>On Behalf Of Doug Henwood
> Uh, Nathan, the boom in stock prices has far outstripped profit
> gains. All conventional valuation measures - P/E, market cap/GDP,
> dividend yield - are off the charts, as is my favorite unconventional
> measure, the S&P 500 divided by the average hourly wage. The profit
> share of GDP peaked in 1996 and is actually a bit off that peak today.
How do you measure profit share of GDP for multinationals? Is this profit
as share of global GDP? The issue is not merely profits as share of
revenues, but expected profits over time. Many companies - the Internet
companies being the most insane examples - are drilling potential profits
into expansion and expanded market share, but as long as workers are not
getting an increased share compared to productivity increases, shareholders
know that deferred dividends today translates into profits tomorrow.
Most companies are doing everything possible to avoid reported profits --
note the news recently about largescale corporate tax shelters -- but even
without the scams, it is hardly surprising that in the scramble of expansion
and merger, immediate profits are low compared to share prices.
But if share values reflects what I think are reasonable expectations of
profits in the future based on extracting productivity increases out of
global workers brutalized by globalization and direct exploitation, none of
the above is inconsistent with the basic point.
Rising productivity and falling wages means more wealth for shareholders -
whether realized today or deferred through reinvestment for tomorrow.
And on that basis, rising share prices should be seen as a barometer of
exploitation not speculation.
If our folks are getting screwed, why should we be surprised that
shareholders are doing so well?
-- Nathan Newman
