Demystifying profits crucial to social change

April 22, 2017

We're all familiar with the old maxim: “the rich get richer while the poor get poorer”. It is said as often with resignation as it is as a call to action.

Left unquantified it remains abstract but it is much easier to get worked up when the sheer scale of material inequality is in front of your face. Hence the growing outcry surrounding Oxfam's recent annual reports on global inequality that clearly demonstrate the concentration of world resources in the hands of the 0.1%.

Oxfam's report for 2015 showed that 62 individuals had the same wealth as the world's poorest half. This was horrendous enough, but 2016 was not to be outdone: that figure has now been whittled down to seven. Seven people, all fair skinned male billionaires, possess the same wealth as the 3.7 billion poorest individuals on the planet. And all seven amassed their wealth through profit-driven enterprise.

Misconceptions of where profits come from and their economic necessity are major obstacles to challenging the economic and political structures of today.

US President Donald Trump was able to persuade at least some of the increasingly insecure and impoverished American public that he would be a good president due to his “success” as a business mogul.

When Kevin Rudd was Prime Minister and wanted to shave off a paper-thin amount from mining corporations' profits, the public was bombarded with advertisements saying this would ruin the mining industry and cause mass layoffs.

In both cases, profits are the sign of progress, and profitability is considered essential to ensuring jobs and opportunities for working people.

If we understand how profits are actually made, however, the respectability of those who have acquired huge amounts in the process is completely shattered. Profits are largely made by paying working people less than the value of what they produce. When a product is sold, that extra — unpaid — value is added to the investment funds available for tomorrow. As businesses expand they hire more workers, but on the same basis of diminished return. Hence, the owner of the business is accumulating wealth through the non-payment — the exploitation — of those working for them.

But don't owners take risks in investing/setting up shop? 

Sure they do, but what they are gambling with is the money that was rightfully someone else's wage and should never have been theirs to gamble.

This is obviously different to small business people who work for themselves. Their situation is made almost impossible by having to compete with bigger, more cashed-up rivals. Many self-employed people will put in long, unpaid hours to keep going, but still the overwhelming majority of these start-ups go broke after a few years of trying, and then it's back to working for someone else.

Haven't the capitalist class “earned” their profits through hard work? 

Even if it were not inherited, which is where Gina Rhinehart got her money, business owners do not work in the real sense. If Gina stayed in bed all day, industry would not be affected. If the workforce she employs did the same, no wheel would turn. This clearly demonstrates where the real origin of value lies and where the real potential power lies too.

Some owners of industry started off small. Dick Smith is held up as a self-made entrepreneur, with humble beginnings fixing toasters in a backyard shed. For that work he should have been paid well. But when that person hires people, profits from their labour and then withdraws from the actual production process while deriving income from the ongoing work of others, that person's existence has become largely parasitic in nature.

A competitive market means their enterprise must continue to grow and expand, delivering ever larger sums of money to them in the process. Working people and the environment have become purely a means to that insatiable end.

So are profits viable or desirable into the future? 

The quest for profit is the driving force for the immense inequality we can see worldwide, including the wars over resources. “Constant growth” economics means there is no such thing as a satisfaction point either. Profits can only come about through exploitation, and a world where dignity is the goal would not see people treat each other this way.

Where needs exist, we can have an economy that is geared and oriented to meeting those needs, allowing a decent and sustainable standard of living for everyone, without profits ever entering the picture.

The profits that have been made already should be put into public hands to help achieve the labour-saving and renewable technology that would ensure a safe climate and relieve us of the need to work. Profits could be invested in areas such as free education and healthcare, and to expand the culture and wellbeing of everyone, not just those who can afford it.

If we lived in such a world based on material satisfaction and community solidarity, it is near impossible to believe that anyone would look around and seriously think to ask: “Yes, but is it all profitable?”

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