QUESTIONS STILL IN NEED TO BE SOLVED (II) PROFIT, THE SOURCE OF ALL OUR ILLS

An English translation by Jean-Loup Komarower of the post QUESTIONS À RÉSOUDRE (II) LE PROFIT, SOURCE DE TOUS NOS MAUX

Robert Owen (1771-1858) was a Welsh social reformer, one of the founders of the cooperative movement. As a very early socialist who was blamed for being strictly speaking a “communist”, he considered profit as the source of all our ills. Owen asserted that profit is pure spoliation: workers were robbed of a benefit that should be theirs. Because profit skims part of the value produced by the worker’s labour, it becomes impossible for the latter to be a consumer of the same quantity of goods that he or she has produced. Owen saw profit as purely parasitic. However, if that was truly the case, as a potential opponent may argue, a situation of perfect, unbiased competition should quickly settle the score and reduce profit to zero. Not so, replies Owen: the word “competition” only describes the kind of war being fought, whereas the word “profit” refers to the type of booty. Since profit cannot be justified in any way, it has to be eliminated.

Does it make sense to eliminate profit as Owen advocates? Gide and Rist offer an excellent analysis of this question:

On the other hand there is this objection:

Whenever profit forms part of the cost of production it is impossible to distinguish it from interest. In that case it is true that even perfect competition would not do away with profit, since it will only reduce the price to the level of cost of production. In that case profit cannot be said to be either unjust or parasitic for the product is sold exactly for what it cost.

When profit does not enter into cost of production there is no possibility in confusing it with interest. It is simply the difference between the sale price and the cost of replacing the article. In this it is certainly parasitic, and would disappear under a régime of perfect competition, which must to some extent destroy the monopoly upon which such profit rests (Gide and Rist 1913 : 240).

Can this question be definitely resolved: is profit derived by industrialists and entrepreneurs a reward for service genuinely provided?

(to be continued…)

===================================
Gide, Charles and Charles Rist, A history of economic doctrines from the time of the physiocrats to the present day, Richard R. translator, Boston : D. C. Heath, 2nd edition 1913