Despite impressive global GDP growth in the past two decades, companies’ aggregate economic profits have been contracting. Analyzing the economic-profit pools of the world’s top 4,000 companies, senior partner Marc de Jong and colleagues find that global economic profit halved from 2005 to 2019 before rebounding in 2021. Profit pools aren’t keeping up with companies’ revenues, however, leading to a long-term crunch in global net economic profit.
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A bar chart shows the size of the global economic profit pool, in billions of dollars, from 2005 to 2021 for the top 4,000 companies. Two sets of bars are bracketed in blue, with the first representing 2005 to 2009 and the second representing 2015 to 2019. The average for each of the bracketed areas is plotted as a single horizontal line. By comparing these 2 lines, with 2005–09 at $612 billion and 2015–19 at $297 billion, we see that the average profit pool for the top 4,000 companies halved between these 2 bracketed periods.
Footnote: Including goodwill and adjusted for inflation to 2021 prices. Based on a sample of the top 4,000 companies by revenue globally, excluding banks, insurance companies, and real-estate companies.
Source: S&P Global; Corporate Performance Analytics by McKinsey.
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To read the article, see “Working hard for the money: The crunch on global economic profit,” April 21, 2023.