| Abstract: | Official statistics on profits in the UK economy during the 1980s show a substantial increase in the share of profits in GDP after 1981. However, these figures are based on companies' own returns which have been distorted by changes in accounting practices and taxation, privatization and the arbitrary allocation of profits by multinational companies. Kalecki's theory of profits provides a way of systematically determining gross profits in national income. However, the use of this method is complicated by the absence of data on the distribution of savings and consumption between wages and profits, and Kalecki's own estimates of the equation appear to be flawed in their statistical methodology. A number of ways of overcoming the distributional problem are explored in this paper, using data from the sectoral capital accounts of the UK during the 1980s. The methodology suggested by Asimakopulos to estimate Canadian profits turns out to be the weakest on theoretical and statistical grounds. All estimates are highly correlated with the officially reported profit series. However, in real terms (defined in Keynes' wage units as a proportion of implied wage income), they all show a profits cycle in which real profits in the second half of the 1980s are lower than they were at the end of the 1970s. The conclusion that there was no upward trend in the profits cycle suggests that the UK government's supply-side policies, designed to make the economy more profitable, did not achieve this purpose during the 1980s. This article is an investigation of what happened to profits in the UK using Kaleckian models of how profits are determined to supplement the rather unreliable data that is provided by the government's Central Statistical Office. In the course of the investigation, a number of different models derived from Kalecki's fundalmental profits equations are presented. Two of them turn out to have a high correlation with the official published data, but contrary to that information suggest that there has been no upward trend in profits. |
