The veteran German Marxist with a primer on the criminal basis of capitalist profit, the theft of our labor.

‘The ABC of Capitalist Profit’ by Hermann Duncker from International Press Correspondence. Vol. 5 No. 51. June 18, 1925.

The essential character of capitalist exploitation, or in other words the nature of capitalist profit, must be explained clearly, and in a manner easily comprehensible, in the theoretical material at the disposal of communist agitation and propaganda. Until we have such an explanation constantly at hand, and until we have learnt to make it known everywhere, the last hour of reformism will not have struck in the labour movement. Sometimes it seems as if this aspect of Marxist enlightenment has been placed too much in the background since the labour movement has become older. Are not these things long familiar to us? We forget that young proletarians are joining the movement every day, and that these have still to learn this ABC of economic Marxism. Its theoretical substantion never becomes superfluous, though the history and literature of the labour movement have already thrown every possible light on the problem.

If we further remember that new economic phenomena are replacing those of the older theoretical conception, rendering a certain adaption of our former agitative formulas necessary, it becomes the more comprehensible that an increasing aversion is felt against theoretical generalisations. Such generalisations are one of the causes of the regrettable tenacity with which reformism is rooted in the proletariat. And reformism is our most dangerous and obstinate opponent. Capitalism would have been overthrown long since if reformism had not taken it under its protective wings of economic illusions, and thus prevented great masses of the proletariat from joining the revolutionary class war. Reformism does not recognise capitalism itself as the enemy, but merely protests against certain of the regrettable shady sides and excrescences of capitalism. Reformism is willing enough to have these removed with the aid of Heaven. Higher wages, shorter working hours these are demands which may be put forward within the confines of the capitalist system, without attacking the system itself. Appeals are made to the “short-sighted” or to the “socially far-seeing” employer, and the latter is shown that even higher profits will be the reward of his reformist obligingness. Wages and profit are not regarded as the extreme poles of antagonism, but are made to appear as if derived from entirely different sources. But if no antagonism exists here, then no class antagonism exists at all Thus we arrive at the theoretical substantiation of civil peace and joint action between capital and labour.

It is an urgent necessity to oppose economic shallowness of this kind by a perfectly clear conception of the nature of capital income and labour income!

Following Marx with the utmost closeness, we shall endeavour to draw the fundamental outline of the source of profit.

We do best to begin with the formula of the circulation of capital: the capitalist buys with money (M): raw materials, machines and labour power for the production of commodities (C), and sells these commodities for which he obtains more money, in which is contained the surplus value (M+S). This process may be represented by the following formula: M-C-M+S.

This is the journey made by money to capital. For money is not capital in itself; it is solely the money which passes through the process to surplus money which becomes capital, “a value breeding surplus value.” The whole of the decisive fundamental sources of profit must be demonstrated by this capital formula: M-C-M+S.

M-C is an act of purchase, the purchase of all the prerequisites necessary to production: the purchase of means of production (raw and auxiliary materials, machines, etc.) and of living labour power. Whether we are concerned with purchase or with exchange, in both cases equal values only are offered for one another, or it is simply a matter of cheating or of usury. We here mean by “cheating” the underpayment of goods (the seller of the goods does not receive their equivalent). By “usury” we mean the overvalued price of goods (the buyer does not receive the equivalent of the purchase price). Marx assumes that equal values are exchanged. He does this for the purpose of clearly exposing the actual character of capitalist (industrial) profit, which cannot be said to be based in general on any trickery in trade. The development of capitalism during the age of “free competition” tended obviously to the increasing exclusion of deceptive manoeuvres and trickery in trade. M-C opposes the producer of goods, or his selling agent, who may of course as such be an independent merchant, to the future producer of goods. It is clear that we cannot assume the money owner–the buyer, who will later on be “seller” again—to be in possession from the beginning of an economic ascendancy placing him in a position to cheat the commodity owner (the seller).

But there is the seller of the commodities known as labour power. He has no capital at his disposal. On the contrary, his absolute lack of means, his proletarian poverty, force him to the constant compulsory sale of the sole possession left to him, his only commodity, his labour power. If we add to this the fact that in the course of capitalist development the proletariat has increased in numbers far exceeding the total demand for workers, so that the “industrial reserve army” (the army of the unemployed) hangs like a chain round the limbs of every proletarian offering his labour power in the market, then it becomes clear that an underpayment is not merely possible, but highly probable. Full payment would mean wages enabling the labour power sold to the capitalist, and expended in the process of capitalist production, to be fully replaced and restored.

We see that wages have nothing to do with the “yield of labour”. It has only been necessary to grant the proletarian sufficient wages to enable him to purchase the amount of food required for the maintenance of his standard of life at the customary social, historical and geographical level. As soon as this is not the case, as soon as his real wages (expressed in the actual commodities purchaseable with the wages) sink, then the payment has become an underpayment. The worker is cheated of his wages. Wherever there is impoverishment, there the capitalist gains his profit by cheating. There is no doubt that this particular source of profit has again increased to a frightful extent of late. During the period of the decline of capitalism we may observe the stage of absolute impoverishment” as clearly as we observed during the honeymoon days of capitalism, when it was first putting its household in order. We must remember the words of the Communist Manifesto (1848):

“The labourer becomes the pauper, and pauperism increases even more rapidly than population and wealth.”

The profit thus swindled out of the workers could be pressed out of the capitalists again to a certain extent by means of a comprehensive, energetic, and purposeful trade union struggle. If only the workers were fighters and not social democrats! On the other hand, the gradual lowering of the proletarian standard of life is an essential part of capitalist development, and is only retarded temporarily, and for certain categories of the proletariat, during periods of rapid and greatly increased economic prosperity. Taken all in all, profit gained by cheating is also inevitable as part of the development of capitalism.

Let us now observe the process, by which the profit, peculiarly characteristic of capitalism, the “surplus value”, is produced. In doing so we set aside for the moment every other source of profit. The capitalist may have paid for the labour power at its “full value”. The capitalist may not have earned any special profit on the sale of his commodities. He may buy and sell everything at its real value, without trickery or cheating. A capitalist with a stainless white waistcoat! Can he possibly earn any profit? Of course he can. But this profit is so deeply embedded in the nature of the capitalist method of production that the naive spectator does not observe it at all; it is a profit forming the normal life of capitalism, it is the backbone of all capitalist profit. It might be designated as the “normal profit” of the capitalist, to distinguish it from the strongly contrasting cheated profit, or from the monstrous “usury profit” with which we shall deal later. This is the profit which Marx called the surplus value, and to the elucidation of which he devoted the greater part of his economic researches.

In this place we can only deal as briefly as possible with the production of surplus values. The actual exchange value of any commodity is imparted to it by the amount of “socially necessary labour” incorporated in it, that is, the amount of work necessary for the production of the commodity (from the beginning to the end of the process), given the socially normal conditions of production, and the socially average degree of skill and intensity in working. The amount of labour stored in the commodity can only be estimated by the time consumed, by the duration of the expenditure or activity of the whole of the necessary working powers. It is thus labour alone which creates value, and labour–as labour power is in itself a certain unit of value, determined by the socially necessary amount of labour required to produce the food needed to replace the amount of labour power expended.

“At a certain stage of human productivity however, the value of the product of a day’s labour is greater than the cost of a day’s labour power.”

The worker creates a greater value than he requires for his subsistence. (Just as the ox can pull a cart containing more hay than it needs as fodder!). And this difference, which under capitalism naturally falls to the commodity buyer of the fortunate represented by labour power, to the capitalist, is the surplus value, the “normal profit” gained in any case, even when no extra profit is won by cheating. (In this world the four legged oxen can however much more certainly expect to receive their necessary ration of fodder!)

After the process of production is completed, the capitalist has received with the value of the commodities produced at the same thime surplus value, for the value of the commodities, less the wages paid and the value of the means commodities production consumed, is equivalent to the surplus value. But the capitalist has first to realise this surplus value, to convert it into money, and this is only accomplished by the sale of the commodities (C-M+S).

It is however also possible that the capitalist sells the commodities at a price exceeding their actual value¹. In this case the capitalist earns a usurer’s profit at the expense of the buyer (consumer). With this we come to the third source of profit: the usurer’s profit. In order to render this accessible, the capitalist has however first to attain a prerequisite which is in itself the product of a long capitalist development; he must be able to keep down competition. For “free competition” has naturally the tendency to deprive the individual sellers of their extra (usurer’s) profit again, that is, so long as competition is free, the prices tend to approach the actual values.²

Should the buyer actually possess a “monopoly”, he is in a position to force an over price. It is obvious that under monopolist capitalism this monopolist profit (or “usurious profit” as importance, although the fact that the great monopolies (trusts, we have designated it) is bound to play a role of ever increasing international scale has the effect of keeping the prices within a cartels, syndicates) are still competing with one another on al certain distance of actual values, however elastic.

During the youthful days of capitalism the role played by cheated profit (in addition to the surplus value or normal profit) lessened. The bourgeois scientists told fables on the “rise of the was a very important one; as capitalism matured its importance working class.” Now, in the old age of capitalism, usurer’s profit is added as a leading factor, and all three sources of profit flow into the pockets of the capitalists:

1. The profit cheated out of the workers by means of miserable wages;

2. The normal profit (surplus value) resultant on the purchaseability of labour power;

3. The usurer’s profit resultant on monopolist domination of the markets.

Besides this, the real wages of the proletariat can again be reduced by way of usurer’s profit, the necessities of existence of the purchasing proletariat being increased in price. Here the cheated profit is again swallowed by the capitalist in the veiled form of usurer’s profit.

A fundamental knowledge and a conceptional differentiation of these three forms of profit are the necessary premise for further theoretical enlightenment on the increases, divisions, and shiftings of profit under imperialism.

NOTES

1. The reverse is equally possible, and can be a source of profit. Should for instance the degree of productivity in some enterprise exceed the social average, the workers employed by this undertaking create an extra surplus profit proportionate to the monopoly of productivity created by the quality of their work. The capitalist realises this extra profit by not selling the goods at their “individual” value, the value corresponding to the amount of labour required for their production, but at the “socially” determined value. He can however sell his goods under their general value, for even then the real “individual” value is realised. In this case the price demanded is under the socially determined value, and the consumer receives a present, so to speak (as for instance under Henry Ford’s successful business methods). But this “extra profit of productivity”, in contrast to the actual “usurer’s profit” of the organised market monopoly, is being based solely on the increased exploitation of the worker, and is generally very short lived, since competitors speedily catch it up.

2. We do not deal here with the modification of value with relation to the price of production, caused under capitalism by the equalisation of rates of profit. The object of the present article is to first give a popular outline.

International Press Correspondence, widely known as”Inprecorr” was published by the Executive Committee of the Communist International (ECCI) regularly in German and English, occasionally in many other languages, beginning in 1921 and lasting in English until 1938. Inprecorr’s role was to supply translated articles to the English-speaking press of the International from the Comintern’s different sections, as well as news and statements from the ECCI. Many ‘Daily Worker’ and ‘Communist’ articles originated in Inprecorr, and it also published articles by American comrades for use in other countries. It was published at least weekly, and often thrice weekly.

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