What are profits

What is the source of profit? Its fundamental source is the labour of the workers. There is no emotional appeal in this assertion. It is simple fact. There is only one thing that diverse commodities, as different as chalk from cheese, have in common. That is that they are the products of human labour. They exchange in definite proportions. Even though in money terms the nominal magnitude of the exchange may be greatly enhanced by inflation, still the proportions in which commodities exchange against each other are definite. What determines the proportions is the amount of socially necessary labour time required for their production. So a pair of boots requires much less (socially necessary) labour time than a motor car. Accordingly the exchange of the two is represented by vastly different prices which reflect the different labour times socially necessary in their respective production.

Labour power is like every other commodity. It has a definite value. Its value, like all other commodities, is established by the amount of socially necessary labour time required in its production. Thus in capitalism the worker is paid fundamentally the amount needed to keep him and his wife and children alive. This is his wages. For wages he sells his capacity to labour to the factory owner. That capacity to labour as a matter of fact, as a matter of observation, exceeds in terms of time what is necessary to recoup the maintenance of the worker. In say 4 hours he produces the equivalent of his keep but in reality he works for 8 hours. The excess four hours belongs to the factory owner because for wages that owner has bought the worker’s capacity to labour. This is what Marx called surplus value. Surplus value is profit. In the capitalist process it undergoes distribution. That distribution can be quite complicated. Marx revealed that the value of labour power and the value produced by that labour power in the productive process are two entirely different magnitudes. The one magnitude is the value of the labour power, wages, the cost of production of the labour power of the worker, and the other the value produced by that labour power realised in the commodity produced. Labour power is the only commodity capable of producing a value greater than it itself has. It is the only source of profit. (“Value” increases in land etc. are not value in the scientific sense but a manifestation of the distribution of surplus value).

Profit is derived from unpaid labour time. Workers’ labour power is purchased on the market by the owners of capital.  Put to work, on average in half the working week, it produces values sufficient to cover wages to maintain a worker and family. The value produced in the remainder of the working week constitutes surplus value, the source of profit. he commodities produced by workers’ socialised labour are appropriated by capitalists. They will continue to be produced so long as they can be sold for profit on the market. The apparatus of state (the term “state” is used to describe public service, army, police, courts, gaols and not describe what are called States in Australia, for these States are provinces) maintains and enforces the system of exploitation.

 The total irrationality of this system is shown by the effect of technological advance. Technological advance under capitalism is dictated by competition for profit. Each capitalist strives to increase his production and reduce his labour costs. Hence today, computers displace large numbers of workers, cargo ships become container ships with mechanical loading and unloading, wheat, sugar, flour are loaded in bulk. So it goes on. The drive for profit and bitter competition leads one capitalist to improve technology; the other must follow or be ruined. Many are ruined and flung into the ranks of workers or unemployed.

When demand is great, profits are high. Production is stepped up. But the market is finite, limited. First it comprises these same workers. Their wages are basically determined according to the cost of production of their labour power, (that is, the amount necessary to maintain the workers and their families). Wages will vary above or below that according as the supply of and demand for workers vary, as the struggle of the workers for more wages keeps up wage levels a little, but the whole tendency of capitalism is to push wages down below subsistence level. By keeping them down the factory owners make more profit by the mechanism explained above. But by keeping wages down they contribute to restricting the very market upon which they rely to realise profit. Second, the market comprises all other sections of the population. Third, it comprises the outside world.  Each of these again is finite, limited. There is mad competition among the owners for profits by sale on the market. Sooner or later that market is glutted. This is so today. Motor vehicles cannot be sold, food is destroyed and so on. True, it is an uneven progress so that at the one time there may be excess of some goods and shortages of others. This arises from uneven development, uneven contraction of the market. The process takes place on a world scale. Re-division of the world constantly goes on.

It is inevitable that sooner or later these social conditions will impel people to organise to end the conflict between the socialised labour process and private ownership of the decisive means of production.  To camouflage and support the reality of ownership and non-ownership, of coercion to maintain it, there are many devices used by the owners of the means of production. It is not sufficient for the owners of the means of production to rely solely on coercion. It is necessary also to rely upon “public opinion”, to persuade a significant number of people that the social system, where ownership of the means of production is in the hands of a tiny minority and non-ownership is the fate of the vast majority, is desirable. Hitler’s Germany was the classic case of open resort to force to maintain private ownership of the means of production. Nonetheless Hitler relied also on “public opinion”, on deception. the ideology of the dominant class, of the owners, is put forward as the accepted ideology.  The class in control of ownership of means of production and the state apparatus imposes its thinking in many different ways, crude and subtle, open and insidious.

Names and terms have frequently given rise to disputes. Commonly the word “socialism” is used as a political trick. The Labour Party is called “socialist”. Obama is called a "socialist". It is suggested that countries with large welfare programmes are socialist or that nationalised industries are socialist. The word “reform” is heard more and more – “reform” of the economy, “reform” of industrial relations, “reform” of the way of government. If one accepts the theory of gradualism (reformism)—that socialism must come through the reform of prosperous capitalism—then of necessity one must agree to the measures to make capitalism prosperous as the necessary stepping stones to socialism. Otherwise, bang goes the theory. “Reform” never alters the fundamentals. “Reform” is just a manoeuvre to deceive people that these fundamentals can be altered. Reality is that their real nature will never change. This has nothing to do with genuine socialism as dealt with here.

With socialism, production takes place for people’s use.  A Socialist means a man or a woman who recognises the class war between the proletariat and the possessing class as the inevitable historic outcome of the capitalist system and of the direct economic and social antagonisms which it has engendered and fostered. And someone who sees that those antagonisms can only be resolved by the complete control over all the great means of production, distribution, and exchange, by the whole people, thus abolishing the class State and the wages system, and constituting a Co-operative Commonwealth or Socialism. The preliminary changes which must bring about this social revolution are already being made, unconsciously, by the capitalists themselves and socialists use political institutions and forms to educate the people and to prepare, as far as possible, peacefully for the social revolution, and holding that this great change should be completely democratic in every respect.

 Socialism arose because mankind had by the middle of the 19th century evolved through a succession of changes in the productive forces, these had given rise to corresponding changes in the relations of production, the shape of the real change (to socialism) could be seen within capitalism by the very process of socialised production and its contradiction with individual ownership. The  utopian Robert Owen advanced his “ideal” society in the early 19th century and first used the terms socialist and socialism.  Marx, and Engels deduced from their observation the general laws that governed social development. Their observation showed that the facts and the movement of those facts obeyed certain definite laws. These laws they discerned and expounded.  They showed that social change arose from changes in the productive forces. The very experience of workers of their exploitation in the socialised process of production educates them. Their education goes through various stages. They ultimately need and get socialist ideas. The theory of revolution arose from mankind's practice and summing up of that practice.

Money had arisen from the extension of trading several thousand years ago, its use as capital became possible. Merchants could add to their wealth by buying goods cheap and selling them dear; moneylenders and mortgage holders could gain interest on sums advanced on the security of land or other collateral. These practices were common in both slave and feudal societies.

But if money could be used in pre-capitalist times to return more than the original investment, other conditions had to be fulfilled before capitalism could become established as a separate and definite world economic system. The central condition was a special kind of transaction regularly repeated on a growing scale. Large numbers of propertyless workers had to hire themselves to the possessors of money and the other means of production in order to earn a livelihood.

Hiring and firing seem to us a normal way of carrying on production. But such peoples as the Indians never knew it. Before the Europeans came, no Indian ever worked for a boss, because they possessed their own means of livelihood. The slave may have been purchased, but he belonged to and worked for the master his whole life long. The feudal serf or tenant was likewise bound for life to the lord and his land. The epoch-making innovation upon which capitalism rested was the institution of working for wages as the dominant relation of production. Most of you have gone into the labour market, to an employment agency or personnel office, to get a buyer for your labour power. The employer buys this power at prevailing wage rates by the hour, day, or week and then applies it under his supervision to produce commodities that his company subsequently sells at a profit. That profit is derived from the fact that wage workers produce more value than the capitalist pays for their labour.  This mechanism for pumping surplus labour out of the working masses and transferring the surpluses of wealth they create to the personal credit of the capitalist was the mightiest accelerator of the productive forces and the expansion of civilisation. Capitalism has produced many things, good and bad, in the course of its evolution. The exploitation and abuses, inherent and inescapable in the capitalist organisation of economic life, provoke the workers time and again to organise themselves and undertake militant action to defend their interests.  The struggle between these conflicting social classes is today the dominant and driving force of world.

The aim of socialism is to introduce the rule of reason into all human activities. Under capitalism the wage worker is treated, not as a fellow human being, but as a mechanism useful for the production of surplus value. He is a prisoner with a lifetime sentence to hard labour. Compulsory labour is the mark of social poverty and oppression. When wealth of all kinds flows as freely as water and is as abundant as air and compulsory labour is supplanted by free time. When free time is enjoyed by all and has become as Marx suggested the true measure of wealth, this is the goal of socialism, and its promise.