Contrasting UK and US profits

These UK figures (pdf), released today, highlight an interesting difference between the UK and US in long-term trends in corporate profits.
They show that the gross rate of return for non-oil companies was 11.8% in Q2. Though short of the late 1990s levels, this is well above the profit rates seen in the late 1960s.
In the US, by contrast, profit rates are still below late 1960s levels. Pre-tax profits in Q2 were equivalent to 7.9% of tangible assets, for non-financial companies.  This is below the  8.6% average of 1964-68. (I'm using the Fed's flow of funds data). And even this rate is flattered by some generous depreciation allowances; in 2004, before these took effect, the profit rate was just 5.5% - the same rate as in the slump of 1975.
Now, we can't compare the levels of the profit rate in te UK and US; the figures are compiled in different ways. But we can compare trends. And these suggest that US profit rates are trending downwards, at least compared to the UK.
It's not just Fed figures for all non-financial firms that suggest US profit growth is  poor. These figures from Robert Shiller show that the  real earnings of S&P 500 companies have grown just 1.7% a year since 1871.

We can't blame this upon the US's capital spending bubble of the late 90s. In the peak pre-bubble year for US profits - 1996 - the profit rate was only 6.7%, below any year in the 1960s except for 1961.
Nor is it likely that UK profits rates are greatly flattered by privatizations; utilities' profit rates would have to be consistently much higher than the average for these to have much effect.
Instead, the US's downward trend (relative to the UK's) might be a testament to the greater dynamism of its economy. Maybe the greater entrepreneurial spirit, or lower barriers to entry (such as building regulations?) allow high profits to be competed away more quickly than in the UK. This great paper by William Nordhaus says:

A miniscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers.

The message? A dynamic economy is not necessarily good for companies or shareholders.

Comments

[Monjo]

The message? A dynamic economy is not necessarily good for companies or shareholders.

- Yes BUT aren't US companies normally traded at far more generous multiples of earnings/profit? Which would be good for shareholders

[Paddy Carter]

now if I remember my Roemer correctly isn't the degree of exploitation (after Marx) more or less analogous to the degree of profitability (surplus retained by capitalist)?

So the degree of economic justice is greater in the US than the UK, if you're a Marxist at least? Do you think we should tell the SWP?

If, though, returns are measured against the risk free rate, we would expect the UK to be a couple of percentage points higher than the US wouldn't we. This is not to address the question of trends though, which is your point.

[Chris Williams]

As well as Marx, how relevant is Burnham here? Is the corporate sector in the US consuming more of the profit itself, through massive salaries and benefits, before it gets to the shareholders?