ABSTRACT
Introduction We aim to show in this chapter that accumulation trends in the business and corporate sectors, by and large, reflected similarly directed trends in business and corporate profitability. First, we argue here that past profitability trends played a crucial role in framing the outlook on future yields of current business investment plans. A legacy of various decades of stagnant profitability will tend to dampen expectations and therefore will produce relatively weak investment plans. In our view, then, the continuing decline of the US nonfinancial nonresidential capital accumulation rate (calculated as net investment flows in that sector relative to the current cost net capital stock with one-year lag) reflects the weak profit expectations generated by a relatively flat profitability trend originating in the late 1980s. We extend this appraisal to major OECD countries as well, showing that profitability trends in the business sectors of major OECD countries do in fact provide reliable guides to predict the direction of actual accumulation trends.
