Where does profit come from? pt 1 of 2

Imagine you are a capitalist. Your money works for you. You wake up in the morning with a big chunk of cash. You invest that cash in some productive capital. At the end of the day you have more cash than you started with. All you did was sit around and drink martinis.
The money you invest moves through space to distant lands, far away, where people you will never meet scurry around on shop floors, assembling widgets which your salespeople will sell to make your profit. You don't know them. You don't care to. After all people are just factors of production... like machines, like raw materials. The cheaper the better.
Out in the world are other capitalists. Unlike workers, they are worth worrying about. For it is these other capitalists that are competing with you for your profit. They compete to outsell you in the market for your commodities. They compete to command cheaper inputs than you. Whenever you aren't chasing after more profit, someone else is. When you meet in the marketplace, they will beat you.
Imagine you are money.
In the morning you start out as a wad of bills in a capitalist's wallet. The capitalist uses you to pay rent for factories, pay wages to workers and to buy raw materials.
Now you are no longer money. You are factories, wages and raw materials. You are productive capital.
Workers hammer on you, smoke comes out of your smokestacks. Your conveyor belts rattle with the magic of creation and.... abracadabra: you are commodities. The production process turns that productive capital into commodities.
As commodities you sit around on shelves. Eventually workers come along and buy you. They pay for you with money. Now you are money again. But this time you are MORE money! We call this circle the "circuit of capital".
Have you ever seen the movie "The Blob"? It's a corny 50's horror movie about this alien monster that looks mysteriously like a large wad of bread dough. It gets bigger and bigger until it takes over the whole town. This is kind of like capital.
Let's go back to pretending we are capitalists...
Capital expands and expands and expands through this circuit of money-commodities-money. (MCM) Capitalists have two choices: either continually reinvest their profits into this circuit of capital, or be destroyed by other capitalists who do.
Let's say you decided you were tired of constantly competing for more profit, constantly searching out ways to lower production costs. Let's say you decided just to keep your production at the level it is. What would happen? Pretty soon other capitalists would have found cheaper inputs, and more efficient ways to produce commodities and they would be outselling you in the marketplace. And pretty soon nobody would want to buy your commodities and you would be out of business.
So capitalists may be greedy. They may be immoral. They may be scum. But capitalism is not greedy, immoral or scummy because of greedy, immoral scumbags. Capitalism is greedy, immoral and scummy because it compels people to be greedy, immoral and scummy. It compels people to compete against each other in a constant quest for more profit, for cheaper production costs. It compels capitalists to stop at nothing to turn their money into more money. Capitalists will pillage the earth, wage wars, buy off governments, destroy peoples' lives all in order to change money into commodities and then back into money.
So maybe money isn't really working for capitalists after all... maybe capitalists are really working for money. One sometimes wonders if there is any limit to what the imperatives of profit will make people do.
But where does this profit come from...?
Money goes into the production process and comes out as commodities which exchange for a greater amount of money. Huh? Is it magic? This makes no sense without recourse to the theory of value.
Let's review that theory for a moment. For all of these different commodities to exchange in the market they must have a common substance. This common substance which allows us to treat all commodities as containing differing portions of the same substance is labor. Labor produces value. All commodities are the products of labor. Their value is determined by how much labor went into them. Labor digs raw materials out of the ground, labor turns raw materials into useful objects (use values), and labor transports commodities all over the world to be consumed. Labor is what makes our economy tick. It is the substance behind everything we consume and all of the objects we interact with. Labor is to the economy what the atom is to chemistry.

Category:

Education

Tags:

• profit
• exploitation
• labor
• value
• exchange
• capital
• capitalism
• socialism
• communism
• anarchism
• market
• competition
• bourgeois

[Benwoodruff]

Do you have a video yet that demonstrates that only labor creates value? That seems to be the underlying assumption for Marx but I have not seen that supported.

[brendanmcooney]

@Benwoodruff. Well that is the topic of my law of value series- still not complete. You might try the Fetishism video (which I guess you already saw) or video 4:Value. Or you might wait till I get around to the "Value and Price" video. I suppose that you are maybe conflating value and price. Many things affect prices and there are different types of prices: day-to-day, long-run, etc. Marx's that value is what is being measured by price, yet there are many factors that mediate this relationship.

[ijust1]

And if and when we completely automate an industry, say agriculture, (personal, automated farms in everyone's backyard), value will not be produced because no value was produced?

We went over this in the comments of your other video. Labor is productive, yes.. but labor's productivity is multiplied by capital. Capital is a productivity multiplier. Thus the capital is integral to the process and saying otherwise is nothing less than idiocy.

[brendanmcooney]

@ijust1

yes, automated industries produce no value. They appropriate value in exchange.

Re. capital multiplying productivity: This is true in physical terms but not in value terms. It is important to understand the difference between use-value and value.

[seigneurvoland666]

Lol in Addendum, it claims that the United States is a socialist country XD

[arn0ldaar0n]

you look like a cool guy to smoke one with

[set4lyf]

Thanks for preaching Proverbs 14:23

If you are working hard and not enjoying the fruit of your labor (profit) it means that (companies) are stealing it from you in the form of exploitation, Governments are stealing it from you in the form of taxes and debasing the currency, banks are stealing it from you in the form of interest and fractional reserve lending or you are stealing it from your future in the form of reckless and foolish living.

[SomeoneCrazy2]

@SomeoneCrazy2 (cont) And now, if you take into account, that in socialism, production would even rise: You could simply go into a store and take what you need (maybe you would be voting on products or completing surveys on the internet, in order for demand to be better measured - just an idea of mine). Don't think like there's going to be a shortage of everything.

[SomeoneCrazy2]

@dogbreath34 What if you don't have any money? Take food, for example. We are already now producing more than enough to feed the entire planet. Yet, 16,000 children starve every year. Why is that? Because there is no profit in feeding them. Corporations rather throw out food than give to people who are starving. Let's pretend that in socialism, production wouldn't go up: There would still be enough for everyone, but this time, everybody would actually have enough to eat. (cont)

[dogbreath34]

@SomeoneCrazy2

Yes and who decides what any of us needs? I for one don't want anyone telling me what I need or don't need. If I need something bad enough I'll pay money to buy it, not apply to some workers committee to decide if my need is justified.

[SomeoneCrazy2]

@dogbreath34 No, the evil in capitalism is that capitalist profits are made through the exploitation of the working class, and that those who work own nothing, and those who own anything don't work. And no, it would not be better if we "just let a monopoly of some sort do away with any competition". It would be better if the means of production were owned collectively by the working class, and production would be for need rather than for profit.

[dogbreath34]

So the evil in capitalism is it forces people to compete with one another to produce products at the lowest possible cost with the highest possible value. How much better it would be if we just let a monopoly of some sort do away with any competition and let the monopolist set prices. Naturally the consumer is forgotten man in this line of thinking.

[TheThedot]

Capitalist need illegal salve labor to grind working peoples wages down. this is why the USA will never stop the endless supply of illegals.

[ivanjrt]

THE CAPITALISTS HAS TO SELL HIS COMMODITIES TO GET RICHER AND THIS BENEFITS THE WORKING CLASS WHO NOW HAS AN ABUNDANCE OF PRODUCTS THAT CAME ABOUT BY THE PRODUCTIVE CAPITAL AND LABOR OF THEMSELVES.