Finance and Industry
WHAT IS PROFIT ?
Last March the Daily Worker had an interview with the Russian economist, Prof. Liberman, whose views on the role of profits in the Russian economy are well known. In the course of the interview Liberman told special correspondent Peter Temple:
“Profit is—like money, wages and prices—an essential part of any economy based on commodity production. It’s merely an expression of surplus product. If we didn’t have any surplus product, then we would be consuming everything we produced and it would be quite impossible for society to develop. Socialist profit is entirely different from capitalist profit, both in its origin and in its designation. In a Socialist society it arises solely from better and more efficient production, producing more goods and services with less expenditure of time, power, raw materials—and that’s all. But capitalism extorts profit from exploiting labour, cutting the workers’ wages, raising prices to the housewife.”
A similar argument was put forward by George Brown when he addressed a meeting of businessmen in Newcastle on May 22. The Times on the following day reported his words under the headline PROFIT MOTIVE AS TEST OF EFFICIENCY. Said Brown:
“As long ahead as we can see Britain is going to have a mixed economy with a very large private enterprise sector. Therefore the profit motive has a very important role to play. It is time we stopped being silly or doctrinaire on all this. Profits are a very good test of efficiency when earned by enterprising management introducing better methods or new products in competitive conditions. They are not good if they arise out of management using market power to raise prices.”
Both Liberman and Brown commend profits that are supposed to come from efficiency and condemn profits that are supposed to come from raising prices. The only difference is that George Brown, unlike Liberman, hasn’t the insolence to call his “good” profits “socialist”. In any event both are confused over the nature and source of profits.
In a way, Liberman is right when he says that profit is something to do with the surplus over and above what is consumed. For thousands of years Man has been able to produce more than he needs for bare subsistence but this surplus has been taken by a dominant social class or classes. The means by which this has happened have varied with economic circumstances.
In Ancient Slavery the process was obvious: the slave-masters led a life of ease without working, while the slaves received their keep. The surplus produced by the slaves over and above their keep belonged to their masters. In Feudal Society the process was obvious too: the serf was required to work so many days a year on the estate of his master. In Capitalist society too the surplus is taken by those who monopolise the means of production, but the process is a little more complicated.
Capitalist production is production for sale -what Liberman refers to as commodity production. In capitalist society everything, including labour power, is bought and sold. In fact capitalism is based on the exclusion of the majority of the population from the means of production. As a result the majority have to sell their working ability for a wage to the capitalists in order to live. On average this wage is about sufficient to maintain the worker in efficient working order.
The capitalist buys labour power for a day or week or a year, as the case may be. For part of this time the worker reproduces his own subsistence; the rest is free labour time, from which profits are derived. Profit arises in the process of production. The capitalist realises his profit when he sells what his workers have produced. In fact the sharing out of the social surplus among the capitalists and their hangers-on is more complicated than this, but the basic fact remains. Profit is taken from the working class in the process of production; this is the form in which the capitalist class take the surplus Liberman talks about. Because they monopolise the means of production the capitalist class are just as able to take this surplus as were the slavemasters and feudal barons.
The hard-headed businessman doesn’t see the origin of profit in this way. To him it appears as a surplus over his costs. He knows that if he reduces his costs he has a chance of increasing his surplus. Thus to him it appears that he can make profits by eliminating waste and cutting down costs, in short through efficiency. True, under certain circumstances, he can increase his share of profits in this way just as under other circumstances he can increase it by reducing wages or raising prices. But he deludes himself in seeing here the origin of profit. George Brown shares this delusion. So does Prof. Liberman, when he tries to tell us that in Russia profits arise from efficiency. In fact, of course, profit there as elsewhere arises from the surplus labour of the working class. This Liberman can’t—or won’t—see, but then he is after all an apologist for the system of exploitation in Russia.
Liberman’s views on profit lead him also to a false theory as to the origin of his “capitalist” profit. He suggests that such profit arises from depressing wages and from raising prices. Once again, a particular capitalist may temporarily increase his share of total profit in these ways but the point at issue is not this; it is what is the source of the total profii itself. Under capitalism profit arises even if wages are equal to their value and even if there are no monopoly elements present. Liberman’s argument about profits arising from efficiency is a familiar defence of capitalism.
Profit then is a form of theft. In Britain we have many robbers fighting over their shares in the legalised robbery of the working class. At present there is an argument as to who is entitled to what. George Brown is suggesting that those who get a share through using market power don’t deserve it. Enoch Powell, on the other hand, says that every capitalist is entitled to what he can grab. This is no argument in which Socialists can take sides: in our view the entire social product should belong to society as a whole.
Then profit will disappear for ever and the surplus that arises from the labour of all will be used for the benefit of all.
In Russia there is one grand larcenist; the State. Till now the State has taken the surplus product of the working class more or less directly. Profit in this sense has long existed in Russia; it is not something new, as some discussions of trends in the Russian economy suggest. What is new is the reliance on supply and demand, and on profit on capital investment, to determine what amount should be produced. The market is gradually taking over from State directives. This changeover creates problems.
“SOCIALIST” UNEMPLOYMENT
In a State-directed economy, such as Russia had for a time, the labour force can be more or less fully used through coercive means such as restrictions on travel or on changing jobs, involving the issue of passes and cards of various sorts. This in fact was what did happen in Russia. Now this has been slightly relaxed, allowing a drift from the country to the towns, creating that chronic capitaist problem, the housing shortage. Thus at the 22nd Party Congress nearly four years ago, Krushchev admitted:
“We still have a housing shortage, the housing problem remains acute. The growth of the urban population in the USSR during the past few years is considerably in excess of estimates.”
Another problem which the Krushchev government had to face was that of large-scale seasonal unemployment on the land. Agriculture in Russia is very backward and very few agricultural workers are paid a steady wage; most in fact are not paid any money at all. In the winter these people are unemployed. Edward Crankshaw of The Observer, in a discussion of this problem in the issue of April 4, writes that a campaign to deal with this problem has now been launched.
“According to Sovietskaya Rossia, which is sponsoring this campaign, there are now well over 10 million collective farmers unemployed each winter—or over a third of the total number of able-bodied workers on the land—and the number is rising. Nothing was done about this under Khrushchev. Nothing much has been done yet. But the fact that a newspaper is permitted to campaign for State assistance in the development of local handicraft industries to keep the peasants in winter is very much a sign of the times.”
Socialist Profits, and now a Socialist Housing Problem and Socialist Unemployment—what next can we expect from the Workers’ Paradise which Russia is supposed to be? The return of our old friends the Soviet Millionaires, perhaps?
THE “PUBLIC MONEY” FRONT
There is another example of the ignorance of economics shown, by the Daily Worker, Russian economics professors and other admirers of Russia, which must be recorded. It is taken from a letter by a leading member of the so-called Communist Party in the South Midlands to a local paper. Apparently he had met a member of the Socialist Party who tried to explain to him that ultimately the burden of taxation fell on the propertied class. This, he wrote,
“… is a prize example of the distortion of socialist ideas into nonsense. As if capitalism, under which we live, had not developed a capitalist state! As if that state were not strong, and the buttress of the exploiting employers! As if the state machine did not organise a complex set of attacks which working people have to resist, whether fighting for higher wages, shorter hours, moderate rent, decent pensions or equitable taxes and better government expenditure! The entire future of Oxford, with the Development Plan and the crying need for improved schools and social services, depends on the all-round struggle for the right use of public money.”
There is not space to go into this in detail; we only record this as in our view the prize example of the distortion of socialist ideas. It confirms that a correct understanding of political economy is a necessary prerequisite for correct practice. One thing is puzzling though : why only “moderate” rents, why not low rents or for that matter no rent at all? Why only “decent” pensions and “equitable” taxes? Surely “high” pensions and “low” taxes would gather more votes? Marx considered the demand of a fair day’s wages for a fair day’s work conservative, but this is almost revolutionary compared with some of the demands in the letter. After all, even Gladstone would have favoured “an all-round struggle for the right use of public money”.
A.L.B.