(f) Socialism and Profit

A further question arises in connection with the influence of workers, of consumers, and of the State upon the socialized undertakings: what is to be done with the surpluses? And ought the undertakings to yield surpluses at all?

The supporters of the jointly-controlled type of business mostly answer this question in the affirmative. In his Weg zum Sozialismus, Otto Bauer takes it for granted that the socialized branches of industry will make net profits.

“It goes without saying that a portion of the annual net profit will have to be employed to extend and perfect the productive apparatus of the branch of industry. The rest of the net profit will be divided between the State, on the one hand, and the workers, employees, and officials who are engaged in the branch of industry, on the other hand.”

Many Socialists have taken exception to the proposal that socialized undertakings and municipal services should be made to yield a surplus, on the ground that this is profit-making, and not Socialism.

This idea is derived from the old principle that each worker should receive the full product of his labour.

Now one thing is clear: the political rule of Labour will involve large State expenditure for various communal purposes, to which we have already referred: a revolution in housing conditions, improvement and extension of education, and also of the health services. Hitherto taxation has been regarded as the chief source of money for State purposes.

But there is something else to be noted: the further socialization progresses, the more will it narrow the field of exploitation for private capital, and the more will it have the effect of raising wages at the expense of profit, thus causing the rate of profit to fall within this constantly diminishing field.

The result will be a steady decrease in the volume of surplus value which goes into the pockets of the capitalists. Now it would be absurd to take measures to diminish this volume of surplus value and at the same time expect an enormous increase in the yield of taxation. If the enormous cost of the social services under a Labour regime is to be met by taxation, then, however high the super tax and the death duties may be, an ever larger portion of the burden of taxation will fall on the worker.

Now according to our assumptions, the wage of the worker will be increased to enable him to support the higher taxation. But would it not be absurd, for the sake of the socialist principle, to pay the workers in the socialized undertakings the amount of taxation in their wages, and then laboriously to take it back from them in a hundred different forms, in constant strife with the tax-gatherers and by means of a clumsy and expensive bureaucratic apparatus.

Once the number of socialized undertakings and the volume of their surpluses become large enough to cover the entire expenditure of the State and the municipalities, the great bureaucratic apparatus, which is to-day employed by the Inland Revenue, will become quite superfluous. We should then be rid of an appreciable portion of that State bureaucracy, to diminish which would be one of the most urgent tasks of victorious Labour. These expensive officials would then be free to undertake productive work.

Tariffs which are nothing more than taxes would inevitably disappear with a thriving system of socialist production. Socialism will proceed from highly developed industrial States, which would no longer need a tariff for infant industries, and would certainly not need a tariff to assure extra profits to the great associations of employers.

There remains the tariff which is imposed for the protection of branches of production which cannot flourish in the country because the necessary natural or social conditions are absent. Tariffs of this kind are only imposed for the purpose of impeding the natural and geographical division of labour, and therefore the development of the productivity of labour, artificially prolonging unproductive branches of industry at the expense of the community.

The abolition of such tariffs might sometimes be painful for many sections of workers. This is a reason to practise caution in the method of abolition, but that is no argument against abolition itself.

To renounce any revenue from the surpluses of socialized undertakings would seriously hinder their progressive development, and would render necessary the maintenance of a comprehensive bureaucratic machinery. This renunciation is by no means synonymous with Socialism.

The difference between Socialism and capitalism does not consist in the fact that the one makes a profit, and the other not, but in the fact that the one makes a profit for individuals, while the other makes a profit for the community. This is an extremely important distinction.

Yet it is not the sole distinction with regard to profit. Under capitalism, businesses have vitality only so long as they yield a profit. Profit is the soul of economy. Individual businesses or branches of industry may be ever so useful to the community, but they cannot maintain themselves unless they succeed in making the average rate of profit. On the other hand, every business can find sufficient capital if it can yield enough profit, however contemptible or injurious it may be for society.

This would be different in a socialistic organization of the process of production. It would now be incumbent on the management of a socialized undertaking to prevent any harmful employment of its means of production, however much profit it promised. The application of this principle would be all the stricter, the greater the influence, not merely of the producers of the particular branch of industry, but also of the whole body of consumers.

On the other hand, the socialist system of production would continue to operate particular businesses or branches of industry which appeared useful to it, even when they yielded no profit, and perhaps required subsidies. The establishment of schools, the construction of roads and bridges has never been a profitable business for the State or the municipality.

It must not be concluded from this that the question of a profit or a surplus is a matter of indifference to the municipal or communal services. At the present tune national or municipal institutions which do not pay for themselves can only be conducted with the assistance of taxes upon individuals, which are all the higher, the greater the services which the institution renders the community. The more socialization progresses, the more branches of industry are transferred to the ownership of the State and the municipality, the more the costly and circuitous method of taxation will be avoided as a source of State and municipal revenue, and the more dependent the public finances will become upon the surpluses of the public services. In these circumstances, particular undertakings and branches of industry may be run without surpluses, and may even require large subsidies. This is of course impossible for the whole of industry. The larger the subsidy for the one, the greater must be the surpluses yielded by the others.

Far from being unsocialistic, the system of surpluses will be important for a socialist regime, as the greater the social tasks to be undertaken, the more considerable will the surplus have to be which the socialized undertakings as a whole provide.

The difference between capitalism and Socialism does not merely consist in the fact that in the one case profits go into the pockets of individual capitalists, while in the other case they fall to the community, and that in the one case the business is run solely on account of profit irrespective of its beneficial or injurious effects, whilst in the other case only those branches of industry which are useful to the community are maintained, the injurious businesses being closed down, whatever profits they may yield.

While it must not create a privileged aristocracy of labour at the expense of other workers, the socialized undertaking should be a model concern in every respect, not least in regard to the position of its workers. The intellectual and physical elevation of its workers must form one of the chief cares of the management of the socialized undertaking.

Its methods of securing a surplus must consist in securing the greatest possible perfection of its technical installations effecting the utmost improvement of its organization, and taking measures which increase the strength and the zeal of its workers. In this respect, it will be able to accomplish more than a capitalist undertaking, as it will be organized, not upon the antagonism, but upon the co-operation of its employees in the establishment and conduct of the business.

The socialized undertakings as a whole will of course have to yield surpluses, and the means to this end is to raise the productivity of labour.