How much more do the corporations need before it trickles down?
Mon Jun 05, 2006 at 05:28:29 AM PDT
By now, we all know the logic of trickle down economics, or "reform": make markets, especially labor markets, more flexible in order to improve company profits (that means lower wages and union busting); eliminates taxes and regulations to unleash entrepreneurial spirit, and see as companies hire more people and spread the wealth.
Whether or not "reform" have been implemented, the official intermediate goals, corporate profits, has certainly been reached:
US companies boost share of economic pie
US companies have increased their share of the economic pie at a faster rate over the past five years than at any time since the second world war.
Recent government figures show that profits from current production as a share of national income have risen from 7 per cent in mid-2001 to 12.2 per cent at the start of this year. This rate of growth is unprecedented since collection of these figures began in 1947.
Adapted from an European Tribune story.
Just a few more numbers from that article:
Profits have climbed by 123 per cent over the same period, soaring from $714.5bn (€552.57bn, £378.89bn) to $1,595.4bn - also the fastest increase since records began. Other official data have shown that profit growth by manufacturing companies, often seen as one of the weakest sectors, has outstripped the rest of the economy. The figures suggest corporate America is enjoying one of its best periods despite more competition from low-cost countries and tougher corporate governance and disclosure rules.
Even during the boom of the late 1990s, companies only managed a 90 per cent increase in profits over a four and a half year period. Annual data on profits go back to 1929; there were faster rates of profit growth in the 1930s, as the US emerged from the great depression. "Companies have had an extraordinary winning streak, that has lasted longer than most expected,"
To put things in perspective, here's how corporate profits looked in earlier decades (from this document, pdf):
And here's the recent evolution for all G7 countries.
(these graphs are not directly comparable to each other or to the numbers quoted in the article above, but they give an idea of the trends...)
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We are a point where corporate profits are no longer a worry, but the economy is not doing well, because stagnant incomes for workers cause either a lack of domestic demand (in countries, like Germany, that are not splurging on debt) or an explosion of debt (like in the USA or even France):
Household debt as a percentage of disposable personal income. Etats-Unis = USA, Royaume-Uni = UK
And growing inequality:
median income is the level at which half earn more, and half earn more. A big difference between average and median is a sign of strong inequality.
As the above graph shows, not only corporates (and their shareholders) are grabbing a larger part of the pie, but the top earners are capturing a growing fraction of the wages still being paid out.
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So two intermediate goals have been very obviously reached:
- corporate profits are strong
- "talent" is properly remunerated, through extremely high remunerations when "needed"
When will that translate into economic prosperity for all, as claimed by the neo-liberals?
Can we now focus economic policy on that side of the equation - distributing to all the prosperity that has supposedly been created? And no, making people borrow the illusion of prosperity via cheap consumer debt is NOT the solution?
Or can we now say it all out loud: trickle down economics, better known as "voodoo economics", is a scam, which should be called by its proper name, "trickle up" or, "the rich taking from the poor".
Who will stand for the (untrickled) downtrodden?
