A brief treatise on this commonly referenced and highly sought subject of economics...
The Economic Function of Profit
Profit serves primarily as an economic idea. If a merchant were to purchase a single loaf of bread for one dollar and to sell it for two dollars, that would be a single dollar of profit, or what many economists would call a 100% profit return. What does money translate to for the merchant? It translates specifically to privilege: the right to possess and consume products and services, which would otherwise be unreachable, had the merchant sold his labor, instead of selling commodities. By selling one loaf of bread and gaining one dollar of profit, we could just as well say that by selling one loaf of bread, he is gaining another loaf of bread for personal use. If the merchant was doing poorly at his business, if he wasn't profiting and his needs as a human being were still just as strong, then he could satisfy his economic position by entering the laboring class. That is one very obvious microeconomic example of what profit translates to. Consider something more on the macroeconomic scale. An investor purchases two hundred thousand dollars worth of stock. The dividends pay him only two percent every quarter, or $4,000 every three months. This money he spends on clothing, food, luxury, transportation, housing, all imaginable needs. His investment was the spur to an economy to get people to manufacture a product that would be sold at a profit. When people bought this product with their money, they not only paid for the production cost of the product, but they paid an additional portion, called the "profit;" which means they were paying for the merchant's food, clothing, and other items of purchase.
The function of profit as a motivator to the capital-owning class, the Capitalist class, is very apparent. Capitalists make wealth by possessing wealth, which is why their property is a different type of property: capital. The alternative to their method of making wealth is to exchange their labor as a commodity. It is also quite apparent that those who make wealth by possessing wealth prefer that method of sustenance. They do not labor, yet they enjoy the fruits of the labor of others. We never see billionaires maintaining power lines or serving fast food. Those who are forced to do these otherwise stressful occupations are people who must trade their labor as a commodity out of necessity. To be able to satisfy their needs of shelter, food, water, and other requirements, they exchange labor as their only commodity. The class that labors to produce wealth to exchange has been referred to by Marxists as the Proletariat class, borrowing terminology from a low caste of the ancient Roman Empire. The class that exists off of the labor of others has gone by the aforementioned popular term: Capitalist.
The Capitalist and Proletariat class are both consumers; that is, they both are purchasers and users of the wealth created by society. When a person purchases a loaf of bread, what they pay can be divided up in to two parts: one part to pay for the actual production costs of the bread, and one part to pay profit. When it happens that the consumer is also a member of the Proletariat class, there are some other deductions that we can further. The Proletariat can pay with the only thing afforded to them: their labor. When a member of the Proletariat decides to purchase a loaf of bread, he is paying with his labor. If a loaf of bread costs only $2.00 and the worker is paid $6.00 an hour, which means that the loaf of bread would cost him twenty minutes of labor. Let's say, for the sake of this example, that the Proletariat consumer here is a bread worker. Since he would be paying for the cost of the bread and profit of the merchant, he would already be making an unfair exchange at the moment of producing the bread. The Proletariat worker who bakes bread for a living will be buying the bread he makes at a loss, and his extra labor will produce bread that will feed other workers. Other workers in society produce items that they would never use in their lifetime. Assembly line workers in expensive automobile factories may never buy a car. Since they contribute to the social wealth in order to have their needs be satisfied, the luxury workers labor in order to get the produce of other members of society. So, we see the producing parts of society in two categories: those who work to produce necessities to feed the majority, and those who work to produce luxury items and fine items for a small minority. The proportion of these groups is probably subject to variation, but it is safe to say that each group of workers plays an enormously important role in the Capitalist system. If a Capitalist is selling a product for fifty percent profit, what he is saying to the Proletariat consumer is: "For you to accept this product, I want you to work long enough to feed yourself and another person; the other person will make luxury items for me in exchange for the surplus bread you produced."
The Social Function of Profit
The origin of a Capitalist's extravagant living, high standards, financial security, and ease of existence is due to his role in the economy: the possessor of wealth. One might look at the way the wealth distribution system is set up and they would say that the only reason one part is privileged is because it owns capital. Simply by possessing wealth does one class gain an advantage over another class. When the Capitalist class desires profit, it can simply raise the retail cost of products and services. A loaf of bread normally costing $1.00 to produce and $2.00 to purchase might then cost $3.00. Instead of a 1:1 ratio proportion of production cost to profit, there is a one 1:2 ratio proportion of production cost to profit. The rising price for the Proletariat workers and consumers means one of three things: they will not be able to consume as many goods, they will need to work longer, or both. The first case, of not being able to purchase as many products, is due to Capitalists enjoying their wealth and suddenly stopping. There was a well-balanced economy, with one part creating the necessities for the majority, and another proportionate part creating luxuries for the tiny minority at the top. The minority at the top stops its consumption, causing massive unemployment of luxury workers, flooding the other economic sector with more laborers but not more consumers. There are more workers competing for the same jobs in the part of the economy that produces the items that the majority uses. But, with the Capitalist class relaxing their purchases, there is a lack of people to buy the items that the new workers can create. The majority was already having its needs satisfied with the current laborers who produce necessities for the majority; since people aren't buying more, businesses cannot take on the additional influx of workers, causing unemployment. The term used by economists is a depression.
Then there is the second case, of the Proletariat consumer having to work longer just to purchase the same items. This occurs when Capitalists want to increase their own items of luxury that they consume. If the retail cost of items goes up, that means that a Proletariat consumer must exchange a longer amount of labor for the same amount of bread. A bread price increase might mean that the Proletariat baker, for instance, would have to make enough bread not just to feed himself and another worker, but he would need enough bread to feed himself and two others. On the macroeconomic scale, this translates to a migration of workers. Workers who produced wealth for the masses would instead shift to the other occupation: producing luxury for the tiny minority of Capitalists. If that happened, that means that Proletariat workers who worked the same amount of time would get a smaller amount of wealth. To sustain the same lifestyle, a worker would have to take on additional work hours. In an economy with this shift, one would see the general trend of workers giving a little more labor, consumers getting a little less wealth, and the Capitalist class gaining privilege. In some cases, this could reflect a recession, the upswing of a depression. These are the guidelines that the Capitalist class will always operate on; the Capitalist class will suddenly relieve their purchasing habits, causing unemployment, or increasing their purchasing habits and causing a less amount of wealth for the workers.
When looking at this social organization, one might ask: why should we live in such an economy? It seems clear that a group of workers is capable of producing enough necessities for themselves and the others; everyone should just work together, everyone contributing to their own common wealth, so that no strictly idle or strictly working class exists. If everyone worked to produce wealth to be used by the majority, instead of working for the luxury of a few, then workdays would probably be cut to a third or a fourth of what they are today. Wages would increase, bringing a real improvement in living and working conditions. Poverty, crime, and unemployment, all products of this Capitalist organization, would disappear if workers were allowed to freely produce and exchange products without profit. It is simply the possession of wealth, of capital, that allows one group to maintain economic dominance over the other group. Since one group possesses capital, they are allowed to be idle and gain wealth by the labor of a Proletariat worker. It is the social organization of Capitalism that creates a type of wage slavery. A worker is forced to produce more wealth than they are given. The extra wealth is exchanged for something that satisfies the interest of a person who did no labor. The social situation at hand begs one final conclusion. Private property is theft. It is by private property, the idea that a person can own capital, that a person can exploit another individual, whose only crime was not being a possessor of capital. All of the wealth of society is produced by the working class, but the rules of Free Enterprise have dictated one unfair judgment: the tiny, idle minority class is to be given more wealth than those responsible for creating it.
The Political Function of Profit
It is ironic today, to see black and Asian businessmen who are willing to contract slave labor in third world nations. The facts are out there: children work twelve hours a day in hazardous conditions for little pay. It is ironic, because both blacks and Asians were once slaves in this country, yet today they participate in the slavery that destroyed their people. The face of authority always changes, but the trends of authority are never absent. The United States, for instance, has a long, dark history, of manipulating international laws, subverting revolutionaries who are overthrowing a dictator, or setting up slave labor in third world countries. Again, the irony is still painfully present: the United States was formed by a cluster of colonies that believed in the idea that people have a right to govern themselves. America's involvement in Vietnam, for example, was solely to prevent the popular Democratic uprising. Perhaps centuries worth of infertile soil and millions of dead people was America's plan. I watch these societies today with pain, as everyone is induced by the hypnotic glare of the establishment's propaganda, through television, radio, and all media.
The newest Iraq War produced for us pictures and photographs of US soldiers torturing prisoners. It was widely known and understood by almost all individuals of the press and government, but they both refused to let the media channels distribute the information. It wasn't until the photographs were distributed that the government needed to take action, "on this horrible thing which we could never have imagined." The words faintly remind us of commanders finally believing the stories of Nazi war crimes only when they crossed the border in to the country. All of a sudden, the world was stricken with the tragedy... despite the decades of information given to authorities and the press in other countries. I'm sure our leaders were thinking more of the interest rates of the debt Germany had incurred; their interest was profit, not any incidental cost of human lives in slave camps. In our world's political scene, we find factories operated by slave labor and producing American commodities, and in every case, there is always a tyrannical government, supporting foreign investors and oppressing its own people. The actions of Nazi Germany come to mind. The German Holocaust is over, that is true, but there are at least a hundred situations in the world right now where the same thing is happening. Instead of taking the complacent posture of ignoring this dreadful mess, the United States government has actively sought to maintain and stabilize the international situation.
Our nation's culture is so adamantly moved by the plight of the Jews in the concentration camps, yet our people turn a blind eye to the same people today that are in the same condition of slavery. Perhaps being Jewish is a requirement for sympathy. People often quote the "six million Jews" statistic, but nobody quotes the "over twenty five million human deaths" statistic of the Third Reich. I don't think I'm confused and I don't think I'm misunderstanding the situation. I know the facts. Whenever the gods of media publish any comedy with any slight relation to the Holocaust, they always present a disclaimer that they do not wish to offend anyone or cause distress to families that may have been in the Holocaust. Without any sense of irony, any second glance, they will stream in to commercials that advertise products made in slave labor camps. The discipline of the overseers at these third world country factories does not differ greatly from the discipline that the Reich's slave masters held. Why would the established authority of America condemn the persecution of minorities in an oppressive, totalitarian government, but at the same time, ignore the widespread slavery throughout the world? American culture and society, which is hopelessly intertwined with authority and the state, allows us to create these contradictions. The American CEO today looks back to Auschwitz and tells us that it is a great crime against humanity. But, he continues, "The slave camps the Reich created in Poland and France are admirable methods of outsourcing labor; we should hope to emulate them in our plan of a globalized economy."
The greatest irony of our world is that we will curse anyone who wants to enslave another man for his race, but we praise those who enslave another man because of his class. America, the state, looks down on any culture that would put forced labor on a person because of their racial background. But when any entire people are put in slavery to create products for Western civilization, words like "rugged individualism" and "free trade" are used as a defense. Millions of Americans continue shopping at Walmart, Niketown, and the other retailers. The crowd mentality survives. The masters of all publishing houses keep the people from knowing the truth. Everyone proceeds on the same grounds, as blind, ignorant, and apathetic as the rest. Here is the cost of profit... real Democracy, where the people are given the light of truth and a conscientious education. Autonomy, rule of the people and for the people, is the first casualty in the system of Capitalism.