Editorial. American Capitalism: One Is Never So Close to the Fall as When One Believes Oneself at the Peak.

“From the Capitol to the Tarpeian Rock is but a step.”

“One is never so close to the fall as when one is at the summit.”

Bruno Bertez
9 July

The most recent data from the Bureau of Economic Analysis confirm a striking fact.

In the first quarter of 2026, pretax corporate profits in the United States reached approximately 14 percent of GDP—an absolute record—at an annualized level of $4,426 billion.T

his ratio has nearly doubled since the 2008 crisis and exceeds the previous peaks of around 13 percent observed in 1951, 2010, and 2011. After tax, the share stands at roughly 11 to 12.4 percent depending on the measure (with or without inventory and capital consumption adjustments), also a historical high.

By comparison, this after-tax share averaged around 5 percent between 1980 and 1995.Since the low point of the 2020 pandemic, nominal after-tax profits have more than doubled (+101 percent), reaching record levels on the order of $3,600 billion and beyond according to the series.

American corporations have never been more profitable in terms of their share of value created (margins and share of GDP).

Yet the stock market has never been more expensive.

The Buffett indicator (total stock market capitalization relative to GDP) is hovering near 230–239 percent, historical highs.

Shiller’s CAPE (cyclically adjusted price-to-earnings ratio) stands around 40–42, near or beyond the levels of the internet bubble.

The contrast is stark: on one side, a rise in the profit-to-sales (or profit-to-GDP) ratio; on the other, a compression of the profit-to-capital-value ratio (stock market and capitalization).

Almost no one in the dominant discourse connects these two movements. Yet it is precisely here that the deep dynamics of contemporary capitalism become apparent, analyzable within the Marxist framework of the law of the tendential fall in the rate of profit, the rising organic composition of capital, and the expansion of fictitious capital.

High margins and the rate of exploitation: the surface of the figures

The share of profits in GDP primarily measures the balance of forces in the distribution of newly created value. A record share means that the rate of surplus value (s/v) is high: the portion of unpaid labor appropriated by capital has increased.

Several countertendencies to the fall in the rate of profit have operated fully since the 1980s–1990s and intensified after 2008 and then 2020: pressure on real wages and employment (precarization, automation, offshoring), increased market power of large groups (high markups, concentration, rentification), lower costs of constant capital through globalization, technology, financial engineering, and recurring tax relief.

The result is a sharply expanding mass of profits and historically high margins on sales (or on value added).

This is the apparent “success” of American capital.

But the true profitability of capital is not measured by the margin on sales. It is measured by the rate of profit: surplus value relative to the total capital advanced (constant capital c + variable capital v).

Even if the mass of profits (P) grows and even if the share of profits in GDP rises, the rate of profit (r = P / (c + v)) can fall if total capital employed grows still faster.

This is exactly what contemporary data suggest.

Organic composition and the sharply expanding mass of capital: ever more capital is required to produce the same profit.

The law of the tendential fall in the rate of profit, as formulated by Marx, rests on the rise in the organic composition of capital (c/v).Technical progress and competition drive the replacement of living labor by dead capital (machines, infrastructure, software, capitalized R&D, etc.).To produce a given mass of surplus value, an ever-larger mass of constant capital must be mobilized.

Empirical Marxist calculations for the U.S. non-financial sector (Michael Roberts, Carchedi, and others I often discuss) show a secular tendency for the rate of profit to decline since 1945, with recovery phases (1980s–2000s) insufficient to reverse the long-term trend.

Even when margins and the profit share rebound strongly, the capital stock (physical + intangible) often advances more rapidly.In the recent period, the explosion of investment in technology (AI, data centers, cloud, automation) perfectly illustrates this mechanism: considerable masses of capital are committed to generate productivity gains and future profits, yet the capital-to-profit ratio grows heavier.

The mass of capital expands much faster than the mass of profits.Hence the apparent paradox: record profits as a share of GDP, but compressed returns on capital employed (and especially on its market valuation).

Organic developments do not explain all the contradictions outlined above; the effects of financialization must be added.

Fictitious capital, financialization, and monetary creation are the pillars of financialization, with the consequence: the swelling of the market value of capital.

The second part of the explanation lies in the very nature of fictitious capital. Shares, bonds, and other securities represent claims on a fraction of future profits. Their value is not determined by the reproduction cost of productive capital, but by the capitalization of anticipated income streams, discounted at an interest rate. When interest rates are low, liquidity is abundant, and expectations of profit growth remain optimistic, this capitalization explodes.

Since 2008, and at an accelerated pace after 2020, massive monetary creation (central-bank QE, endogenous monetary creation by the banking system, the development of shadow banks), the explosion of private and public debt, disintermediation, and generalized financialization have artificially/nominally inflated the value of fictitious capital.

Stock-market capital (and financial capital more broadly) grows far faster than the real mass of profits to which it entitles its holders.Result: the profit-to-market-capitalization ratio collapses—what is called the earnings yield, the inverse of the price-earnings ratio—even as the profit-to-GDP ratio soars.

This is the divergence between the sphere of real valorization (production of surplus value) and the sphere of fictitious valorization. This divergence is no accident. It is a structural response to the tendency of the rate of profit to fall in production—a phenomenon I have analyzed and described over the years.

Faced with insufficient productive returns, capital takes refuge in speculation, share buybacks, mergers and acquisitions, and financial leverage.Financialization becomes both an outlet and an amplifier of the contradictions. It allows asset prices—and thus apparent “wealth”—to be maintained at artificially high levels while masking the underlying compression of the real rate of profit.

Everything proceeds as if there were a kind of race between fictitious capital and the mass of profit.The phenomenon I describe is therefore dual and coherent within my analytical framework:

• In production: rising organic composition; ever more capital must be advanced to produce a given (even growing) mass of profits; the tendential fall in the rate of profit, partially masked by the rise in the rate of exploitation and by increases in the prices of goods and services.
• In circulation and finance: monetary creation and debt inflate the value of fictitious capital far beyond the real and anticipated mass of profits, causing the profit-to-market-value-of-capital ratio to collapse and making the stock market “never more expensive.”

The two movements reinforce each other; there is reflexivity. High profits (as a percentage of GDP) justify, in the dominant discourse, high valuations. But those valuations rest only on the optimistic capitalization of future flows which, to be realized, would require an even more massive accumulation of productive capital, in turn accelerating the rise in organic composition.

The more the mass of fictitious capital increases—and even accelerates—the greater and faster the need for profit becomes. As they say in equity markets, “you have to deliver”; the anticipations embedded in share prices must be realized.

A terrible mechanism! A terrible mechanism whose movement escapes everyone.The system locks itself into a relentless flight forward in order to support valuations.This configuration is profoundly unstable. The history of capitalism shows that phases of extreme divergence between fictitious capital and the real base of surplus value are resolved by crises of devaluation: stock-market crashes, destruction of fictitious capital, and sometimes of productive capital, which temporarily restore the rate of profit.Wars are an effective tool for restoring the proportions between profit and capital.

Current levels of the Buffett indicator, the CAPE, and Hussman’s proprietary indicators, combined with record profit shares, recall end-of-cycle configurations (1929, 2000, and to a lesser extent 2007).The difference lies in the scale of monetization and the role of the state and central banks as permanent safety nets, which slow and delay but do not eliminate the contradiction.

Within the analytical framework I employ, the apparent “success” of American profits is not evidence of a revitalized capitalism, but the expression of an advanced phase of its internal contradictions: intensified exploitation and hypertrophied financialization to counteract the tendential fall in the rate of profit, at the cost of an ever more fragile growth of fictitious capital relative to the mass of value it claims to represent.

The race between the mass of capital and the mass of profit continues. It cannot continue indefinitely without a violent adjustment.

IN OTHER WORDS

Record profits of American corporations are not the sign of a triumphant capitalism, but the clearest symptom of the disease that is eating away at it—the expression of its most advanced internal contradiction. Not the expression of its strength, but of its weaknesses and of the considerable mass of remedies it is forced to employ to mask its real situation.

This is well grasped by Ray Dalio when he writes about the end of the long cycle that began in 1945. Dalio does not use Marxist intellectual tools, but he uses History. Hegel said that History is crystallized dialectics.

On one side, a share of created value never seen for decades, confiscated from wage earners through intensified exploitation, strengthened monopolies, and systematic pressure on labor.

On the other, a mass of fictitious capital inflated by debt, monetary creation, and speculation, growing far faster than the surplus value it claims to capitalize.

The profit-to-GDP ratio soars while the profit-to-market-value ratio collapses: living proof that capital must continually deploy ever greater means to produce a mass of profits that, relative to total capital employed, tends to stagnate or decline.

Financialization is no longer a mere accompaniment; it has become the very condition of survival for a system that no longer finds in real production the returns it requires.

This race between the mass of capital and the mass of profit cannot be prolonged indefinitely.It prepares, as always in the history of capitalism, the moment when fiction will have to be forcibly brought back into line with the reality of surplus value.

When that moment arrives, the devaluation of fictitious capital will not be a market accident—least of all a black swan, since it will have been written long in advance: it will be the brutal reminder that, beneath the record profits and stratospheric valuations, the fundamental law of the tendential fall in the rate of profit has never ceased to operate.