pinkfloydpsw's Blog

I studied Economics at degree level, but I wouldn’t claim to be an economist. I did, however, learn a few basic things that have stuck with me, and changed the way I see the world. That’s what studying is supposed to do, change your perspective, if you study and don’t change at least a little bit, then you didn’t study, you memorised….

Nobody makes a profit from working, at least no working person makes a profit from working. Working people actually make a loss, since their output must be greater than their input or they would not be a viable prospect for employment to an employer. No employer will hire somebody who does not make a profit for the company, that would make zero sense, so the remuneration to effort ratio is never 1:1, it is always less to the worker than that effort is actually worth overall, or the employer would not have any benefit to employing the worker.

Employment is not an act of benevolence, it is for the purpose of accumulating capital, power, and currency. I sell my labour for the means to provide for myself and those I care about, I do not own things of a resource nature because I am not from that background. I do not have power because I have not the social circumstances to be imbued with it (I don’t know the right people), and I am not willing to take big enough risks to try to create wealth because of the failure rate of entrepreneurialism (not often the talking point in business journals or the Bloomberg/FT press). So I have choices, do nothing, or, sell my time, intellectual labour, and physical abilities etc, or, prostrate myself at the feet of dragons or Mr Sugar begging for an opportunity to be in the posse.

Profits are made from owning things, things like other people’s productive, or intellectual, output. Revenue, or turnover, is the complete amount of financial incomings a business has. Costs are the complete amount of financial outgoings a business has. The difference between these (revenue and cost) is the profit, or in many cases, the loss. These, before profit objects, encompass the wages paid to all employees, investments made in machinery and training, material costs, all billings and charges, payment of loans, payments to the firm, money made through sales, money made through assets and investments, and on and on and so forth….

I, and likely you, if you are employed, am paid from the revenue, paid as a necessary cost of doing business, or what could be described as an investment in our ability for a return of our productivity. We are what economists long before Karl Marx described as Variable Capital. A thing, the tool you use to do your job, that is Constant Capital, so is a resource like a place of business. Profit is Surplus Capital, the bit that belongs then to the folks that own, keep that in mind…

THE ONLY PEOPLE WHO MAKE PROFIT ARE THOSE THAT DO NOT DO

The providers of things to do (Employers), the providers of the capital to enable that which gets done (Investors), the owners of the things that are needed in order to get things done (Resource holders), the providers of the incentives to do things (Consumers), those that control certain circumstances which in turn often force things to be done (Warmongers), the slings and arrows of outrageous fortune and the ravages of time (Medical/Social), those that persuade consumers (Marketeers), those that own the machinery that gives them the ability to transport things (Logistics). These all realise value, they make the profits in one way or another whether through realised value, or directly through money.

So when a thing must be done, not when a thing is desired, then the profits of that thing must detract from the provision of that thing, this is because revenue can be achieved without profit if the revenue is equal to the costs involved. This would provide no incentive to a profiteer though, since there would be nothing to gain personally, it would provide no incentive to an investor, nor to a resource holder either.. So we can state at this point that the purpose of anything that makes a profit is to attract those that want to make a profit, profiteers we can call them, people who need to be incentivised so as to participate, else they just wouldn’t. Looking at it in this way makes the profit made by those that participate in the business of providing for need, rather than desire, to be quite morally questionable.

We might say that this thing does not fit in a capital model, but that wouldn’t mean that it is not still achievable or necessary, it just means those people who wish for profit would not willingly participate. We rely, at least we used to rely, on government to do those things that these aforementioned people would not willingly do, and for the reasons that, for one, there is a need, and for another, there is a public will, for said provision. That’s the role of government after all, to do what needs to be done for the body of people who need those things to be done, an example of this would be law and order, another is education (I realise these both sectors have been invaded by profiteers, but that’s really the point I am trying to make isn’t it?).

In a perfectly imagined capitalist utopia, dreamed up in the minds of conservatives, liberals, and Adam Smith fanatics, there would be no need for government as the market would provide, but even though leaders of capitalist countries for decades have been spouting the nonsense that capitalism has won the battle for the right way to organise the world, it just hasn’t happened, and it’s looking increasingly like it’s not a possibility, though that realisation doesn’t seem to have reached the profiteers or government ministers they sponsor. In fact, governments have been consistently getting bigger, not smaller. If capitalism had have won it would have done so by now, it’s had long enough and plenty of supporters. There would be no such thing as a subsidy or a treaty, no such thing as a sanction, no such thing as a trade deal, no such thing as a tax, no such thing as goods being banned, no such thing as a price cap… they just wouldn’t exist or need to, the market would do it all…

Medical/Social care is another example of a fly in the ointment, one that none of us, given the vast amount of media coverage it has had recently, can have avoided being an observer of, is now an industry expectant of profit, but one that is badly fitting in the capital model for two very important reasons…

It is not a choice based market so it is not natural for it to be in a model of profit where we would more normally find goods and services that realise a price point through demand and supply incentives intersecting at a particular point we refer to as the equilibrium, in fact it might be immoral to actively seek to profit from the circumstances that other people find themselves in. Nobody that misses out because of lack of means is harmed by missing out if the good in question is a pair of Nike trainers or the service is Sky television or a tattoo…

Every measure of profit is a detraction from the product (as stated above) since that is money that has been removed from the industry to be deposited in the accounts of investors, resource holders, and owners. If this industry did not make profit then it would function at a higher level of provision, that’s just a fact.

Capitalists/Liberals/Conservatives would say that this is arguable, so I’ll try to highlight their oft mooted position…without profit incentive then innovation may not be present, therefore no progress might be made, leading to a lesser outcome or stagnation. Only the provision that arises from driving competition in an open and uninhibited market can goods be forced to improve, because competition requires innovation to survive the shark-tank that is the marketplace, as new goods arise they are necessarily better and more productive than those they replace.

I don’t doubt this is true of a market that is a natural fit for capitalism, and I wouldn’t think to argue it, but the progress made in medicine, as far as I am aware, is more normally made by universities than pharmaceutical companies, and in universities the research students don’t make a bundle. That is not to say that there have not been breakthroughs in the private sector, but it would be silly to state that they would not have been possible if the industry was nationalised. It is not an argument that can be made to lay all progress at the feet of capitalism, though even Marx himself stated that Capitalism has created more wonder in a short span than the whole of human history that preceded it. That’s how progress works though. capitalism didn’t build the first bridges over rivers, nor irrigate uphill, nor did it invent medicine, or create farming, those things preceded it by thousands of years.

Competition drives capitalism but discovery drives innovation, and leisure time allows for persons to have innovative ideas. By freeing people from the humdrum of daily work and shopping we would create an abundance of ideas that might innovate the world and make things possible that hadn’t been before, but it is capitalism that has kept the people in the chains of the humdrum. I’ll explain what I mean, we should, because of innovations and technology, be working much less hours, and be getting a greater return for our efforts and have a greater stake in the collective wealth of the nations we inhabit… but this is not the case, we work just as many hours if not more, for comparatively less than our parents, and we have less and less rights and stake in the economy thanks to successive (conservative) governments telling us that, even though we are much more productive than we were, and we have much more technology, we are not competitive in comparison with other countries. The result is our loss to be personally shouldered (workers) because we cannot be paid more because the capitalist class cannot afford to lose their incentive (which is the only part of the economy that continues to grow rapidly) else they might find incentive elsewhere. So the question is.. whom does this mode of organising the economy work for, who is the beneficiary?

Paul S Wilson