“Gross operating surplus” in the Eurozone: do high profits make an economy more resilient? (graph)
Update: coincidentally, Eurostat published its “gross operating surplus” time series today (Jan 30). They call it the ‘rate of profit’, but it includes rent and mixed income as well as is shown by the tables.
Gross operating surplus is equal to profits, interest and rents before tax plus income of the self employed. Ireland had the highest rate of the EU, in 2007 (graph). Germany had one of the lowest. This metric is of course influenced by the structure of an economy. Even then: it is remarkable that the German economy was so much more resilient than the Irish one, after 2007. I’m rather sceptical of most kinds of industrial policies. But making your country a tax haven, like the Irish did, may actually be one of the worst.
But didn’t Ireland, which at the time still had a large deficit on the current account as well as a rapidly increasing government deficit and no car industry to speak of, introduce a ‘cash for clunkers’ policy to boost demand, back in 2009? Germany said: thanks! So much for Irish economic policy.
The official definition of the metric: “The turnover is used to remunerate the production factors: capital in the form of the gross operating surplus, and labour in the form of the personnel costs. The share of the gross operating surplus in the turnover varies from sector to sector: The more capital-intensive the sector, the higher the share of gross operating surplus in turnover” and:
“Operating surplus is the surplus (or deficit) on production activities before account has been taken of the interest, rents or charges paid or received for the use of assets. Mixed income is the remuneration for the work carried out by the owner (or by members of his family) of an unincorporated enterprise. This is referred to as ‘mixed income’ since it cannot be distinguished from the entrepreneurial profit of the owner.”