On rising corporate power

US intellectuals face the challenge of how to think about rising corporate power. This is not because corporations or corporate power are inherently bad things. I don't believe they are, and to think they are is merely an assertion. Intellectuals need to make arguments, not assertions. Instead, the problem of corporations has to do with the steady economic power corporations have amassed relative to households. Here are five graphs to make this point:

1. Real median household income. In 2012 the median household income was $51,017, a meager rise since 1984 ($47,181). In fact, today's median household income is basically at the same level it was in 1995/1996. Remarkable.

 

2. Real median household income/GDP. As we see above, median household income, in absolute terms, is stagnating or even falling. This second graph shows how far median household income is falling behind economic growth as measured by GDP. See the following as more or less a ratio between HH income and GDP.

 

3. Total corporate profits/GDP. In contrast to household income, corporate profits are not only keeping pace with economic growth, corporate profits are rising relative to growth.

 

4. Domestic corporate profits/GDP. Perhaps US households aren't seeing any returns from economic growth because corporate profits are based offshore? Put another way, perhaps domestic profits are as stagnant as domestic household income gains? No, they are not. Unlike HH income, domestic corporate profits are more than keeping pace with growth.

 

5. Overseas corporate profits/GDP. This is one to keep an eye on. Essentially, corporate profits from outside the US are now as high as total corporate profits were barely a decade ago (offshore corporate profits in 2011: $419 billion. Total corporate profits in 2000: $482 billion). Indeed, as we've seen, corporate profits across multiple categories are at historically unique levels. But the continued ability of US corporations to extract profits outside the US domestic economy could continue to have deleterious effects for households and even small businesses anchored to the domestic economy. The more US corporations can earn profits with emerging market consumers, the less incentive the US political structure will have to invest in middle-class institutions like education, infrastructure, and health here at home.

 

In sum: US households' incomes, in absolute numbers, are at best stagnating. They are, in relative terms, falling dramatically behind. Meanwhile, corporate profits are at record highs, and even outpacing economic growth itself. US does not have a well-functioning domestic economy, in the sense that wealth gains right now are not being broadly shared.