PROFIT. - This term generally means the net return of the entrepreneur, corresponding to the interest that belongs to the capitalist and to the wages owed to the worker. This return ordinarily comprises: a) the interest on capital, if the entrepreneur is also among the financiers of the enterprise; b) fair compensation for his work as manager and organizer; c) finally, a reasonable premium for the risks of the enterprise. Almost always, after these elements have been deducted, there still remains a residue, sometimes a large one, which is profit properly so called, the object of social controversy on account of its disputed legitimacy.
It is one of those economic institutions that do not possess an absolute value of necessity, but live as long as they have a social function to fulfill: after which they more or less quietly disappear. Only abuse violently calls them back into question in difficult moments, without however resolving them, precisely because of their relative value. And abuse, in the case of profit, may be called almost normal: a) both because of the speculative instinct that inspires and animates anyone who devotes himself to commerce or industry, and because of the excessive greed of some; b) and because the unforeseen events of competition, bureaucracy, politics and industrial progress itself, and the consequent fear of losing, lead to exaggeration in reserves and precautionary measures; whence, once the entrepreneurial return has been purged of its legitimate components calculated in fair measure, there almost always remains a residue that has no particular and precise justification of its own, but that in the present stage of economic civilization constitutes the mainspring and the almost sole purpose of initiative and progress (v. SPECULAZIONE).
The polemical argument that sees in industrial profit the obstacle to the growth of wages has no solid basis: it is enough to compare the total annual profit of all industries with the sum of wages paid in the year, to observe how modest the ratio is, hovering around 10 percent. So that the violent abolition of industrial profit, while it would not appreciably change the wage conditions of the workers, would not compensate for the damage of a mortified private initiative (v. TORNACONTO).
Profit moreover represents a saving that is absolutely necessary for the continuity and progress of production: a saving that in almost its entirety goes to feed old and new industries, and that the worker, today, would very hardly accumulate in order to employ it in the same way. In profit, therefore, we must recognize the surplus that must return to the poor, that is, to those who have not been able to save, but have made saving possible (v.).
Profit is therefore not, in itself, immoral or harmful to the economy: but it can become so through its measure, its origin or its destination: inasmuch as there are honest and dishonest profits, deriving from skill and from lower production costs relative to the maximums that determine market prices, or else from transitory commercial contingencies; profit that arises from protective expedients (v. PROTEZIONISMO) and monopoly profit whenever a dictated price is imposed by a single entrepreneur who is the sole producer of a commodity or the sole provider of a service, or by an industrial syndicate (trust, cartel, etc.) that gathers all the producers of that commodity or providers of that service.
Profit is naturally tending to diminish, limited by competition, just like the interest on loans (v. INTERESSE), and it may even disappear in a society finally calmed of passions and fears: but there is no doubt that its abolition by means other than economic ones would provoke the disorderly arrest of industrial initiative, making it fatal and necessary to replace it with State initiative (v. SOCIALIZZAZIONE).
The Marxist accusation that profit comes from an unjust reduction of wages has no basis: inasmuch as profit arises from situations that take shape, without any guarantee of continuity, outside of and after the productive process, when the freely agreed wages have already been paid and the cost of production ascertained. It must therefore be said that profit is an element of price, and not of cost. In the Soviet regime, moreover, profit in industrial enterprises is not abolished at all: only, it is appropriated by the State and in part disbursed in social assistance.
Modern times have however placed on the agenda a fair distribution of profit among all the factors of production (v. SALARIALE, REGIME): particularly because very often it depends on fortunate contingencies of a commercial or political nature, on which labor, intelligence or in any case the method of the entrepreneurs have no weight, and without any new risk for them. To bring about such a distribution, or sharing of workers in the profits of enterprises, is the present task not only of sociologists, but above all of the entrepreneurs themselves, or at least of those who to a Christian and social conscience join a practical and far-sighted spirit, and who, without waiting for legal impositions, always burdensome and imperfect, mark out with their courageous initiatives this most noble path of progress as well (v. U.N.I.A.P.A.C.).
Bibliography7 works
Mario Baronci