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BPEA Article

The Falling Share of Profits

Abstract

BY MOST RECKONINGS CORPORATE PROFITS have taken a dive since 1966. The share of corporate profits (including the inventory valuation adjustment, or IVA) in the gross national product fell from 11.0 percent in 1966 to a postwar low of 7.1 percent in 1970. In the recent expansion, the share has rebounded only to 8.5 percent of GNP during the profits boom of 1973. Even with the "breathtaking" profits predicted for oil companies during 1974, the share is expected to decline to 8.1 percent. The poor performance of corporate profits is not limited to the United States. A secular decline in the share of profits has also occurred in most of Western Europe.

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