US profitability
Trevor Evans writes: But its interesting to note that today's Financial Times (29 October, p. 14) carries an article by someone called Ricahrd Waters, which says: 'Leaving aside the effects of lower taxes and declind interest rates, the profits miracle looks much less impressive. A return on sales of about 25 per cent before interest , taxes and depreciation leaves the profitability of the average US company below the peak levels hit in both the 1970s and 1980s. ...' I don't think that the "return on sales" is relevant. It's like the big grocery chains complaining about their small profit margins. What matters is the profit rate on capital invested. Also, Andrew Glynn has an article on profitability in the September 1997 issue of the Cambridge Journal of Economics, in which he produces figures showing that the profit share and the profit rate in the US have risen since the early 1980s, but that they are still considerably below their level in the mid-1960s. He's right (and I have an unpublished and unfinished ms. on this). But the rapid rise of profit rates during the 1990s is also quite important. How good profitability is depends on one's frame of reference. And more than one frame of reference seems relevant. that's enough for today. Jim Devine [EMAIL PROTECTED] http://clawww.lmu.edu/1997F/ECON/jdevine.html "A society is rich when material goods, including capital, are cheap, and human beings dear." -- R.H. Tawney.
US profitability
Thanks to Doug for reporting Anwar Shaik's evaluation of profitability. But its interesting to note that today's Financial Times (29 October, p. 14) carries an article by someone called Ricahrd Waters, which says: 'Leaving aside the effects of lower taxes and declind interest rates, the profits miracle looks much less impressive. A return on sales of about 25 per cent before interest , taxes and depreciation leaves the profitability of the average US company below the peak levels hit in both the 1970s and 1980s. ... The likelihood that earnings growth is about to slow has already been a source of unease on Wall Street.' Also, Andrew Glynn has an article on profitability in the September 1997 issue of the Cambridge Journal of Economics, in which he produces figures showing that the profit share and the profit rate in the US have risen since the early 1980s, but that they are still considerably below their level in the mid-1960s. Trevor Evans.
[PEN-L:10201] US profitability
Bill Burgess, Tom Walker, and others were talking about profitability. I just looked at the profits/GDP series for a piece in LBO comparing the present expansion with previous postwar US expansions. Not to give it all away before it even reaches subscribers, I'll say that on most indicators, the 1991- upswing is middling-to-poor - except profits, which have been in an uptrend (as a % of GDP) since the early 1980s. Nonres fixed investment, though, isn't terrific, and more of it seems to be done by financial firms, whose contribution to human welfare is open to challenge. There haven't been any capital stock figures since 1994's, so it's impossible to do profits/K estimates. But that series follows a similar pattern - a decline from the early 50s into the early 80s, and a ragged uptrend since. Doug -- Doug Henwood Left Business Observer 250 W 85 St New York NY 10024-3217 USA +1-212-874-4020 voice +1-212-874-3137 fax email: mailto:[EMAIL PROTECTED] web: http://www.panix.com/~dhenwood/LBO_home.html
