Michael Lebowitz

By Humphrey McQueen
(5 March)

Profits and surplus value

This is the second item in a sequence spotlighting elements in Michael Lebowitz’s ‘Marx’s falling rate of profit: a dialectical view’ from the Canadian Journal of Economics, IX (2), May 1976, pp. 232-54 (to be available on surplusvalue.org.au).

This item begins to dissect the phrase ‘rate of profit’ by pointing up the distinctions between profit and surplus value. The next item will look into the difference between rates of profit and gross profits.

The items are not a summary of Lebowitz’s articles. Their aim is to help activists approach the Marxist concepts that he interrogates.

‘Profit’ is a word in everyone’s vocabulary. ‘Surplus value’ is a term from political economy which has become a Marxist specialty. Indeed, Marx’s treatment of surplus value is his keenest contribution to criticising the political economy of capitalism.

Marx offered two different ways of thinking about the relationship between surplus value and profit – one physical, the other ideological:

  1. profit is realised surplus value;
  2. profit is the mask behind which the bourgeoisie conceals the exploitation involved in the extraction of surplus value. This disguise is hard to spot because profit emerges from the sale of the produce in which the surplus value is embedded.

Surplus value is extracted during the circuit of production when it is embodied in the commodities produced. Profits can be secured only after the circulation of those products. All profits derive from surplus value. Not all surplus value can end up as profits.

Were markets as frictionless as their apologists pretend, all surplus value might end up as profit. Even in that utopia, all the surplus value could never return as profit to the capitalist(s) whose money-capital had gone into the production circuit during which the surplus value was extracted.

The industrial/production capitalist can profit from the expropriation of surplus value only if three conditions are met:

  1. the commodities are sold;
  2. their sale price exceeds the costs of production and of circulation, and
  3. at least some of the proceeds from that sale make their way back to the industrial/ production capitalist.

None of these conditions can be guaranteed in a market economy. It is possible for a slave-driver to go broke. Appropriating vast volumes of surplus value cannot of itself lead to the accumulation of a larger quantum of money-capital.

The hazards involved in securing a profit out of exploitation will now be illustrated by following an agribusiness which screws every last measure of surplus value from its purchase of labour-power. At the end of the growing and picking, it has a hanger full of strawberries, each one supersaturated with surplus value.

Now the capitalist has to surmount the three conditions outlined above.

  1. The punnets are on their trays, the trays on the pallets, the pallets in the containers and the containers in the pantechnicons ready to leave for the fruit and vegetable markets. The driver is so overworked that, despite his handful of Bennies, he doses, veers off the highway and the produce is consumed in a fire. The surplus value has missed its chance to become profit.
  2. In the second case, the pantechnicon gets to the markets at the same time as three others, all filled with strawberries of equal quality from competitors. Coles and Woolworths have shelf space for only two turck-loads. The purchase price drops to that of the costs of production. The strawberries have been sold at a price below that which realises none of the surplus value embodied in them. Again no profit can wend its way back.
  3. Thirdly, the strawberries are sold at the top of the market. Surplus value is realised as profit. The agribusiness prepares to expand its operations.

Then, three days later, Coles’ customers come down with gastritis. The Department of Health traces the cause back to a chemical that the agribusiness sprayed on its plants. Enter the lawyers. Three years on, the agribusiness wins its case on a technicality but has to pay its own legal expenses – which equal the profit from the sale. The lawyers have run off with the surplus value which was realised by the sale to Coles. That law firm accrued its profits without expropriating surplus value itself.

To reduce the risk of not benefiting from their exploitation of labour power, capitalists conspire, swindle and monopolise. (For such behaviour towards their competitors and customers, see the item on Swindles.) The profits from such carryings-on do not come from the swindling itself. They are re-distributed from the surplus value extracted by other capitals. (See the item ‘All capitalists are parasites’.)

Next – and at last – the rate of profit.

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