PROFITTO. — This term generally denotes the entrepreneur’s net income, corresponding to the interest accruing to the capitalist and the wage owed to the worker. This income ordinarily includes: a) the interest on capital, if the entrepreneur is also among the enterprise’s financiers; 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, a residual remains, sometimes a substantial one, which is p. in the proper sense, and has been the object of social controversy because of its disputed legitimacy.
It is one of those economic institutions that do not possess an absolute value of necessity, but exist so long as they have a social function to perform: thereafter, they more or less quietly disappear. Only abuse brings them violently back into question in difficult times, without, however, resolving the matter, precisely because of their relative value. And abuse, in the case of p., may be said to be 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 contingencies of competition, bureaucracy, politics, and industrial progress itself, together with the consequent fear of loss, lead to exaggerated reserves and precautionary measures; hence, once the entrepreneurial income has been stripped of its legitimate components, calculated in fair measure, there almost always remains a residual that has no particular and precise justification of its own, but which, at the present stage of economic civilization, constitutes the principal driving force and almost the sole purpose of initiative and progress (v. SPECULAZIONE).
The polemical argument that sees industrial p. as an obstacle to the growth of wages has no solid basis: it is sufficient to compare the total annual p. of all industries with the sum of the wages paid during the year to observe that the ratio is quite modest, standing at around 10 percent. Thus, the violent abolition of industrial p., while it would not significantly alter the wage conditions of workers, would not compensate for the damage caused by the frustration of private initiative (v. TORNACONTO).
P. also represents savings that are absolutely necessary for the continuity and progress of production: savings that, in almost their entirety, go to sustain old and new industries, and that the worker today would find it exceedingly difficult to accumulate for the same purpose. P. must therefore be recognized as the surplus that ought to be returned to the poor, that is, to those who have been unable to save but have made saving possible (v.).
P. is therefore not in itself immoral or harmful to the economy; but it may become so because of its amount, origin, or destination: for there are honest and dishonest p., arising from skill and lower production costs in comparison with the maximum costs that determine market prices, or instead from temporary commercial circumstances; p. arising from protective devices (v. PROTEZIONISMO), and monopoly p. whenever an authoritative 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 brings together all the producers of that commodity or providers of that service.
P. naturally tends to diminish, limited by competition, like interest on loans (v. INTERESSE), and may even disappear in a society finally pacified with respect to its passions and fears; but there can be no doubt that its abolition by means other than economic ones would cause the disorderly halting of industrial initiative, making it inevitable and necessary to replace it with State initiative (v. SOCIALIZZAZIONE).
The Marxist accusation that p. derives from an unjust reduction of wages has no basis: p. arises from situations that take concrete form, without any guarantee of continuity, outside and after the production process, when the freely agreed wages have already been paid and the cost of production has been established. It is therefore customary to say that p. is an element of price, not of cost. In the Soviet system, moreover, p. in industrial enterprises has by no means been abolished: it is merely appropriated by the State and partly allocated to social assistance.
Modern times have, however, placed on the agenda an equitable distribution of p. among all the factors of production (v. SALARIO, REGIME), particularly because it very often depends on fortunate circumstances of a commercial or political nature, on which labor, intelligence, or indeed the entrepreneurs’ method have no bearing, and which entail no new risk for them. Bringing about such a distribution, or workers’ participation 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 combine a Christian and social conscience with a practical and far-sighted spirit and, without awaiting legal impositions, which are always burdensome and imperfect, mark out through their courageous initiatives this most noble path of progress as well (v. U.N.I.A.P.A.C).