political economic causes of the Arab uprisings?

    I “cannot find a couple of articles on the political economy of the Middle East and North Africa and Africa.” Are you saying that Marxist economics is not interested in the region?

    “this blog is mainly about Marxist economics, not about events in various regions.” Yes, indeed. followed your blog for years and I know quite well that it’s main focus is Marxist economics. I never said you should write about events. I am puzzled by the way you read my comment and distorted it.

  7. Hello, Michael; I have a question. It comes from two related ideas which concern me. One is that much of politics in the western world is just a fight between financial and industrial capitalists, with different interests. The other is that the confused response to covid is part of this fight. Financial capitalism seems to benefit greatly from the pandemic and seems to want it to continue. Industrial capitalism is being destroyed by the pandemic and reacting by trying to “force open” the economy and demanding a “herd immunity” approach to covid.

    Your graphs seem to confirm this. Am I reading them right?

    For what its worth, I have done some blogging of my own on this theme. If there is interest in that, find it at https://yaxls.wordpress.com/2021/11/03/the-covid-war/

    1. Silence no doubt means consent. I will likely cite this article in some future writings of mine on the topic.Sure you would like the extra traffic.

    2. How you calculate organic composition of capital? Did you just use the annual compensation in the denominator, or did you divide them by the number of turnovers? I think the P. Jones’s OCC calculation method is the best and as close as possible to Marxist theory (although even his VCC calculations show an increase of three times in more than 60 years, the data of Tsulfidis and Tsaliki show almost the same).

      1. Both Jones and tsoulfidis provide a very good analysis. Yes, if you want you can divide annual compensation by turnover times. That just reduces the v in the denominator so that fixed element of constant capital is even more determinant of the rop. That is why many rop calculations do not bother with measuring v in the formula s/C+v

    3. «One is that much of politics in the western world is just a fight between financial and industrial capitalists, with different interests.»

      There are several factions in the “right”, which I personally define as “incumbents” rather than “capitalists”, and some of them are:

      * Residential property interests.
      * Commercial finance interests.
      * Investment finance interests.
      * Industrial interests.

      Which factions dominate changes with time and place, but most anglo-american countries today seem to be dominated by property rentiers allied with investment finance interests, and commercial finance and in particular industrial interests are in a subordinate position. This is not a new phenomenon, but it has become more important with time:

      https://www.theguardian.com/commentisfree/2009/jul/09/financial-services-act-city
      «The weight given to the City’s interests over a long period has seriously distorted our economic performance – and the more successful the City seemed, the more important its earnings to our national accounts, the more other parts of the economy were allowed to wither away. The problem is not a new one; it was Winston Churchill who, as chancellor of the exchequer, remarked in 1925, “I would rather see Finance less proud and Industry more content.” An excessive attachment to the interests of those who hold and manipulate existing assets, at the expense of those who want to create new wealth, is, after all, a characteristic of mature economies that have substantial assets to protect – and we have been a mature economy for 150 years.»

      Another view is that USA politics in particular is dominated by an ongoing struggle among:

      * East coast finance.
      * Texas oilmen.
      * Midwest agribusiness.
      * West coast technologists.
      * Military industries a bit everywhere.

      There used to be another powerful faction, Northern industrialists, but northern industry became “infected” with labor unions, and to expunge them the USA elites decided to destroy (mostly by way of offshoring) the industries the labor unions had infected.

      1. This is interesting. I am puzzled why there is so little effort to look into the factions of the ruling elite.

        About the Northern Industrialists, it seems like these people destroyed themselves by offshoring. They thought they could maintain their profits by buying low abroad and selling high domestically. I suspect that they got eaten up as they fell behind technologically.

        It also seems to me that the financial capitalists are different from the other industrialists. The big thing is they want the population to decline, not grow. Their own holdings would be more valuable if the rest withered away. They are the ones mainly pushing the “climate change” thing.

        Know any good blog which does research into all this?

        https://yaxls.wordpress.com/2021/11/03/the-covid-war/

  8. And once again, as I’ve commented to similar posts before, the profits include corporate portfolio investments from financial asset speculation (stocks, bonds, forex, etc.) which, according to Marx’s falling rate of profit tendency, do not constitute profits from productive labor and therefore should be discounted. How do you separate out portfolio profits globally from production profits by productive labor only? If you can’t, your data is indeterminate.

  9. Hello Michael! I try to follow the blog regularly. Thank you very much for your hard work and effort. Of course, the decrease in profit rates is an important indicator for understanding the capitalist crisises, but I think that the total profit mass stands out as another important indicator, especially with the extraordinarily accelerated increase in the level of monopolisation and the growth in the excess capital. If you have an article in the past which you examine the changes in the total profit mass as HC and CC, I would appreciate it if you could share the link. If you haven’t, would you consider doing a study on this topic?

    1. Scott I think we can link profitability with new periods of intensity of class struggle. Eg falling and the 1970s and rising and neo liberal period. I write tentatively about this in my book The Long Depression and in my chapter on the UK in World in Crisis, both published by Haymarket

  10. Every time Michael presents new calculations on the fall in the rate of profit, the same objections come from people who want to calculate their rate of profit differently. They should! But then please also bring a timeline with your calculations so that it can be seen whether your rate of profit calculation really leads to different conclusions.
    Alternatively, everyone has the option not to speak of THE rate of profit, but to characterize his rate of profit calculation more closely: as Michael does, for example, with his “overall economic rate of profit” of the US at the beginning of his analysis.

    1. I was thinking along the same lines. Michael (and Brian, and others) have shown their curves, and demonstrated that they forecast crises (in the sense of Granger causation, for example).

      I’m open to Dr. Rasmus’ argument that national governments allow corporations to muddle their accounting so that their reported rate of profit does not reflective the productive sector.

      But the burden of proof falls on them to show that these accounting tricks can affect the tendency. It would be easy to do so: just show that using different, and demonstrably legitimate, numbers for the rate of profit, it’s possible to generate a different TREND (meaning, not just the values themselves, but what they show over time) from the one Michael et al. have obtained. If it’s possible to show that you can use different data to show a rising RoP, or one that goes up and down without rhyme or reason, or one that doesn’t correlate well with crises, then we could discuss whether the RoP is really indeterminate.

  11. It’s not only Michael and Brian. The FED, the BEA, the ONS in Britain and other governments regularly produce Rates of Returns. Seems in private it shapes policy while in public they deny the centrality of profit and its link to investment.

  12. The financial sector does not create new value; it takes a cut from the profit extracted from labour in the non-financial sector. And if we look just at the non-financial corporate sector (NFC), a proxy for what we might call the ‘productive’ part of the capitalist economy (where workers create new value for capitalists), then it is a different story
    Again I don’t understand :
    If productive capital is not making high profit and financial one is doing well , and financial profit is being produced in productive sectors and speared as a cut , so overall capital is doing well ? Am I mistaken ?

  13. «attempts to measure the turnover of circulating capital and variable capital (wages)»
    «a big discussion over which measure of fixed assets to use»
    «If inflation is high, as it was between the 1960s and late 1980s, then the divergence between the changes in the HC measure and the CC measure will be greater»

    One of my common arguments is that accounting is a very important matter, that “mainstream” Economics ignores it, and that marxian approaches are fundamentally based on cost accounting (where “cost” means “labour”), and this post and the quotes above are essentially about cost accounting. Which of course I applaud, because I think that cost accounting is one of the main pillars of civilization.

  14. This is very interesting, but looking at national accounts is full of dangers, because the figures are constantly “improved” for “accuracy” by the statistical agencies, particularly in the USA for GDP and inflation, and a lot of reported GDP seems actually GDI, quite a different concept (especially for finance, that gets nice chunk of GDI even if its contribution to GDP may be zero or negative).

    https://www.bloomberg.com/view/articles/2016-10-19/no-u-s-manufacturing-isn-t-really-booming
    http://globaleconomicanalysis.blogspot.com/2005/05/grossly-distorted-procedures.html
    https://conversableeconomist.blogspot.com/2018/01/nicholas-stern-interviews-tony-atkinson.html
    http://host.madison.com/ct/article_71fad514-9caa-11de-9a00-001cc4c03286.html
    https://www.bea.gov/help/faq/1459

    Click to access jce00.pdf

    https://baselinescenario.com/2009/03/21/ceo-semiotics-and-the-economics-of-vilification/

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