Wednesday 2 September 2020

So, Where do Profits Come From?

There we go! Geronimooooo! (source)

For the first time since 1991 Australia registered two consecutive falls in its quarterly GDP figures: we’re officially in recession.

Today ABS released national accounts data corresponding to the June-August quarter and the picture ain’t pretty: GDP growth of -7.0%, the largest quarterly fall on record.

Those interested in those numbers can go here:



It was these data, however, that caught my attention:

                            % Change
                           Mar 20 to
                              Jun 20(*)
Compensation of employees       -2.5
Gross operating surplus(#)      14.9
Gross mixed income              21.9
Taxes less subsidies          -111.9
Statistical discrepancy           NA
Gross domestic product          -7.6
(*) Seasonally adjusted
(#) Private non-financial corporations

“Compensation of employees” means wages, salaries and employers’ social contributions; “gross operating surplus” means profits of incorporated enterprises; “gross mixed income” is the income of sole proprietorships and partnerships (i.e. unincorporated enterprises) and contains elements of compensation of employees and gross operating surplus.

From that you can see that we aren’t all in this together: in three months workers lost 2.5% of their income. On the other hand, over the same quarter, capitalists – whether big (shareholders of incorporated enterprises), or medium/mum-and-dad (owners of partnerships or sole proprietorships) – are doing hunky-dory, thank you very much (increases of 14.9% and 21.9%, respectively, in their incomes).

This is a recession, so where did these profits come from?

Come on, make a guess. Go ahead, don’t be shy.

Remember that I said that the JobKeeper was a wage subsidy? Well those profits came from there, or more precisely, from the -111.9% change in taxes on production less subsidies: “The rise in subsidies was driven by JobKeeper and Boosting cash flow for employers policies”.

Is not just that capitalists – small, medium, and big – enjoyed largely subsidised labour, which they paid with money they received from the Government, they also retained some of that money as profits: “Subsidy payments not utilised to cover labour costs or operating expenses were retained in profits.”

Profits came literally from money meant to pay wages. That gives that anti-Marxist genius of online MMT Neil Wilson’s “wages of capitalists” a whole new meaning, eh?


SARS-CoV-2 sent our already unhealthy economy to ICU.

It could get worse. Things may change, eventually; someday the recession may cause housing rentiers some pain; up to this point, however, housing prices are doing well.

Tiny, brainless particles of self-replicating organic matter: 2; Prof. Steve Keen: 0

Is a good thing – isn’t it? – when an economist’s livelihood doesn’t depend on the economy he/she tries to predict – so far without too much success – but on the gift economy.


The Australian Greens have been adopting many policies from the Bernie Sanders crew. Shoebridge, from the NSW Greens, is advancing a somewhat reduced version of the Job Guarantee. And Adam Bandt, federal Greens leader, has a Green New Deal proposal.

I think that is cause of cautious hope. I doubt one can expect much from the Australian Labor Party.

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