The graph shows Real GDP/capita and Real Disposable Income/Cap since 1950 on a log scale. (Data through 2009, from The Census Bureau. Table 678 at the link.)
I've left the 50's out of the argument, as a courtesy to Ike, since his relative performance suffers due to the post war baby boom - Ye Olde Denominator Thang.
What I want to emphasize here is the difference between the two lines. Though both have a knee, the Disposable Income break is much sharper. Here is a graph of the difference between the two, linear scale. And, BTW, this time I left the '08 and '09 data in the trend line determination.
Well - since 1980(-ish) not only has GDP growth slowed, the amount captured in disposable income has decreased, quite dramatically.
That's a whole lot of wealth that is NOT ending up in peoples' hands, wouldn't you say?
Do you have any helpful thoughts?
.
5 comments:
Hey, Jazz. I've been anxiously awaiting Part 2.
I like to identify the categories as factor costs: the wages of labor, the profits of stock, the rent of land... Adam Smith's three "component parts of the price of commodities". And then I add the interest of money to create a category for finance.
Given my categories, one of my objections to your investigation may have to be that you mix interest in with the profit from productive endeavor.
I anxiously await Part 3!
Art -
When I did part 1, I did not know what part 2 was going to be. As of now, I haven't nailed down part 3.
Your objection is a bit beyond me. I think you're talking about inputs, and I'm talking about outputs. I don't know where I have conflated interest and profit.
Cheers!
JzB
No, I don't care about inputs. I care about costs. Wages are part of the cost of a product, as are profits. As are finance charges.
"Since 1990, Ford has made more money from financial services, principally automobile loans to consumers and dealers, than from car- and truck-making operations." From "In Record Turnaround, Ford Had $2.5 Billion Profit in 1993," by James Bennet in The New York Times, February 10, 1994.
And again: "Ford Motor Company has earned more as a banker than as a car builder in five of the last six years." From "Financial Powerhouse Takes Aim at Bad Credit Risks," by Robyn Meredith in The New York Times, December 15, 1996.
Also, Allan Schmid writes: "Everyone wanted in on the golden goose as firms like GE and GM, who formerly made real goods, switched to earning a big share of their profit on leveraged financial contracts."
Maybe it's not *all* interest. Some of it is the profit of the financial sector. But then, if we cut total debt in half, we would reduce both interest costs *and* the size of the financial sector we need. I think of all finance as interest.
On Smith and the Factors:
http://newarthurianeconomics.blogspot.com/2010/12/cost_22.html
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