Corporate Profitability

Mark Thoma notes the historic high levels of Corporate Profitability.

Economy built for profits not prosperity, by Lawrence Mishel, EPI: Newly released data on corporate profitability for 2012 show the continuation of historic levels of profitability despite excessive unemployment and stagnant wages for most workers. Specifically, the share of capital income (such as profits and interest, which are hereafter referred to as ‘profits’) in the corporate sector increased to 25.6 percent in 2012, the highest in any year since 1950-1951 and far higher than the 19.9 percent share prevailing over 1969-2007, the five business cycles preceding the financial crisis. …

Could the US economy be undergoing a fundamental change as it moves resources from Department II to Department I? If so, we should see a greater capital investment.

But the fundamental problem remains: the consumption can only be realised through wages and salaries. Since these, in total, are decreasing, then total consumption must fall as well. This means that profits must eventually decline as well.

Can an economy consist entirely of Department I?