I Read It as Far as the First Glaring Error. And Then as Far as the Next One.

Some economics "professor" in City AM Forum: MY NEXT Gresham professorial lecture has the provocative title "Was Karl Marx always wrong?", but those wanting a detailed dissection of Marxism should stay away.  Rather, I used this to highlight one of the important phenomena of our times – the falling share of labor incomes of GDP. The fall has meant a growing share of national income going to capital.  And the rising share going to capital, coupled with falling yields as the Chinese savings glut starts to hit the world economy, has underpinned the global bull market for equities that has lasted for nearly 50 years.  Nope. The returns to actual, real capital will always be competed away down to a low return of 5% or 10% or something, once you adjust for risk. If your competitor invests in actual, real capital and steals a march on you, he might initially have a much higher return, but you can play catch up by copying him.  And total business income is shared between the employer/business owner and labor in a fairly fixed ratio, probably about 20/80. As City AM explained yesterday, a large part of the reason for apparent falling wages is that wage overheads (Employer's NIC and pension contributions) are creeping up, which take the first slice of labour's share (and the threat of losing your job pushes wages down a bit more).  The 20/80 ratio is stable because if businesses became super-profitable and wages were depressed, more employees would resign and set up their own businesses. The motivation for making that leap is the comparison between a) likelihood of making a profit multiplied by likely size of profit and b) your current wages. If a) goes up and b) goes down, more are motivated to resign their jobs, so employers have to bump up wages to retain staff etc, and it all levels out again.  So much to the free-market, base-case equilibrium scenario. What the man is actually talking about is not "capital" at all but "monopoly". Unlike returns to capital invested or labour, monopoly income cannot be competed away. And it is monopoly's share of total income which is going up.  So businesses with a market dominant position with pockets deep enough to pay politicians and civil servants to erect barriers to entry, to abolish price controls, to reduce taxes on those businesses, or turn a blind eye to gaping loopholes in the tax legislation will get richer and richer. (Landownership is the extreme example of this type of business - rents as a % of GDP go up as GDP goes up, that is not "return to capital", that is monopoly income).  All this would be bad enough, but he compounds his error (conflating capital with monopoly) by then conflating share prices with capital or returns to capital. Again, nope.  Actual returns to capital/monopoly have gone up, agreed, but share prices, as a multiple of earnings, have gone up as well. So tomorrow's shareholders are not getting much return - if they have to pay £30 for a share paying £1 dividends a year, they have effectively given the previous owner the next 30 year's worth of income, only after 30 years will tomorrow's shareholder break even.  So in effect, this is yet another layer of monopoly - today's shareholder holds the exclusive right to enjoy the underlying businesses capital/monopoly income, and charges tomorrow's shareholder a premium to be allowed to tap into that.  These gains in share prices are not real income or changes in wealth at all - wealth is created at business level, if it makes a good product and a good profit and pays good wages, that is clearly wealth being created.  What happens to share prices is more or less irrelevant because today's shareholder's gain is tomorrow's shareholder's loss (pretty much like changes in land prices, only not so highly leveraged).  Here endeth. The twat.