Re: zero average profit

From: Allin Cottrell (
Date: Sun Jun 01 2003 - 21:49:14 EDT

On Sun, 1 Jun 2003, Ian Wright wrote:

> My question is about monetary profits, rather than what those
> profits represent in value terms. The existence of surplus-value
> production, or primitive accumulation, are statements about value
> transfers in the economy. They do not alter the fact that total
> monetary transfers must sum to zero.

I take your point.  All the same, from the point of view of the
capitalist class there is a distinction between (a) making a profit
and (b) having aggregate income in excess of aggregate expenditure.
(I'm rephrasing the distinction I made last time, in the hope of
achieving greater clarity -- and I'll get back to this after
re-establishing some context.)

> I am trying to understand however what can be deduced if money does
> not flex. This implies that the value of money must change if new
> surplus-value production or primitive accumulation occurs. But I
> wish to ignore the value of money.
> Allin wrote:
> >Here's a simple example.  Each period the capitalists lay out 50 on
> >labour power.  The workers produce goods to the value of 100.  50 of
> >this is necessities, purchased by the workers, and 50 is luxuries,
> >purchased by the capitalists.  Aggregate profit = capitalist
> >consumption = 50.  Total income = 100, period after period.
> When I first asked the question I was not clearly distinguishing
> between absolute profits and profit rates, which I will now try to
> do.
> In this example let's assume that the total money in the economy is
> M=100. The net transfer of money between workers and capitalists is
> 0. The situation reproduces period after period. The capitalist
> class does not increase its money holdings, and its total absolute
> profit is 0, and its total profit rate is 1 (i.e., they're not
> making a profit).
> Allin wrote:
> >The "fixed money" situation is compatible with positive profit.
> In your example, in which there is no net money transfer between
> workers and capitalists, only invididual capitals can have non-zero
> absolute profit, and profit rates in excess of 1. This is due to
> internal transfers of money between members of the capitalist class
> when they purchase luxuries. (This may have been what you meant).

"Only individual capitals can have non-zero absolute profit".  I
disagree.  Profit is the difference between income and outlay or
costs.  In my toy example the capitalists (in aggregate) had outlay
or costs of 50 (their wage bill) and income of 100.  Of course, their
total _expenditure_ (including their purchases of luxuries produced
during the unpaid portion of the social working day) was 100, and
equal to their aggregate income.

Note the importance of aggregation: the only _net_ outlay of the
capitalists is the wage bill of 50.  The rest of the 100 spent by
capitalists is not a cost to the class, it's a transfer between them.

To get a good understanding of all this, I strongly recommend reading
Kalecki.  He shows very clearly that the capitalists can have total
income greater than total expenditure (which is not the same as simply
having positive profits) only on condition that

- the state runs a budget deficit; or
- the country runs a trade surplus; or
- workers have negative saving

If the state budget is balanced, trade is balanced, and workers'
saving is zero, the capitalists "get what they spend": their income
necessarily equals their expenditure, and their profits equal the sum
of their consumption and (net) investment expenditures.

Allin Cottrell.

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