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The Profit Motive; A response to Francois Tremblay

29 August 2008 by Mike Gogulski
Posted in economics, philosophy | 24 Comments »

Oh, it’s late. Anyway, here’s the original link

Workers in general do not care about profits nearly as much as they care about their own wages and well-being.

I’m not sure whether or not you fell off the definitional rails here. To the worker, his profit is his wages. More specifically, his profit is his subjective value of his wages minus the subjective value of the opportunity cost and the time+labor he forfeited to obtain them.

Let’s go through a likely and probable scenario for the creation of a new business in an Anarchist system:

1. A group of investors, be they relatively rich people, managers of a planned community or people interested in the boom of a town or neighbourhood, or a private bank acting for millions of normal people looking for a way to make some interest, see an opportunity, and pool their resources together.

With you.

2. These investors attract workers, who become the first owners of the new business. The investors give these workers a starting capital (as well as perhaps an ideal location or new ideas to use) in exchange for a set return on their investment.

Breakdown. Who are these investors? Santa Claus? They just come around and give the “workers” a whole bunch of money AND a great idea, in exchange for a “set return”? I’ve met banks that work that way, but never investors. Is it possible for “workers”, as you go on to describe more in what follows, to become investors? If so, why would their values and motivations change so much?

3. The workers get to work and pay off the investment and interest.
4. Having paid off the investment and interest, the workers are now working solely for themselves (self-management). They decide of their own working conditions and wages. They decide of their management and the future of their business.

The non sequitur just deepens here. Let me try to get this straight, for my own understanding. The investors come together around a great idea which can create a self-sustaining and profitable business for those who own it, and then they just give it away to the people they need twisting knobs, pulling levers and bashing on keyboards to make it real. Why? Would you, if you were one of those investors with the brilliant idea to create wealth and the connections to bring an organization into being that could realize that idea just give it away for a “set return” on investment? If so, sir, you are a true saint and a man of great virtue, one to be admired and sung of down the ages. Funny, I can’t find anyone matching such a description in the phone book or my history texts.

In the world that I live in, investors want to become part-owners. Yes, they want others to perform the labor. But they provide the capital to make that labor possible, especially within the window where success or failure is not known and all money invested may be lost. I doubt very seriously that this dynamic would change in any substantial way minus the state, or that it ought to. To me, it’s simply an observation of human nature, and I believe that it is not human nature that we ought to elect to contest.

The workers would have a strong incentive to make the business grow so they can pay off the initial investment faster, and thus have free reign. But when that’s done, the workers (the only people who legitimately own the business) have a much stronger incentive to secure better wages and work conditions for themselves than they do of making more profits. So businesses (not corporations, obviously, since the corporate status is a creation of the State), as organizations, would seek to improve the quality of their work environment and their service, instead of trying to expand or make more profit.

If we accept a ridiculous premise, we can arrive at all sorts of ridiculous conclusions. I’m using forceful language here because I know you respond to it and because I believe you are a person with his eyes open. The workers in your scenario might or might not be motivated as you suspect. They might be motivated not by potential future security in the maintenance of a self-sustaining and growing business, but rather by the grim necessity of earning a wage to feed their children. They might be motivated instead by a cultural diktat which says that hard work is virtue. They might be motivated by the continuing chance to steal from the cash drawer. They might be motivated by the need to maintain a certain wage in order to maintain a gratifying lifestyle. They may know nothing of economics, and nothing of political theory. They may have extremely short time horizons which renders speculation about their incentives meaningless or at best questionable. They may be insane!

That was a response to the first sentence. Now the parenthetical, “the workers (the only people who legitimately own the business)”: Huh? I do understand there is a historical and moral critique which suggests that those “employed” today ought rightly seize and legitimately own the means of production put at their disposal through employment. I also understand there is a position which states that workers “should” own their means of production. The reality of things is much different, though, even if we imagine starting from a utopian genesis in which all property titles were legitimate and in which coercion were never employed except in legitimate defense. Inequalities of wealth will still occur. They will be based upon such factors as natural resources available in the starting areas and the intelligence of the economic actors, and become amplified over time. Eventually there arises a group of people with the capital to become investors. You or I or the lowliest of our brothers might be members of that class. But they rise from the same stock! They are not going to look around with superhuman virtue, seeking places where they can offer to advance the species for something as shitty as a “set return”! Were you or I in their place, we would rightly and honestly seek better than that.

To the second sentence, I say again that there is a fuzzy barrier here between the concept of “wages” and the concept of “profit”. It’s made even worse now in that the workers have taken over the ownership of the business. What then is to be the logical blade which separates “wage” from “profit”? If I am a co-owner with a few others of the means of our production — and thereby the means of sustenance of our selves, our families, our values, our political philosophies and our blogs — how could this division even exist at all? I will certainly not appoint one of my comrades in the industrial collective as he who shall determine what is “wages” and what is “profit”, especially being that “profit” as defined is that which shall be swallowed up by those who exploit us. The enterprise has input costs and it receives sales revenues. That difference is called net income, or something similar. From that income, that excess, that “gross profit” in a broader sense than the accounting textbooks define, must be derived the fixed wages of all employees (shareholders/members/comrades), plus the amount to be reinvested in expansions (via marketing, territorial growth, hiring, product diversification, etc.), plus the amount that should be disbursed to investors as compensation for their interest, plus amounts to be employed in improving efficiency, etc.

Would the fully-vested co-owner of such an enterprise sit around trying to draw lines between “profit” and “wages”? Surely not! These categories have become meaningless to his calculations, whether those calculations serve only his own aggrandizement or some nobler ideal of group advancement. “Profit” as bogeyman has become meaningless.

  1. 24 Responses to “The Profit Motive; A response to Francois Tremblay”

  2. By David Z on 29 August 2008

    I was a bit perplexed by Franc’s post, too. Thanks for giving it a thoughtful response, I’m out of town for the weekend, but it’s a topic I’d like to explore a bit more, too.

  3. By Kent McManigal on 29 August 2008

    I think Franc’s post was in response to a post I had made earlier, where he disagreed with me about “bosses”. I kept thinking about his assertions, and they continued to elude me. I put it down to the fact I am not as smart as he. Which I honestly do believe.

  4. By Francois Tremblay on 29 August 2008

    Your response is that the syndicalist premise is fanciful because the investors will want partial property rights on the business. But one’s desires are not an argument. I may desire to have partial property rights on other people, but it is not legitimate for me to have such rights. Likewise, it is not legitimate for anyone to claim property rights on someone else’s means of production.

  5. By Mike Gogulski on 29 August 2008

    You buy a machine that prints designs on T-shirts, and hire me to operate it. I shout “the workers should control the means of production!” and assert my ownership of the machine. You boot me out on the street for trying to steal your property.

  6. By Francois Tremblay on 29 August 2008

    If you hire me to operate it, it’s not “your machine” any more. I am the one occupying it, not you.

  7. By Mike Gogulski on 29 August 2008

    By what alchemy does my property suddenly become yours? Is it yours the moment you sign the contract to operate it for wages? Is it yours the first moment you touch it?

  8. By Francois Tremblay on 29 August 2008

    The word “alchemy” is a pejorative. You’re trying to belittle the syndicalist position.

  9. By Mike Gogulski on 29 August 2008

    Right on both counts. Would you care to respond to the argument? Substitute the word “process” for “alchemy”.

  10. By Francois Tremblay on 29 August 2008

    I am not going to do this, because you have a hostile attitude.

  11. By Mike Gogulski on 29 August 2008

    Francois, I have challenged you to defend what I view as outright theft. If you don’t want to do that, or to illustrate how the discussion should be re-cast in different terms, but instead slink away with complaints about my attitude, so be it. I shall have to conclude that you’ve abandoned the argument due to a lack of merit, rather than that you are so offended by my use of the word “alchemy” as to be psychologically incapable of response.

  12. By Danoteles on 30 August 2008

    Mike, although I mostly agree with you, one point to comprehend is that of the possible difference in proportion of potential/actual investors in the current state of affairs to whatever we would like to become. Cheap credit is nowadays only available to a few wankers up there, which leads to more folks having to work and workers competing for jobs. On the other hand, cheap credit available to anyone means, it seems to me, more investors having to compete for less workers.

  13. By Danoteles on 30 August 2008

    And therefore the ‘Santa Claus scenario’ is quite possible.

  14. By John Petrie on 30 August 2008

    “If you hire me to operate it, it’s not ‘your machine’ any more. I am the one occupying it, not you.”

    I’ll have to be sure not to lend you anything of mine…

  15. By Cork on 31 August 2008

    In my experience, most mutualists themselves don’t actually understand the “occupancy and use” system as proposed by Tucker, which was *only* meant for land. He was opposed to absentee ownership of land to collect rent, but strongly opposed the idea that workers get to “take over” the workplaces and machinery they use. He was not against private ownership of the means of production or employment.

  16. By scineram on 1 September 2008

    Great post, I was thinking along the same lines reading him. I wonder if syndicalist ever leave their homes or park their cars.

  17. By Francois Tremblay on 1 September 2008

    No one’s asking you to lend me anything. In an Anarchist system, you wouldn’t need to lend anyone anything: you’d own it, or not.

  18. By Francois Tremblay on 1 September 2008

    You guys just refuse to recognize that work hierarchies are hierarchies because you’re capitalist holdouts, that’s all. I used to be in the same situation as you. I understand the mindset.

    Once you understand the contradiction, you’ll eventually have to choose between capitalism and Anarchy, between force and freedom.

  19. By http://corktageous.blogspot.com/ on 2 September 2008

    Franc,

    I went through a period of great interest in this whole schtick, so I’m more than familiar with all these arguments you’r emaking. I’ve “tried leftism on to see how it fits.” I’ve taken the time to read a pretty substantial amount of radical leftist literature, with an open mind. I know all of their very best arguments, and I’ve also read responses to those arguments (which utterly demolish them). Few lefties, imo, are interested in reading or even considering counter-arguments.

    If free-market capitalism is “hierarchical,” then so is any economic system, because every economic system requires us to “submit” to the demands of clients and consumers. This is as true for communism, collectivism, and guilds as it is for capitalism.

    The left’s proposed alternatives (which they are never much interested in) tend to be pretty ridiculous models, considering how spontaneous, complex, and widespread economic activity is.

    I could go on and on about these kinds of flaws, but I’m not sure there would be much of a point. The point is, many of us do genuinely understand the leftist positions and simply reject them.

  20. By Cork on 2 September 2008

    That last post was mine–Blogger did something weird..

  21. By scineram on 2 September 2008

    I recognize hierarchy when I see it. I just accept it if voluntary.

  22. By Francois Tremblay on 2 September 2008

    There is no such thing as voluntary adherence to a monopolistic hierarchy.

    You have to choose between freedom and control. There are no other choices.

  23. By Mike Gogulski on 3 September 2008

    @Dano: Well, that’s a nice vision. However, there’s a habit of mind I employ in such cases, which is to tell myself that utopia isn’t possible. Economic scarcity is. Human nature is. Building models for now or the near future based on radical changes to our current situation leaves the departs the realm of philosophy for the realm of fiction.

  24. By scineram on 3 September 2008

    I was talking about not monopolistic hierarchy. That which is voluntary.

  25. By http://francoistremblay.wordpress.com/ on 6 September 2008

    Voluntaryism is irrelevant when we have an ideological monopoly. Capitalism mandates exploitation and oppression- of the workers, of the third-world, of the environment. Democracy mandates the exploitation and oppression of all its subjects, whather they vote for it or not.

    In a free society, yes, you should be free to choose a hierarchy if you are so damaged that you can’t live any other way. But this is NOT a free society. This is a society, an economic system based on theft, illegitimate property, control and extortion.


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