The profits generation in the Spanish economy during the pre-crisis and crisis period

This paper intends to explain the sources of profits in the Spanish economy during the last eleven years, a period of time that comprises several years of sustained growth (2000 - 2007) and the years since the global financial crisis which started at the end of 2007. First, we will examine briefly the theory of profits along the history of economic thought, seeing that despite the importance of the profits for capitalist system, the economists have tended to ignore them, not offering any explanation about their determination and generation. Then, we will look at the evolution of profits in the Spanish economy in the period 2000-2011. Doing this, we will take advantage of the method first devised by Jerome Levy and Michal Kalecki in the 1920’s and 1930’s, respectively. We will see that, contrary to the general belief among economists and businessmen, profits have soared since the beginning of the crisis in 2007, given mainly to the huge government deficits and the improvement in the foreign sector. Finally, we will compare our measure of profits against other common measures, such as the Madrid stock exchange volume of profits or the Bank of Spain’s Central Balance Sheet Data Office, arguing that our measure of profits gives a better idea of the business situation and concluding that the prospects for the profits in the following years are quite gloomy.