Unemployment and the Maturity of Capitalism

In my last post, I discussed the underwhelming relation between interest rates and unemployment. In this post, I’ll look at a better way to connect unemployment to interest income.

It turns out that if you take US net interest and divide it by corporate profit, you get a ratio that closely tracks unemployment. It’s a measure that Jonathan Nitzan and Shimshon Bichler call the ‘maturity of capitalism’.

If this language sounds odd, that’s because Nitzan and Bichler see capitalism differently than your average economists. So before we get to the data, let’s review some of their thinking.