TCS Daily - European Corporate Profits Rising Faster Than Salaries - A European Ownership Society - by Johnny Munkhammar

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European Corporate Profits Rising Faster Than Salaries - A European Ownership Society - by Johnny Munkhammar

"As the EU Finance Ministers met on February 27, they expressed worries about profits rising faster than wages in Europe. The conclusion was that the current global economic boom mostly benefits owners rather than workers. This led the German Finance Minister to warn of an upcoming crisis of legitimacy for the current economic and social model. The Ministers jointly stressed that wages should grow in line with productivity. This resurrects an old ghost. Will Karl Marx, the man who has so far been wrong about most everything, finally have a point about usurpation, in today's global economy? Politicians could meet this alleged development with the same measures as they have done in the past, such as increasing taxes (on profits, for example) or growing government to redistribute money to wage earners."

Europe has moved towards a more advanced, capital-intensive production. By any measure of prosperity, that is very good. But it also implies that many owners of companies are very successful in today's global economy. As companies find new places to produce goods and services cheaper, profits rise - faster than wages. That creates a political dynamic towards redistribution of resources through more government. Why should the rich get richer fast, but ordinary working people merely get crumbs from the table?

The image is not really true. We all benefit from this development as consumers, since prices of many goods fall. Lower prices are just as important as higher wages, especially for people with low incomes. Furthermore, we are all substantial owners indirectly, since pension funds get a large share of the profits. But accepting that politicians should act, more government intervention would be counterproductive. Higher taxes in general would slow down growth and employment. And higher taxes on capital would decrease investments in Europe." Note EU-Digest: This report by Mr. Johnny Munkhammar reflects the typical conservative/capitalist economic viewpoint of the world economy, which on a world-wide scale has not worked and continues to make the gap between the poor and the rich wider and wider.