The role of profit in a free society might be a bit surprising. by Gene DeNardo
(libertarian)
Saturday, April 10, 2010
Many who claim to be freedom advocates speak of "profit" as a sign of the "healthy" or "free" economy. While it is a sign of whether an economy is free or not, its interpretation has been virtually turned on its head. It seems the polarity on the profit meter has been reversed.
Profit is inversely proportional to freedom within an economy. The more profit, the less free the economy and the resulting transactions that occur within that economy. The freest economy coincides with the point of zero profit.
Profit must first be defined before any conclusion can be drawn about its use as a negative gauge of the free economy. Profit is any gain or advantage within an economic system that exists beyond wage, interest or rent.
Wage is value received for labor. Labor includes all valued human action, not simply what is commonly done by those individuals we refer to as "workers". Management of a huge firm is just as much labor as mowing lawns.
Interest is the return received from the loaning of capital. Capital is the surplus value of work done in the past.
Rent is the cost of land or the resource.
Profit can occur in any of these three areas and only these three areas. This is not some great insight at all, simply definition.
Marx's great "surplus labor value" was greatly overstated. Marx was drawing attention, in an extremely complicated manner, that you can create profit from labor by "enslaving" those who labor for you. This condition is created by "taking" something from those whom you wish to profit from. Most commonly it is by stealing land or access to land but taking away what people use for their livelihood, such as fishing areas, etc., is another method. A great amount of force, such as the State, is necessary to maintain this condition. People naturally migrate to freedom not enslavement.
In a free economy, wage always falls to the lowest value that a laborer will perform the task and still be able to sustain himself. Free competition insures that this is possible. There is no reason for a worker to work for less than what would sustain him, unless all other options have been taken from him. For the same reason, competition, all options can only be removed through force and/or the restriction of competition.
It would be impossible to "profit" from other's labor in a free economy. If it were possible, then free competition would cause others to attempt to "profit" from this condition until that point of lowest return was reached. At that point, the former "profiteer" would simply become a "manager" which is nothing other than a form of labor. They would then be paid the lowest wage they would accept to organize the labor of others.
As long as the exchange of capital is not impeded, insured by socialization or controlled, interest will always fall to its absolute lowest level. That level would the "fee" that one charges for the use of capital. There would be no reason to pay a "return" for capital, since free competition would allow some other "capitalist" to offer their capital for the basic "fee". If there were only a few capitalists and little capital, there would be no reason for high interest as there would be little demand for capital since there would be no one who could "afford" to borrow the product.
In a free economy and in any economy that is based on reason, the solitary use for capital is to produce, to aid labor and the production process. Since interest is an added expense to production, all means would be exhausted before capital is added to the production process to remain competitive with production that is completed without the use of capital. Capital would only be justified if it "augmented" and/or lowered the cost or raised the value of the resulting product.
Since the cost of capital would determine and affect the cost of the product, interest would fall to its absolute lowest value, that of "fee". The fee is the cost of transferring the capital from the producer of the original surplus to the next producer.
Much has been made of risk and its effect on the return of capital. In a free economy, when the cost of capital is the fee [the cost of capital transfer], there is no risk at all to the capitalist. The risk is always to production. If a sector of production failed to achieve its goal, which is to create what other's value, then production would simply shift to another area. In fact, this is another aspect of free competition. What is now referred to as "venture" or "innovative products" would be the standard mode of free production. Monopoly is what stifles innovation.
To determine natural rent, the cost of the land and resources, there must be free access to both. Profit from rent can only be obtained through monopoly and for the most part, this rent monopoly can only be enforced by the state. As long as people are not enslaved and their movement inhibited by force, it requires the force of the state or many states to restrict free movement to available lands or resources.
Another factor in natural rent is the cost of property itself. The cost of property must be borne by the landlord or rent receiver, not society [unless we determine society to receive rent], in order to reach the natural cost of rent. Protection of property and other costs such as access, recording and maintenance must fall on the shoulders of those who receive the rent or a free value can never be attained. Any cost paid by others becomes profit.
In a free economy, rent would fall to its lowest value that allows the product from the parcel of land or the resource to be produced. Any value above this, or profit, would cause the product to lose its competitiveness and other land or resource would be sought out and attained.
Profit in our current controlled economy is a form of tax. We are forced to pay it due to the restrictive nature of our economy. A free economy would lower the cost of wages, interest and rent but at the same time would raise their "value". While this might seem impossible, we would no longer be paying the cost of profit and the value that profit now absorbs would be transferred to wage, interest and rent.
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You sound very intelligent, but you are obviously not a real libertarian.
People are free to slave themselves out. That's what employment is!
Self-Employment is where you slave yourself out to yourself.
People are free to enter into w/e contract they wish.
Your logic also concludes that Unions themselves are anti-libertarian because of their Pension Plans....where they pay out to every member of the union they have enslaved(contracted) themselves for.
In my honest opinion, a true Individidualist (which all real libertarians are) would advocate minimmizing the leasing out of property use , in order to avoid such contracts with other undeservingly labled "individuals".
My Creed: What is yours is yours and for you to use and give as you please.
Equivilant Exchange(non-profit) is difficult to achieve. ...unless you happen to be God (the ultimate and most true epitome of what it means to be an individual).
Charity is where there is no attempt for Equivilant Exchange and is usually not forced(if it's even possible to force someone to be charitable...). If charity is forced, it is because of Communism, Socialism, and Marxism and their delusionary theories that ultimately create tyranny instead of liberty.
Any questions, please email me at HerrQuixota@gmail.com :)
