Chapter XV

PROFIT CAPITALISM


The predominant method of production and distribution, at the present time, is based upon the purpose of getting the difference between the cost and selling price. The motive of this form of business is neither to supply human needs nor to give employment to labor. With profit as the motive, there naturally follows a desire to make commodities seem better than they are for the purpose of encouraging the consumer to buy, and for the purpose of lowering costs of production. Adulteration, falsified advertising, and the multitude of frauds which require laws penalties, police, inspectors, and jails are among the results. A story is told of the Professor of Business Ethics, who was being introduced to an English philosopher who was hard of hearing. "What did you say he is?" asked the philosopher. "Professor of business ethics," replied the introducer. After this had been shouted back twice more, the philosopher shook his head and observed: "Never mind, I don't get what you say at all. You know I'm hard of hearing. It sounds to me as though you said 'Professor of business ethics.' My bad hearing plays amusing tricks on me."

In the interest of reducing costs, the consumer suffers not only from adulteration and short weights, but from monopolistic combines which keep up prices. To elevate prices for the sake of profits, scarcity is promoted. Tariffs prevent the consumer from getting foreign goods at a lower price. Conspiracies in restraint of trade are entered into. Combines of business unite against a competitor who would lower prices. The following headed a news item in the New York Times (1 Dec. 1945): "British Cut Pan-American Airways to 2 Flights a Week. Slash from 5 Comes as the Line Begins Low Rate Trips." This air line had proposed to fly a daily trip between New York and London at the rate of $275 instead of $572, the prevailing rate. The British Government at the instigation of American and British air lines was responsible for forbidding the lower fares. It finally permitted the air lines to charge $375 per passenger for a limited number of trips.

The competitive struggle to get the customer is a struggle largely among individuals in business. They learn to fight one another. When the competition crosses international lines, it becomes war engendered by business competition. Men will fight for the privilege of making profits from somebody as surely as they will not fight for the privilege of serving somebody.

Tariffs are imposed upon imports to help domestic profits at the expense of domestic consumers. Tariffs are potent factors in promoting international hostility. In 1930 the United States increased its tariff on foreign goods. By 1932, thirty-five other nations with which the United States does business had raised their tariffs apparently in retaliation. This is part of the constant commercial warfare growing out of the quest for profits. Tariffs are associated with a multitude of intergovernmental intrigues which build up hostilities. Lord Halifax, British Ambassador to the United States during World War II, said that behind all kinds of trade restrictions the nations of the world will enter "feverish years of jungle life, in a cut-throat war for international trade; of scrambling and out-smarting each other; of stealing each other's customers and blackening each other's faces, until another Hitler arises to exploit the miseries of the peoples and to multiply them tenfold by another war."

Monopoly serves capitalism by preventing the lowering of prices by free-enterprise competition. The movement toward monopoly characterizes the prevalent business system, which itself is moving toward state control and ownership. In the United States, the Federal Trade Commission on 25 July, 1948, reported to Congress that "no stretch of the imagination is required to foresee that if nothing is done to check the growth of concentration, either the giant corporations will ultimately take over the country, or the Government will be impelled to step in and impose some form of direct regulation in the public interest. In either event collectivism will have triumphed over free enterprise and the theory of competition will have been relegated to the limbo of well-intentioned but ineffective ideals. The Commission believes that a definite choice is to be made. Either this country is going down the road to collectivism, or it must stand and fight for free enterprise." This means that the Government itself is aware of the socialistic fate that awaits the prevalent economy of the country.

"Combination in restraint of trade" is the name of the monopoly system. In the United States it is illegal. In 1947 the Department of Justice found a combination of the big drug firms guilty of joint agreements to keep up the price of certain essential drugs, such as insulin. The purpose was to increase the already enormous profits of the business. The result was just that, together with deaths among the sick who could not afford to buy the drug.

The prevalent economic methods are taking a staggering toll from the face of the earth itself. The powers of famine are moving forward. The constant process of soil erosion is robbing land of fertility that represents a stored up capital that took millions of years to accumulate. Industrialism is rapidly exhausting man's best capital saving. Deliberately and before our eyes this pillaging of natural resources proceeds in the agricultural lands, grass lands, forests, and mines of the world, moving mankind toward its ultimate and fatal impoverishment. Man goes out and draws upon this great bank account and makes no comparable deposit. This while already half the people of the world are undernourished. Wastage of the soil, forests, and mines is compensated for to a degree by modern methods of conservation. But these methods are inadequate to balance losses. Conservation is slow while destruction rushes on. Profit commerce takes most of the fruits of the land and sells them to somebody else for its own gain.

Sale of services as well as commodities is involved in the business struggle. A vast governmental machinery becomes necessary to control and regulate profit commerce, while business moves toward bigger and bigger combines which eliminate small business. The machinery of the Government does (1) everything possible to promote business and profits, and (2) not quite everything possible to prevent exploitation of nature's resources and of the public. The two are incompatible.

The relation of the profit business system to war is intimate. It is a promoter of war. Dogs of war feed on the bones of business competition for profits. Preparation for war, called "preparedness" increases not only armament business but the business of providing military supplies of every kind. Multiplication of armament is stimulated not so much by the needs of defense as by the hunger for profits. The British Royal Commission on Armaments m 1935 reported as follows:--

(1) That armament firms have been active in fomenting war scares and in persuading their own countries to adopt warlike policies and to increase their armaments.

(2) That armament firms have attempted to bribe Government officials, both at home and abroad.

(3) That armament firms have disseminated false reports concerning the military and naval programs of various countries, in order to stimulate armament expenditure.

(4) That armament firms have sought to influence public opinion through the control of newspapers in their own and foreign countries.

(5) That armament firms have organized international armament rings through which the armaments race has been accentuated by playing of one country against another.

(6) That armament firms have organized international armament trusts which have increased the price of armaments sold to governments.

A vast propaganda in the interest of armament business is always on foot causing war scares, whipping up international hostilities, and glorifying militarism among a docile public. War itself is rich in opportunities for profits. The more war scares, the more preparedness; the bigger armies, the more promotions there are and the more need for military officers.

Basically the profit motive as a predominant way of supplying human needs is ultimately unworkable and tends to destroy itself. It exhibits the need of (1) keeping down wages on the one hand and (2) keeping up prices on the other. It is an inconsistent neutralizing system. Keeping things scarce to maintain prices limits productive industry and labor. Advertising and pressure salesmanship urge people to buy with limited funds in a scarce market. When the product leaves the factory new prices are added as it passes along toward the consumer. The people who make things as workers do not receive enough wages to buy these same things as consumers. Every industrial country must export or destroy the surplus which the people can not buy. Export business becomes necessary; but as industry develops in country after country, each nation becomes more and more self-sufficient. It needs to import less. As it needs to import less, it needs to export more. Also countries export those goods they can produce most efficiently and abundantly. Abundance depresses prices. An impasse develops. When export business declines, it leaves an unsolved problem in each country. Goods are destroyed. Wheat is burned. Several million bushels of potatoes are now being destroyed by order of the U. S. Government, to make potatoes scarce and increase the price. All the while people were starving for want of the things thus wasted.

During World War II, as in all wars, profit business naturally devoted its principal efforts to making profits for itself at the expense of the Government. War gives business its great opportunity. In the United States, the profits were out of proportion to the decencies of commerce. While men were drafted to give their lives, capitalistic business was drafted to increase its profits. This was because the Government was in a desperate situation and had to have the goods immediately and regardless of price. Profits pretty generally take precedence over patriotism. Manufacturers' profits on goods sold to the Government in the United States increased 83.3 percent. The price of engines and turbines increased 426.1 percent, motor vehicle parts 236.3 percent, and rubber products 263.6 percent. Business makes its big killing during war. Profits before taxes for all industries in the United States during War II were $22.7 billion. The year before the War profits were $5.3 billion.

The Department of State of the United States in 1945 reported that "Two-thirds of the people on earth have never had enough to eat, though two-thirds of the people work at producing food. About 75 percent of the people of Asia and 30 percent in advanced industrial countries live on a diet below the minimum standard of health. Approximately 50 percent of the adults of the world are unable to read and write." (Department of State Publication No. 2302). Apparently the profits of business have not solved these problems of the common people.

Connection of American big business with German big business served to promote German preparedness for World War II. Collusion of American business with German business provided the latter with important American military secrets. International business combines raised prices to the United States Government for necessary war materials. The American oil trust, in 1942 found guilty of defrauding the United States Government, was sentenced to pay a fine representing a small part of its fraudulent profits. The public was permitted little knowledge of the oil trust's collusion with the enemy. All this has bearing upon the causation of war.

Profit business has been able to survive because of--

(a) Increase of population. But in the great industrial countries this increase is halting.

(b) Foreign trade. But exports and imports are declining.

(c) Business failures of competitors. But competitors are disappearing as monopolies and trusts take their place.

(d) Exploitation of natural resources. But natural resources have in many countries been exploited to death. The value of all natural property in the United States is less today than it was 100 years ago; the country is poorer.

The prevalent economic system is undergoing disintegration from causes engendered within itself. Inequalities of opportunity, privilege, great wealth on the one hand and squalid poverty on the other lead to social degeneration. Production of more goods than consumers can buy, the inevitable unemployment which uncontrolled profit manufacturing business causes and wants, and the constant warfare between capital and labor characterize the changing scene. They are the conditions which historically have preceded the collapse of other civilizations. They are now all preventable as never before. Have that small minority of people, who see the situation, who desire a stabilized civilization, and who know how it can be attained, sufficient influence upon the masses to bring about peaceful change for the better?

The same economic forces which spelled the fate of the Roman Empire repeated themselves in the decline and fall of the European countries during the first half of the twentieth century. Great wealth in few hands, widespread poverty, costs of government mounting, taxes increasing, value of money declining, wars always threatening or in operation, centralization of power increasing in the hands of government, the individual losing his self control and control of his property, political officials multiplying, and a general sense of futility and hopelessness among the masses have characterized the situation. (See Greatness and Decline of Rome by G. Ferrero.)

While there is poverty everywhere there is less destitution. The hungry are fed, clothed, and housed by the state as never before. This makes poverty easier to bear, more acceptable, and more difficult to eliminate. During the century of the prevalence of capitalism the world has made its greatest advances in science, invention, the arts, in the accumulation of wealth, in elevating the standard of living, and in the humanities. The United States, the outstanding exemplar of capitalist economy, has become the most prosperous country in history. It is the country that can now feed the hungry nations. But the sands have run low and the effectiveness of capitalism to supply human needs is failing. After War II American relief, promoted by a large element of philanthropy, served a benign purpose in relieving European hunger and want. Back of it was American business with its desire to sell the goods for rehabilitation, to see the European people set on their feet so they might become customers for American goods, to see that they became industrious enough to buy imports--but not industrious enough to become serious competitors.

Craving for profits in industry knows no moral code. Individuals do, but not industry. It will stop at nothing to get profits. How little conscious the public are of what profit business would do to them if it were not restrained by laws, inspections, penalties, and police power! Reformers talk about substituting cooperation for profit competition. They speak of cooperation in general and miss the specific method. They seem not to know that cooperation is in operation all around them and that it is a reality in the midst of the capitalistic business they do not like. Perhaps they do not expect to see their ideal garbed in the raiment of business, with scales, wrapping paper, and cash registers. They walk past the cooperative store, filling station, credit union, and factory with their heads in the clouds, failing to see the place where they could take hold and do something.

The capitalist profit method has served a necessary purpose. In the absence of ability of the people to supply their needs by other and more efficient methods capitalism, since the discontinuance of feudalism, has performed the essential service of supplying human wants. If civilization is to be attained, free enterprise and the right of the individual to produce or buy and sell commodities and services for profit should always exist; but as the predominant method, the free enterprise profit system has seen its day and is drawing to a close. Its predominance will be supplanted by socialism, which means the state in business; or by the nonprofit, private property, free enterprise method commonly known as consumer cooperation.

Freedom of industry in profit business leads to monopoly, and monopoly means higher prices and often scarcity for the purpose of keeping up prices. This is hard on the consumer. Monopoly for profit's sake can not compete in a free market with cooperative business. This has been proved time and again in Sweden and is undergoing proof in many fields in other countries. Slow failure of profit business, its disintegration in small business form or in monopoly form is the fertilizer of cooperation. This same failure is also the fertilizer of socialism. The question of the future is: Can the cooperative, voluntary, free method of business make headway and compete with the socialized state in business? Economically it can. But the socialized state in business can use coercive methods, prohibitions, restrictions, and if need be force, to prevent competition from other forms of business. The state is always in a position to give itself privileges operating against freedom and the individual. Cooperation can win in this conflict only by proving its superiority before the eyes of the people, and then winning their support. This popular support, when sufficiently widespread, is capable of establishing the cooperative method as a peaceful predominant way of production and distribution.


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The content and opinions expressed on this Web page do not necessarily reflect the views of nor are they endorsed by the University of Georgia or the University System of Georgia.