Superprofit
Encyclopedia
Superprofit is a concept in Karl Marx
's critique of political economy, subsequently elaborated by Lenin and other Marxist thinkers.
in Das Kapital
. It referred basically to above-average enterprise profits, arising in three main situations:
We could - although Marx does not discuss this in detail (beyond referring to international productivity differentials in the world economy) - also include a fourth case, namely superprofits arising from structural unequal exchange
in the world economy. In this case, superprofit arises simply through buying products cheaply in one place and selling them at a much higher price elsewhere, yielding an above-average profit margin. This type of superprofit may not be attributable to extra productivity or monopoly conditions, and represent only a transfer of value from one place to another.
, superprofits are extracted from the workers in colonial (or "third world
") countries by the imperialist
powers (in the "first world
"). Part of these superprofits are then distributed (in the form of increased living standards) to the workers in the imperialists' home countries, in order to buy their loyalty, achieve political stability and avoid a workers' revolution, usually by means of reformist labor parties. The workers who receive a large enough share of the superprofits have an interest to defend the capitalist system, so they become a labor aristocracy
.
Superprofit in Marxist-Leninist theory
, is the result of unusually severe exploitation
or superexploitation. All capitalist profit in Marxist-Leninist theory is based on exploitation (the business owners extract surplus value
from the workers), but superprofit is achieved by taking exploitation above and beyond its normal level. There are in Marxism-Leninism no profits that could result from an activity or transaction that did not involve exploitation, except socialist profits in a Soviet-type economy.
Leninists reply that cheap consumer goods are precisely the method through which global capitalists allow workers in their home countries to share in their superprofits. The capitalists could sell those consumer goods at higher prices and obtain higher profits. But they choose to sell them cheap instead, in order to make them widely available to workers in their home countries and thereby spread a consumer culture that erodes class consciousness and removes the threat of revolution.
In other words, capitalists sacrifice some of their superprofit, either consciously or unconsciously, for the sake of increased stability at home. Once a worker owns a foreign-made fridge, car, stereo, DVD-player and vacuumcleaner, he no longer thinks of revolution and thinks capitalism is the best of all possible worlds.
Other Marxists however regard this line of thinking as a vulgar economic reductionism, and regard it as a fallacy to think that capitalists "choose to sell goods cheaply" for some political purpose. That would be only an exception to the rule, which is that goods are sold at the highest price that enables those goods to be sold.
argues in his book Late Capitalism that the frontline of capitalist development is always ruled by the search for surplus-profits (above-average returns). But, he argues, the growth pattern of modern capitalism is shaped by the quest for surplus-profits in monopolistic and oligopolistic markets, in which a few large corporations dominate supply.
Thus, the extra or above-average profits do not arise so much from real productivity gains, but from corporations monopolising access to resources, technologies and markets.
It is not so much that enterprises with superior productivity outsell competitors, but that competitors are blocked in various ways from competing (for example, through cartellisation, mergers, fusions, take-overs, government-sanctioned licensing, exclusive production and selling rights etc.). ]
In that case, the extra profits have less to do with "reward for entrepreneurship" than with market position and market power
, i.e. the ability to offload business costs onto someone else (the state, consumers, other businesses), and force consumers to pay extra for access to the goods and services they buy, based on supply monopolies.
Karl Marx
Karl Heinrich Marx was a German philosopher, economist, sociologist, historian, journalist, and revolutionary socialist. His ideas played a significant role in the development of social science and the socialist political movement...
's critique of political economy, subsequently elaborated by Lenin and other Marxist thinkers.
The origin of the concept in Marx's Capital
The term "superprofit" (extra surplus-value) was first used by Karl MarxKarl Marx
Karl Heinrich Marx was a German philosopher, economist, sociologist, historian, journalist, and revolutionary socialist. His ideas played a significant role in the development of social science and the socialist political movement...
in Das Kapital
Das Kapital
Das Kapital, Kritik der politischen Ökonomie , by Karl Marx, is a critical analysis of capitalism as political economy, meant to reveal the economic laws of the capitalist mode of production, and how it was the precursor of the socialist mode of production.- Themes :In Capital: Critique of...
. It referred basically to above-average enterprise profits, arising in three main situations:
- technologically advanced firms operating at above average productivityProductivityProductivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...
in a competitive, growing market.
- under conditions of declining demand, only firms with above-average productivity would obtain the previous socially average profit rate; the rest would book lower profits.
- monopolies of resources or technologies, yielding what are effectively land rents, mining rents, or technological rents.
We could - although Marx does not discuss this in detail (beyond referring to international productivity differentials in the world economy) - also include a fourth case, namely superprofits arising from structural unequal exchange
Unequal exchange
Unequal exchange is a much disputed concept which is used primarily in Marxist economics, but also in ecological economics, to denote forms of exploitation hidden in or underwriting trade...
in the world economy. In this case, superprofit arises simply through buying products cheaply in one place and selling them at a much higher price elsewhere, yielding an above-average profit margin. This type of superprofit may not be attributable to extra productivity or monopoly conditions, and represent only a transfer of value from one place to another.
Leninist interpretation
According to LeninismLeninism
In Marxist philosophy, Leninism is the body of political theory for the democratic organisation of a revolutionary vanguard party, and the achievement of a direct-democracy dictatorship of the proletariat, as political prelude to the establishment of socialism...
, superprofits are extracted from the workers in colonial (or "third world
Third World
The term Third World arose during the Cold War to define countries that remained non-aligned with either capitalism and NATO , or communism and the Soviet Union...
") countries by the imperialist
Imperialism
Imperialism, as defined by Dictionary of Human Geography, is "the creation and/or maintenance of an unequal economic, cultural, and territorial relationships, usually between states and often in the form of an empire, based on domination and subordination." The imperialism of the last 500 years,...
powers (in the "first world
First World
The concept of the First World first originated during the Cold War, where it was used to describe countries that were aligned with the United States. These countries were democratic and capitalistic. After the fall of the Soviet Union and the end of the Cold War, the term "First World" took on a...
"). Part of these superprofits are then distributed (in the form of increased living standards) to the workers in the imperialists' home countries, in order to buy their loyalty, achieve political stability and avoid a workers' revolution, usually by means of reformist labor parties. The workers who receive a large enough share of the superprofits have an interest to defend the capitalist system, so they become a labor aristocracy
Labor aristocracy
"Labor aristocracy" or "Labour aristocracy" has three meanings: as a term with Marxist theoretical underpinnings, as a specific type of trade unionism, and/or as a shorthand description by revolutionary industrial unions for the...
.
Superprofit in Marxist-Leninist theory
Marxism
Marxism is an economic and sociopolitical worldview and method of socioeconomic inquiry that centers upon a materialist interpretation of history, a dialectical view of social change, and an analysis and critique of the development of capitalism. Marxism was pioneered in the early to mid 19th...
, is the result of unusually severe exploitation
Exploitation
This article discusses the term exploitation in the meaning of using something in an unjust or cruel manner.- As unjust benefit :In political economy, economics, and sociology, exploitation involves a persistent social relationship in which certain persons are being mistreated or unfairly used for...
or superexploitation. All capitalist profit in Marxist-Leninist theory is based on exploitation (the business owners extract surplus value
Surplus value
Surplus value is a concept used famously by Karl Marx in his critique of political economy. Although Marx did not himself invent the term, he developed the concept...
from the workers), but superprofit is achieved by taking exploitation above and beyond its normal level. There are in Marxism-Leninism no profits that could result from an activity or transaction that did not involve exploitation, except socialist profits in a Soviet-type economy.
Criticism of Leninist interpretation
Critics of Lenin's theory (including many Marxists) hold a different view. Their argument can be summarised in the following points:- the average rate of surplus-value is typically higher in rich countries, because of higher labor-productivity;
- high-paid, skilled workers can be very militant and display class consciousnessClass consciousnessClass consciousness is consciousness of one's social class or economic rank in society. From the perspective of Marxist theory, it refers to the self-awareness, or lack thereof, of a particular class; its capacity to act in its own rational interests; or its awareness of the historical tasks...
;
- the existence of reformist labor parties in the Third World;
- the differences in wages between rich and poor countries are far greater than the differences in wages within rich countries, so, if anything, the whole working class in rich countries is a "labor aristocracy" from a global point of view.
- it is not clear that workers in the imperialist country directly share in repatriated profits from overseas dominions;
- the actual amount of repatriated profit from overseas investments that could "trickle down" to the working class as salary income is not large enough to sustain a "labor aristocracy", if there is one.
- Probably the main economic benefit that workers in rich countries obtain directly from poor countries is cheap consumer goods, but in fact the monetary value of these goods is statistically only a small part of their total budget. The "big ticket" foreign-made items in working class budgets are foreign computer hardware, foreign-made appliances and foreign cars (i.e. durable consumer goods). But out of that total expenditure, only a small fraction represents goods from poor countries.
Leninists reply that cheap consumer goods are precisely the method through which global capitalists allow workers in their home countries to share in their superprofits. The capitalists could sell those consumer goods at higher prices and obtain higher profits. But they choose to sell them cheap instead, in order to make them widely available to workers in their home countries and thereby spread a consumer culture that erodes class consciousness and removes the threat of revolution.
In other words, capitalists sacrifice some of their superprofit, either consciously or unconsciously, for the sake of increased stability at home. Once a worker owns a foreign-made fridge, car, stereo, DVD-player and vacuumcleaner, he no longer thinks of revolution and thinks capitalism is the best of all possible worlds.
Other Marxists however regard this line of thinking as a vulgar economic reductionism, and regard it as a fallacy to think that capitalists "choose to sell goods cheaply" for some political purpose. That would be only an exception to the rule, which is that goods are sold at the highest price that enables those goods to be sold.
Mandel's theory
Ernest MandelErnest Mandel
Ernest Ezra Mandel, also known by various pseudonyms such as Ernest Germain, Pierre Gousset, Henri Vallin, Walter , was a revolutionary Marxist theorist.-Life:...
argues in his book Late Capitalism that the frontline of capitalist development is always ruled by the search for surplus-profits (above-average returns). But, he argues, the growth pattern of modern capitalism is shaped by the quest for surplus-profits in monopolistic and oligopolistic markets, in which a few large corporations dominate supply.
Thus, the extra or above-average profits do not arise so much from real productivity gains, but from corporations monopolising access to resources, technologies and markets.
It is not so much that enterprises with superior productivity outsell competitors, but that competitors are blocked in various ways from competing (for example, through cartellisation, mergers, fusions, take-overs, government-sanctioned licensing, exclusive production and selling rights etc.). ]
In that case, the extra profits have less to do with "reward for entrepreneurship" than with market position and market power
Market power
In economics, market power is the ability of a firm to alter the market price of a good or service. In perfectly competitive markets, market participants have no market power. A firm with market power can raise prices without losing its customers to competitors...
, i.e. the ability to offload business costs onto someone else (the state, consumers, other businesses), and force consumers to pay extra for access to the goods and services they buy, based on supply monopolies.
See also
- surplus valueSurplus valueSurplus value is a concept used famously by Karl Marx in his critique of political economy. Although Marx did not himself invent the term, he developed the concept...
- Unequal exchangeUnequal exchangeUnequal exchange is a much disputed concept which is used primarily in Marxist economics, but also in ecological economics, to denote forms of exploitation hidden in or underwriting trade...
- Profit (economics)Profit (economics)In economics, the term profit has two related but distinct meanings. Normal profit represents the total opportunity costs of a venture to an entrepreneur or investor, whilst economic profit In economics, the term profit has two related but distinct meanings. Normal profit represents the total...
- imperialismImperialismImperialism, as defined by Dictionary of Human Geography, is "the creation and/or maintenance of an unequal economic, cultural, and territorial relationships, usually between states and often in the form of an empire, based on domination and subordination." The imperialism of the last 500 years,...
- neo-colonialism
- LeninismLeninismIn Marxist philosophy, Leninism is the body of political theory for the democratic organisation of a revolutionary vanguard party, and the achievement of a direct-democracy dictatorship of the proletariat, as political prelude to the establishment of socialism...
- superexploitation