I have taken a few graphs from this article in the Naked Capitalism blog. The article attempts to explain the rise in US corporate profits despite the bad economy. It argues that the profits of non-financial corporations have been bolstered by their use of capital to speculate in commodity markets. Moreover, the bulk of corporate profits have been produced by the financial industry which is also related to speculation in commodity markets. In particular, it argues that Wall Street has hedged against inflation by investing in oil futures, and that has maintained high oil prices during a period of weak economic growth and low demand for oil. If the oil bubble bursts, this would create another financial crisis according to the author of the article.
I am not sure about the basic thesis in this article but the graphs tell an interesting story. One story is the rise in the share of corporate profits that has gone to the financial industry. Fifty years ago the bulk of corporate profits went to manufacturing companies. The financial industry captured only 10% of corporate profits. Today the financial industry has over 30% of corporate profits. The other story is the relationship between corporate profits and the share of national income going to wages. Profits have grown as the share of national income going to wages has fallen. This may be the result of the shift from a manufacturing economy to a financial economy. Manufacturing is more labor intensive than the finance industry. That would explain the decline in wages in relation to profits and it would also explain the increase in wages in the finance sector. The profits are shared by a relatively small number of employees in the finance sector.
The graphs can be enlarged by clicking on them.
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