[introduction.]
p In the economic practice of the capitalist, surplus-value appears as profit.
p Profit is the excess of the value of a commodity over the expenses incurred by the capitalist in its production or the increase of the whole capital advanced by him.
p Profit is the motive force and main aim of every capitalist. For the capitalist, production is solely a means of making profit. The requirements of the people in a capitalist economy are taken into account only insofar as they are necessary conditions for extracting profit. Apart from this, the concept "requirements of the people" has no meaning for the capitalist.
p Capital seeks in every way possible to augment the mass and rate of profit.
p The rate of profit denotes the ratio of surplus-value to the total capital invested in an enterprise. The rate of profit is an index of the profitability of a capitalist enterprise.
Differences exist between individual branches of industry in the process of producing surplus-value. In some branches the capitalist has to invest the larger portion of his capital in the means of production—buildings, machinery, etc., which in themselves do not bring in profit although they are essential for obtaining it. In other less technically equipped branches, the larger proportion of the capital is expended on hiring labour-power. The proportion between constant and variable capital determines the organic composition of capital, whether in a particular enterprise or in tlio branch of industry as a whole. The larger the relative share of constant capital in the total capital, the higher is the organic composition.
Average Profit
p Equal capitals invested in different branches of production having varying organic compositions produce different amounts of surplus-value. The surplus-value created in branches with a low organic composition of capital is larger than in those with a high organic composition.
However, branches with different organic composition of capital could not coexist unless capitalists received the same amount of profit on capitals of equal size. Indeed, what would be the sense of a capitalist investing capital in a branch with a low rate of profit? Experience proves that equal capitals invested in different branches 225 of industry, regardless of organic composition, yield more or less the same profit. This is explained by the fact that alongside the competition between capitalists within each branch for the sale of commodities of the same kind, there exists competition between the capitalists of different branches over the most profitable way of investing capital. The flow of capital from one branch to another leads to the raising of prices in some brandies and their lowering in others. Capital forsakes those branches in which there is an overproduction of commodities, causing prices to fall sharply and enterprises to go bankrupt; it finds its way to those branches where a shortage of commodities has caused prices to rise. Thus, the spontaneous equalisation of rates of profit in branches of industry with different organic compositions of capital leads to the formation of an average (or general) rate of profit. Thanks to this flow of capital, the total amount of surplus-value produced by the working class is distributed among the various capitalists approximately in proportion to the magnitude of their capital.
Price of Production
p As a result of the equalisation of the rates of profit, the prices of commodities under capitalism are determined by the price of production, which equals the cost of production plus the average profit. Every capitalist seeks to sell his commodity at a price that will bring him not only the cost of production but also the average profit which is normal for the given country at that time. The price of production of the individual commodity may, therefore, be higher or lower than its value. However, the sum of the prices of production equals the sum of the values of all commodities.
p Let us suppose, for example, that the value of commodities in branches with a high organic composition of capital amounts to 120 monetary units (constant capital—90, variable capital—10, and surplus-value—20 units); and that in branches with a low organic composition the total value is 140 units (constant capital—80, variable capital—20, and surplus-value—40 units).
p Under these conditions, the price of production, which equals the outlay of capital and the average profit, amounts to:
p
2°2f’40
= l30 units.
p The commodities of branches with a high organic composition of capital are sold at 10 units higher than their values, while the commodities of branches with a low organic composition of capital— at 10 units lower than their values. Individual deviations from value cancel one another, and the sum of values of all commodities (120+ +140=2(30) coincides with the sum of the prices of production (130+ +130=260).
226p The theory of average profit and prices of production is of great significance for understanding the basic tasks facing the proletariat in the class struggle. This theory demonstrates that every capitalist has an interest in raising the degree of exploitation not only of his own workers but of the working class as a whole, since, in the final analysis, the profit of each capitalist represents his share in the total mass of surplus-value created by the working class. It is understandable, wrote Marx, "why capitalists form a veritable freemason society vis-a-vis the whole working class, while there is little love lost between them in competition among themselves".^^111^^
p The theory of average profit thus reveals the material basis of capitalist class solidarity. To this capitalist class solidarity, which is based on the selfish aim of extracting as much as possible out of the worker, the working class counterposes its own unity, which is based on the legitimate aspiration to abolish capitalist exploitation. The struggle of the working class against the rule of capital cannot be limited to action against individual employers for the improvement of labour conditions in a given enterprise, or a particular branch. The ultimate goal of working-class struggle is the elimination of the capitalist system of exploitation and the bourgeois social structure.
p The theory of average profit shows that the competition between capitalists of different branches of production reduces the different profits to the usual average profit, irrespective of the organic composition of capital in one or another branch. The average rate of profit changes in the course of time, but for each country at any given period it is sufficiently stable to be reckoned with by all businessmen.
A rise in the organic composition of capital implies a more rapid growth of constant capital compared with variable capital. And since constant capital by itself yields no profit, it is clear that the rate of profit (i.e., the ratio of surplus-value to the total capital and not only to its variable proportion) tends to fall. To diminish this tendency capitalists try to raise the rate of exploitation, resorting to various methods of counteraction. But this in its turn aggravates the contradictions between labour and capital.
Profit of Enterprise and Interest
Capitalist profit is divided into profit of enterprise and interest. The capitalist entrepreneur usually does not limit himself to the use of his own capital. He also puts loan capital into circulation. The portion of profit which the functioning capitalist surrenders to another capitalist or bank in return for the use of capital is called interest. The part which remains after interest is deducted from profit is called profit of enterprise. Under capitalism banks act as intermediaries in settling accounts between capitalists, gather money capital and receipts (through deposits and other operations) and place them at 227 the disposal of capitalists. By facilitating the development of capitalist production and the centralisation of capital, banks simultaneously consolidate the rule of capital over labour. They create the conditions under which big capitalists dispose not only of their own capital but of an increasing proportion of the money and income of the other strata of the population.
Profit Is a Limitation of Capitalist Production
Bourgeois economists extol capitalist profit as the greatest stimulus to technical progress and unlimited growth of production. They never mention that capitalist profit results from exploitation and the exhaustion of labour-power. They gloss over the fact that the subordination of production to the principle of capitalist profit is not only a stimulus but also a limitation of capitalist production. Capitalists produce only those things, and such amounts of them, that can yield a profit. It not infrequently happens that capitalists, especially under present-day conditions, restrict production, hold back technical progress, and destroy masses of products in order to raise the rate of profit. Moreover, capitalist monopolies unleash wars, which cause mankind untold destruction, and all this is done for the sake of profit.
Notes
