It has been a great time to be a capitalist. All around the world, profits have been rising as a percentage of gross domestic product.

According to Goldman Sachs (NYSE: GS - News) , the profit share of US GDP in the first quarter of this year was an all-time high. HSBC says 2005 was the best year for UK profits since records began.

This is not just a case of Anglo-Saxon fat cats getting the cream. According to UBS, the Japanese profit share is close to a 35-year high while the continental European profit share is approaching a record.

A crucial question for investors is whether this profit share can be maintained, or increased, or whether it is doomed inexorably to retreat to the average.

Theory would suggest there should be some mean reversion in the profit share. If profits are high, then people will be tempted to create new businesses and existing businesses will expand; the resulting competition will drive down margins. If profits are low, companies will fold, easing the competitive pressure on, and boosting the profits of those that survive.

But this process can take years to work its way through the system. For the moment, companies are rolling in it; those in the S&P 500 index could achieve their twelfth successive quarter of double-digit percentage profit gains.

Those who attended any 1960s and 1970s political meetings will recall that at some stage someone would shout: "What about the workers?". And the same question could be asked today.

If profits are gaining their share of GDP, some other sector must be losing. And it is labour that has suffered.

Goldman Sachs estimates that the slow growth in the compensation paid to labour has accounted for about 40 per cent of margin expansion over the past five years.

What explains the sluggishness of wages? UBS cites an academic paper by Richard Freeman which says that the entry of China, India and the ex-Soviet bloc into the global economy effectively doubled the size of the labour force. As with any other economic good, if the supply increases substantially, the price is likely to come under pressure.

Other factors have helped the corporate sector. Interest payments have been low, in real and nominal terms, reducing the cost of corporate debt. Depreciation charges have fallen, since companies cut right back on their capital expenditure in the aftermath of the dotcom bubble. Tax rates were cut in the early stages of the Bush administration.

In the UK, the buoyancy of overall corporate profits has been boosted by the gains made by the energy and mining sectors. Strip those out and HSBC says that, in 2005, both the return on equity and net margins fell.

But the picture is still pretty upbeat. HSBC says the gap between the return on equity and the cost of equity (a sign of the "value added" by the corporate sector) is close to an all-time high.

Nevertheless, anyone taking the long view must be concerned that the news on profits cannot get any better than this. A number of factors may be acting to drag profits back down. Interest rates have been rising. Capital expenditure has been picking up, suggesting the depreciation charge will increase.

UBS adds that capital goods prices are now rising, implying higher spending costs for a given level of investment. Tax rates are unlikely to fall any further, given the widespread budget deficits in the developed nations.

But the key issue is obviously wages. Traditionally, as the economy expands, it becomes harder and harder to find workers. This pushes up wages, eating into margins and stoking inflationary pressures, which prompt central banks to raise interest rates. Higher rates eventually cool demand and slow the economy.

This has yet to happen this time around. But the cycle has not been abolished, merely elongated, by the China/India effect. Goldman Sachs's analysis suggests the basic correlation of wages to economic growth remains intact. UBS thinks that spare labour capacity has receded and that unit labour costs may now start to rise. In other words, the workers may start demanding their share of the pie.

And there is another factor to consider. High profits and the extremes of wealth they usually imply can be extremely unpopular.

We have already seen how high oil prices have tempted governments to make asset grabs in Latin America. Even in the capitalist US, there are mutterings about the profiteering of the oil giants.

It is easy to assume that the liberalising processes of the past 20 years are irreversible. But such reforms have little bedrock support; they have been effectively imposed on many countries by economic elites.

But the task may be getting harder. Even supposedly pro-reform governments, such as that of former Italian prime minister Silvio Berlusconi, got little done.

The breakdown of world trade talks this week showed how governments are still in thrall to their agricultural sectors and how hard it is to find political support for one of the basic tenets of economics: free trade.

So profits may come under pressure from the normal workings of the cycle. But in some sectors, governments may act to take them away. And the globalised economy that has helped companies increase their profits is a fragile structure; it could be swept away just as the previous version was in 1914.

philip.coggan@ft.com