In the 1990s profits, as measured by the national income accountants, peaked in 1997. Thereafter--even as productivity and production in the entire economy grew more rapidly than they had in a quarter-century--profits fell. The benefits of the wave of innovation in information technology and economic growth in the last years of the twentieth century flowed not to corporations' shareholders but to consumers in the form of lower prices and to workers in the form of high wages and salaries. There had been a debate about whether the coming of information technology would subject American businesses to more competition, as better information technology made it easier to comparison shop, or subject to less competition, as first movers exploited economies of scale and scope to acquire entrenched monopoly positions. The answer, of course, is "both"--America is a big place where lots of things can happen. But it seems clear that the first happened more than the second: that the late 1990s saw a profit squeeze as the benefits of economic growth went overwhelmingly to workers and consumers.
The joker was that America's businesses did not tell their investors that profits had peaked in 1997. By 2000 the S&P 500 firms were reporting operating profits 50% higher than in 1997. The stock market today seems to be on a general downward trend. I think this downward trend is because investors are hearing more bad news about how true profits are and have been lower than they had beleived than they are hearing good news about the unexpectedly-rapid recovery from last year's recession.
I'm Brad DeLong.