I trust Doug on data, so if what I say is wrong, I stand ready to be corrected. The finance, insurance, and real estate sector accounts for about 40% of profits [working from memory]. When BusinessWeek published that estimate, I contacted the reporter, David Henry asking him where the finance arms of corporations like General Electric and General Motors were. He thought that their earnings might be counted as manufacturing, but was not sure.
One of the main factors hidden in our discussion is the fact that much of manufacturing has not been renewing capital, but letting it age. As a result you can get increases in production at having some new capital, but letting existing capital get old.
I'm too swamped now to fish out the data, but as I recall much of the investment in manufacturing is coming out of depreciation funds.
SA wrote:
> The right number for per capita total
> output excluding finance is an increase of 90% - almost doubling - from
> 1980 to 2007. The manufacturing number is definitely right because I
> took it straight from the BEA's quantity index for manufacturing value
> added - it also almost doubled. (The two aren't strictly comparable; I
> used an income measure for total output excluding finance whereas the
> mfg number is an output number, but obviously the right numbers wouldn't
> change much. Also, I used the overall GDP deflator for national income
> minus finance, whereas the right deflator would be slightly
> infinitesimally different since we're excluding finance, but again, the
> discrepancy obviously would be minimal. Finance hasn't changed much as a
> percentage of GDP - from about 14% to 18%.)
>
> So - assuming the mfg sector and the total economy minus finance (and
> insurance and real estate) are both good proxies for whatever one's
> notion of the "real" or "useful" economy is, I think a doubling in 27
> years makes it hard to argue that capitalism has been unable to produce
> enough investment for sustained long-term growth.
>
> SA
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-- Michael Perelman Economics Department California State University Chico, CA 95929
530 898 5321 fax 530 898 5901 http://michaelperelman.wordpress.com