Some of this may be true, but some of this can also be very misleading. For many companies, profits generally increase on an annual basis, usually through market growth. What needs to be looked at to understand whether they’re gouging/greedy is what their history of profit/revenue growth is and whether their profit margins are increasing/decreasing.
Here’s Chipotle, for example: Chipotle Mexican Grill Revenue 2006-2021 | CMG | MacroTrends
They typically see growth every year, certainly on the average. It’s like when Apple announces “the fastest iPhone ever!!” Yeah, we get it. It’s always faster.
DoubleG
4281
They’re increasing, massively:
Inflation is prices going up. The CEOs of the companies that were mentioned are going on earnings calls and literally saying that the current climate has allowed them to increase prices, which are directly responsible for their increased profits.
I’m really wary about social media flagging posts because economists disagree, as economics is by far the softest “science” where political opinions often masquerade as neutral facts.
CraigM
4282
So I see you are familiar with the Chicago school as well.
Bad chart, it’s as a share of GDP so much of the increase could be from the decline/slower in GDP last 1-2 years.
There are all sorts of weird base effects due to the pandemic, basically every year over year growth rate during 2020-22 is worthless, depending on when the economy was affected (which varies by region).
I think the most honest data point would be if profit margins have increased significantly - which then could be used to argue firms are facing high input costs, but increasing their end prices much more using that as a fig leaf.
Cancel culture is on another thread.
To be accurate, inflation is a sustained rise in the price levels.
DoubleG
4285
Here it is without GDP. No matter how you slice it, profits are way up for large corporations.
For what it’s worth I think it’s both an increase in prices and greater market control from all of these large firms.
Thanks for sharing, no argument with that. I dug further and think this may be closer to what I was aiming at with my earlier comment - it admittedly is quite close to your first chart, so maybe that was already conceptually similar enough. I’m sharing the full history as I think it makes another useful point - average profit margins were around 2% for many decades until the 1980s, when they started to roughly double every decade or so - to now around 15.5%. That’s pretty striking.
My suspicion is this is mostly affiliated with the rapid expansion of the knowledge economy, since margins there tend to be enormous - 30% or more in some knowledge sectors (not just IT - also consulting, etc). But it’s just a hunch, I don’t have time to dig through the sector level data right now.
I think that chart is going to match pretty closely with the chart that shows the decline in the labor share of productivity growth. Starting in the 80s, most of the productivity gains began to be allocated almost exclusively to ownership / management, not labor.
CraigM
4288
Theres another huge factor, wage growth has not kept pace with economic growth. Most benefits of economic growth have been hoarded by corporations and investors rather than going to the people doing the work. The timeline fits rather well with Reaganite economic policy which enabled that.
But guys, if capitalists have to pay taxes on stuff they won’t invest in anything and we’ll all starve to death while they stare admiringly at their balance sheets!
Guys, it’s because we left the Gold Standard in 1973 or whatever. See how it changes after that?
While those charts are funny, it’s damn near impossible for Reagan to be the cause of those trends, without multople subsequent administrations and congresses going along with it and amplifying it. Reagan as a liberal boogie man has the problem of it being 40 years ago.
DoubleG
4294
I actually agree with you about subsequent Democratic administrations being complicit, but you can’t deny that they started this shit in the 80s.
After 40 years, I think “they” becomes “us”. It’s American policy at this point. There’s a very good argument that a ton of Americans vote against interest, but I don’t subscribe to “it’s Reagan’s fault!” I think if the Dems had been out of power for 40 years, you could at least argue that they got dragged along, kicking and screaming, but that isn’t the case.
DoubleG
4296
Right, it’s the fault of the American Voter, who famously broke the PATCO strike and destroyed our welfare system
Alstein
4297
The only group that can claim they’ve been dragged along kicking and screaming is the left flank of the Dems, who have been out of power for 40 years.
True. But that also comes with not being able to take credit for much of anything.
It’s almost like the Democratic Party’s leadership abandoned labor and the working class in the runup to 1990 and have been fighting the rank and file about it since.
