Capitalist Theories of Profit


In a recent article published in the DAILY TELEGRAPH, Max Hastings claimed that the Conservatives told the electorate the the facts of life about Capitalism. However, the Tories lack of understanding of capitalism is no better or worse than the level of economic ignorance held by the Labour Party and Liberal Democrats. None of these political parties and their economic advisors understands the laws and contradictions acting upon the anarchy of commodity production and exchange for profit.

Profit is a fact of life under capitalism. And it is this particular fact of life which we explore in today's lecture for it touches upon other facts of life which the capitalist political parties want to supress.

Defenders of capitalism display a very raw nerve when it comes to the question of profit. They feel compelled to defend the word profit although they do not understand its source within the productive process of commodity production.

In David Cameron's Big Society, for example, there are a group of investors called social entrepreneurs who believe in the mantra of the three p's; people, planet and profit and who carry on their business as though there is no contradiction or conflict associated with these three words and that profit appears from thin air as if by magic.

The appearance of profit on companies' balance sheets, as if by magic, brings to mind a conjurer who puts a £1 coin in his left pocket, shows an empty right hand pocket to the audience and then says some magic words like abracadabra and then shows an empty left hand pocket but then pulls out a £2 coin from what was the empty right hand pocket of his trousers. Were we all able to wear magic trousers and make money from thin air?

The anti-capitalism movement also puts forward a contradictory expression people before profits. These protestors believe capitalism can be reformed fairly by enlightened politicians, as one of the demonstrators camped outside St Paul's Cathedral in October 2011 remarked to a BBC journalist. In capitalism profits have to come before people.

And if anyone should question profit-making the media comes down on the perpetrators like a tonne of bricks. Take the expression profit is a dirty word. The use of this phrase has a long history to denigrate the unearned income of the capitalist class but it has been met with a backlash on the internet with hundreds of successive web page entries proclaiming profit isn't a dirty word and erroneously celebrating the profit-motive as a natural instinct of human beings. In fact the expression seems to have derived from the mid-19th to the early 20th century boom in the construction of public baths and wash houses for the working class when contractors were literally making profit from the dirt of the poor (Profit is a Dirty Word: The Construction of Public Baths and Wash Houses: 1847-1915, S. Sheard, Social History of Medicine, Vol. 13, Issue 1 pp. 63-86).

So why the abject fear from academics, journalists and politicians when profit-making is subject to any form of criticism? Profit is very important to the capitalist class. As a consequence defenders of the profit system are intuitively in favour of capitalists making profits.

Yet economists are very reticent to discuss profit and where it comes from. Little is to be found on the subject in economic text books generating ignorance on the subject. This has led to a well-known statistical fallacy of treating profits purely as an accountancy problem in respect to a particular industry.

An example of this statistical fallacy or false accountancy, if you like, - occurred recently when the media criticised the utility companies for making, what they said, were obscene profits from consumers. British Gas was worried at the accusation of making excessive profits and in its defence stated that it had only made £4 profit per customer (GUARDIAN 24th February 2011). British Gas had made a statistical fallacy in dividing the total profit of the company it made in any one year by the individual consumers who used its gas and electricity supplies as though profits were made this way. They are not.

Individual companies do not trade in isolation. To understand profit first requires an understanding of the economy as a whole; capital in motion, as Marx put it. Profit maximisation by capitalists leads to a movement of capital to sectors of the economy with the highest rate of profits, which tends to lead to an equalisation of profit rates. The amount of profit realised by an individual capitalist, and by the capitalist class as a whole, depends on the competitive process that works through the sphere of circulation. Profits are made in production and only realised in circulation.

Incoherent and simplistic theories of profit occur because academic economics tries to provide a theory of capitalism without a theory of profit. For an example of this economic illiteracy see the recent book, THE FEAR INDEX (2011) by the novelist Robert Harris where an explanation of profit is given by the protagonists as the skill of market investors using complex mathematical programmes in hedge fund swaps and derivatives. To hold a theory of capitalism without a theory of profit, as one critic of academic economics stated, is like trying to have a theory of the Catholic Church without the Pope (MARX'S ECONOMIC THEORY AND CONTEMPORSRY CAPITALISM F. Moseley in INTERNATIONAL PERSPECTIVES ON PROFITABILITY AND ACCUMULATION, eds. F. Mosley and E. Wolff. Cheltenham: Elgar Publishing. 1992).

A theory of capitalism does not begin with investment and equity markets in either the City or Wall Street or in hedge fund consultancies operating from plush Mayfair and Geneva offices. As Marx showed right at the beginning of the first volume of CAPITAL, a theory of capitalism and an explanation of profit must begin with the analysis of the commodity.

What is definitely not found in economic text books is Marx's explanation of the origin of profit. Marx showed that commodities contain value created by the socially necessary labour time that goes into their production. Workers, in the process of commodity production produce value equivalent to their wages and salaries and a surplus value which is the origin of profit and the source of the unearned income of rent, interest and profit.

The amount of surplus value depends on the value of labour power, the length of the working day and the intensity of exploitation.

Marx concluded his analysis of a capitalist economy that total price equals total value; total profits equal total surplus value and the aggregate priceâ rate of profit equals the aggregate valueâ rate of profit.

Capitalists, for Marx, are continually striving to minimise costs and maximise profits by increasing exploitation of labour and innovating by introducing new and better machinery. To quote Marx:

..the restless, never-ending process of profit-making is what he (the capitalist) aims at (CAPITAL VOL. 1, Chap. IV, p. 152).

Capitalism cannot exist without profit and profit cannot exist without the exploitation of the working class. No amount of reforms can alter this fact. Only the replacement by capitalism with Socialism a conscious and political act by the world's working class - can create a social system based upon production for social use and not profit. This is the fact of life about capitalism.

Economists believe that to advocate such a theory of profit is economic heresy. Socialists have no sympathy for their discomfort. Academic economics does nothing more than interpret, systematize and offer an apology for class exploitation. Recognising this fact allows us to give a scientific view of exploitation. And this requires going beyond mere appearance.

For as Marx stated we need to understand that the appearance of capitalism does not coincide with its reality. If it did then science would be a superfluous. Marx showed that the purpose of capitalism is profit and his theory of profit, as we shall see later, is logically coherent.

Three Fallacious Theories of Profit

When pushed, defenders of capitalism come out with a number of fallacious theories to explain profit. They are very crude.

Here are a few examples in no particular order.

a). The Del Trotter Theory of Profit

The first fallacious theory is that profit is made by one capitalist making his profit at the expense of another. This is the Del Trotter theory of profit. Del Trotter was the central character in the situation comedy Only Fools and Horsesâ.

In the episode Who's a Pretty Boy”, Del Trotter discusses with the Landlord of the Nag's Head about doing some painting and decorating to the public house. He finds out that a competitor will do the work for £1000 so he agrees to do the contract for £2000 on the basis that the landlord submits his tender to the brewery as the lowest one received and they get £500 each and give £1000 the other builder to carry out the painting and decorating since only fools and horses work. Del believes he has made a profit of £500.

The comedy might make you laugh. But it says nothing about the origin of profits. It is like the mythical purse of Corneous which bred money overnight; a myth. Money does not breed money.

Del Trotter's thinking is like that of many capitalists; the aim of the entrepreneur is to manipulate markets and undermine competitors to make their profits. They believe profit is made by buying cheap and selling dear. They buy commodities below their value and sell them more than their value so that this time next year we'll all be millionaires.

In the various episodes of ONLY FOOLS AND HORSES, Del Trotter frequently loses out to competitors and sometimes gains at the expense of others. But if one commodity is sold more than its value and another commodity is sold for less, when an aggregate of the sale of all commodities is made, the losses and gains cancel out. The explanation of profit is not made by buying cheap and selling dear. The origin of profit is still to be explained.

b). The Indiana Jones Theory of Profit

The next crude theory of profit found in economic text books is the theory that profit is the capitalist's reward for risking his capital.

This is the Indiana Jones theory of profit. Indiana Jones was a fictional explorer who would cut his way through the jungle, evade head hunters with poisoned darts and the traps set by greedy competitors risking all to find the priceless jewel in the lost ancient temple.

Sometimes this theory is known as the abstinence theory of profit. The capitalist decides that instead of living a life of pleasure he will take a risk and keep asides some of his wealth and invest it in a company bought to his attention by his financial advisor. It might mean a little less cocaine or the pleasures of the flesh but since by magic it brings him more money than he first invested it was worth denying his passions for additional wealth.

However, in deciding to invest his original capital to obtain more capital than the initial investment it still does not explain where profit comes from. After all, Rupert Murdoch goes to bed at midnight and wakes up in the morning to find he has made millions of dollars by just being asleep.

The point which should be understood is this; while individual capitalists might lose capital through bankruptcy the capitalist class has seen its capital grow every year. The average annual rate of return on investments varies; sometimes 3-4% sometimes higher depending on the risk and the state of the economy.

Any capitalist can make money without taking any risk at all simply by leaving his or her money in the bank deposit account although in recent years some Banks have not been that safe, high inflation has reduced the initial capital and low interest rates has not given much of return. Nevertheless the wealth of the richest 1% has increased over the last decade and it has increased, too, under a Labour government.

In modern capitalism employers like Rupert Murdoch employ senior and junior managers, technicians, editors, lawyers and accountants. In fact all the functions undertaken in Mr Murdoch's Media Empire are carried out by employees earning wages and salaries. Murdoch is rarely there except at Board Meetings. He doesn't have to be because he could employ a chief executive to take his place and often does.

The point is, is that Mr Murdoch's profit does not depend on his ever going to News International. Given that his company is operating on a sufficiently large scale he can leave all management to salaried officials and depart for one of his luxury residences and still make a profit.

The chief executive positions Mr Murdoch and his family hold is merely a means of taking profit out of the company in the form of salaries, perks, director's fees, car expenses and so on, in order to save tax.

If profit is not a payment for managerial services we are left with profit as a reward for risk-taking.

But what is a capitalist risking?

It is said, and it is true, that capitalists sometimes lose money. When the US stock market crashed Bill Gates and some members of his class lost billions although others will make a profit by buying cheap shares and selling them when the stock market improves. A capitalist who recently went bankrupt found that her jewellery collection which she bought for over £1 million was in fact worth only £100,000 (DAILY TELEGRAPH 1st October 2011).

But again, if we look at capitalist society as a whole, total wealth and total profits are increasing with the increase in productivity. Never have the capitalist class held so much wealth. Individual capitalists may lose, but the capitalist class as a whole has been increasing its profits.

A fact of life under capitalism is uncertainty; uncertainty for workers to keep their job and uncertainty for capitalists to sell their commodities for a profit.

All companies produce according to the laws of the market under pain of competition as explained by Karl Marx in his three volume work, CAPITAL. All capitalists take the risk of losing their capital because capitalism is anarchic and unpredictable. An economic crises and trade depression can and does make companies go bankrupt. The State might nationalise the company and not compensate the owners. If the company becomes a monopoly it can be broken up. And other companies might take it over and strip it of its assets or it has to close because it is not as profitable as its competitors.

No capitalist, knows for certain, that when they go to market they will find a buyer for their commodities. This uncertainty was known to Marx in his considered reply to what was known in the 19th century as Say's Law.

This is what Marx wrote: no one is forthwith bound to purchase, because he has just sold if the split between the sale and the purchase becomes too pronounced, the intimate connection between them, asserts itself by producing a crisis (CAPITAL VOL. 1, Chapter III, Moscow, p. 113 and 114).

So this theory of profit cannot account for the actual existence of profit or a surplus. Even the economist J. M. Keynes was aware of this. He said of profit as interest on capital:

Interest to-day rewards no genuine sacrifice, any more than does the rent of landâ (THE GENERAL THEORY OF EMPLOYMENT, INTEREST AND MONEY, p. 376MacMillan 1961).

And Keynes should know, for he successfully speculated on the stock exchange in the US becoming very wealthy (a fortune of £25 million in today's terms) while following an academic career as an economics professor at Kings College Cambridge. While he was holding seminars, writing learned papers, eating and drinking good food at college banquets and discussing principles of economics with governments and the Treasury, profit on the interest of his investments came flowing into his bank account. As he said, it was no genuine sacrifice.

Suppose however that we sympathised with the risk takers and decided to end the suffering and anguish which their abstinence imposed upon them and made raw resources, land and industry the common ownership under democratic control of all society. Would a surplus still be produced over and above the direct need of the working population and their dependents? Of course it would. And yet risk in the sense used by capitalist economists could hardly said to exist at all.

More importantly, what is the owner of capital risking? They are risking losing their capital. When they become bankrupt the worse that can happen to them is they become a member of the working class. The risk of millions of workers who periodically lose their jobs varies from short-term discomfort and hardship to starvation and death.

c). The Holy Trinitarian Theory of Profit

But the commonest if not the crudest economic arguments are those that explain profits by the three factors of production.

Marx derided this theory of profit by an allusion to the theological Trinity theory of the Catholic Church dismissing it as the religion of everyday life. Marx said that the secular Trinitarian theory of profit in which three persons; capital, land and labour all co-mingle together to generate social wealth:

completes the mystification of the capitalist mode of production…the bewitched, distorted and up-side-down world haunted by Monsieur le Capital and Madam la Terre, who are at the same time social characters and mere things (Marx, CAPITAL VOLUME 3, chapter 48: The Trinity Formula ibid p. 969 Penguin 1991).

The three factors of production is the capitalist theory of profit which states that the capitalist risks his capital and receives profit; the worker decides to work rather than stay in bed all day and is rewarded with a wage and the landlord contributes his land and earns rent rather than using it to shoot grouse or hold rock concerts. All are given equal weight as wealth creators in this harmonious picture of class collaboration.

Let us consider the real world and not the fictitious abstractions of academic economics.

What of land? The theory that rent is the reward for the landlord contributing land is a self-evident fallacy because the land will obviously survive the burial of all private landowners. Land, in any case, has to be ploughed and harvested and raw materials have to be mined. This function is carried out by workers expending socially necessary labour time.

Defenders of this specious theory ignore the fact that the worker's labour power is not only a commodity but part of capital what Marx called variable capital. The peculiarity of variable capital is that it produces a surplus value over and above the value necessary to maintain and reproduce the working class and their dependents.

What is called profit, interest and rent do not explain the origin of the surplus but only how it is distributed. There is no comparability between capital, land, and labour. The first is a relationship within a historically defined social system based upon the private ownership of the means of production and distribution; the second is inert; the third is active in that it produces social wealth. Land, raw resources and machinery do not create social wealth. What does create social wealth is the application of social labour to land, raw resources and machinery.

As Marx concluded:

capital is not a thing, it is a definite social relation of production pertaining to a particular historical social formation, which simply takes the form of a thing and gives that thing a specific social character (Marx, CAPITAL VOLUME 3, chapter 48: The Trinity Formula p. 953 Penguin 1991).

In fact a socialist revolution would demonstrate that capital was in the first place a social relationship within a historically given social system. Marx once remarked that a Negro is a Negro but only under certain social conditions is he a slave. Likewise, it is only under capitalism that raw resources, land and machinery become capital.

A negro is a negro. In certain circumstances he becomes a slave. A mule is a machine for spinning cotton. Only under certain circumstances does it become capital. Outside these circumstances, it is no more capital than gold is intrinsically money, or sugar is the price of sugar.... Capital is a social relation of production. It is a historical relation of production. (Karl Marx, LOHNARBEIT UND KAPITAL, N. Rh. Z., No.266, April 7, 1849 cited as note 4 in CAPITAL VOLUME 1, Chapter 33, The Modern Theory of Colonisation, Penguin 1996)

Abolish the capital-labour relationship and raw resources are just raw resources, and machines are just machines. In reality the constant capital they represent in capitalism is nothing more than dead labour. With the abolition of the wages system, labour-power will no longer be a commodity and will not become value-producing variable capital. In Socialism labour will be free and voluntary producing useful things just to meet social need.

2). Surplus product, surplus value and wages

a). The process of exploitation

Is there a more scientific analysis of profits and wages? We know that capitalism is a social system based on commodity production and exchange for profit. Those workers engaged in production and distribution are, for the most part, producing commodities for sale with a view to profit.

The process can be shown as follows:

M = Money capital

C = Commodities

P = Process of Production New-C = New commodities produced in the process of production

M1 = more money capital than the original investment M

This is how Marx mathematically presented the problem of exploitation before he gave his answer to it. The mathematical analysis of the process of exploitation Marx's employs in CAPITAL is about the level of pre-GSCE mathematics.

The capitalist starts with his investment (M) which he uses to buy commodities such as, raw materials, machines, factories, transport, communication systems and labour-power.

He then sets the labour-power he has bought on the labour market to work on the raw materials and sells the commodity for more money than he originally started with (M1).

This additional money that he gets for the sale of the product is his profit once deductions are made; rent to the landlord, interest to the banker and taxation to the capitalist State.

Given that cheating only means that some capitalists get more at the expense of other capitalists, profit must somehow arise from within the process of production, even if it can only be realised in the form of money by sale of the commodities.

Profit (and that is the surplus product in another form) arises in the process of production.

How does this happen?

When workers set to work operating machinery and using raw materials or semi-manufactured goods, then something is produced which is apparently worth more than the parts of which it is made.

The “output” is greater than the input.

The capitalist as owner of capital has made no productive effort; nor the landlord nor the financier.

And this is true not only of the commodity but of the machine itself which produces the commodity and the raw resources which is used up in the course of production.

This focuses attention on the worker.

The slave was forced to work for his master; so too, was the serf. Both produced a surplus; they performed surplus labour producing a surplus product.

But the modern worker appears to be free to work for his employer or not. When he does work for an employer, is the worker not paid for his or her work?

It seems that somewhere here lays the key to the mystery of the surplus product, or surplus value, the origin of profit under capitalism.

And in solving this mystery we will be on firm ground in answering two central questions; “who produces the social wealth in capitalism?” and does the working class need the capitalist class?

Go back a little to the process of production.

What sets the machinery in motion and uses raw materials is the conscious purposeful application of human energy and skill.

It is not risk-taking or sacrifice.

Cars, computers, ships, clothing, bread and all the other goods and services on which we depend for existence come from the energy and skill of labour embodied in the raw materials shaped with the aid of machinery (itself the result of similar work at an earlier stage of production).

b). A scientific view of exploitation

Under capitalism, social wealth derives from the exploitation of the commodity, labour power.

Exploitation, in its scientific sense, is not a question of long hours, child labour, unsanitary conditions or vicious employers.

A scientific analysis of exploitation focuses in on the fact that the capitalist is able to take for himself a surplus created by the working class solely by being the owner of the means of production.

So long as the capital-labour relationship remains, exploitation remains.

We can look at this in terms of the factory producing silicon chips for computers.

Let us assume in 8 hours a worker produces 1000 computer chips. We can say that he produces 125 chips an hour. We can assume the rate of surplus value is 100 per cent.

In the first four hours the worker produces computer chips equal to the bundle of commodities he and his family needs to live on. He is paid a wage or salary for these four hours. This is known as necessary labour. That is, the expenditure of necessary labour time in production to create value to produce and reproduce the working class in the form of wages.

In the second four hours the value of the silicon chips produced in this period is a surplus over and above that needed by the worker and his family. The worker is not paid for this work. It is unpaid labour. Marx called this surplus labour time or surplus value.

This line of argument means that the expressions a fair day's work for a fair day's wage and a just wage have no scientific meaning. And it is why Marx concluded that the motto of the working class should be abolition of the wages system.

Capital, wrote Marx, is not only command over labour but essentially command over unpaid labour and living labour. Marx drew an analogy between the capitalist and a vampire; the dead living off the living.

In demonstrating the scientific nature of exploitation we show that the class struggle is not only over the extent and intensity of exploitation but is primarily about the means of production and distribution and who owns it and for what purpose.

The class struggle is, in effect, a political struggle.

3). How the capitalist seeks to increase his profits.

Marx's theory of profit has considerable explanatory power. Not only does it explain the source of profit but accounts for the class struggle and why trade unions and employers' association exist and why the capitalist State behaves the way it does towards the working class over questions of wages and productivity.

The driving force of capitalism is profit. All capitalists have to make a profit or face bankruptcy. A by-product of making profits is to continuously reduce costs.

Everywhere we see examples of cost cutting for the one area where costs are cut is the wage and salary bill. This means redundancies. City workers, once on large salaries, are now being made redundant in their thousands. The assault on the wage bill as in other areas of cost cutting is to increase, what Marx called, the rate of exploitation.

A distinction has to be made between the rate of exploitation and the rate of profit. The explanation is technical and somewhat dry. However to understand Marx's theory of profit is to understand capitalism and the reason why capitalists and workers behave as they do.

The capitalist measures the surplus value created for him by the working class not just against the cost of employing labour (rate of exploitation or of surplus value) but against the cost of materials, plant and machinery needed for production as well (rate of profit).

In Marxist terms, the money capital spent on employing labour power is called variable capital; and that spent on machinery, raw materials and so on is called constant capital.

Variable capital is so called because of its unique property of creating more value than it possesses itself.

Constant capital is so named because machines do not themselves create value but transfer to the new commodities part of their own value wear and tear; and the value of the raw materials enters completely into the new product; its value is carried over.

In this terminology, the rate of surplus value is s/v; and the rate of profit is s/ c + v where s is surplus value, c is constant capital and v is variable capital.

a). How are the capitalists going to increase their profits?

How are the capitalists going to increase their profits? This is another fact of life under capitalism

The first thing to bear in mind is that the worker sells his labour power. Once sold the use of that labour power is at the disposal of the employer.
This has a further consequence.

The wages paid to the worker have no special connection with the value created by labour power; in the same sense the wages paid have no necessary connection with the price charged for what the workers produce.

Let us take as an example a company like Microsoft.

Suppose for example that at a particular moment, four hours' work by a Computer programmer at Microsoft equals the value of the goods they need to keep them and their family for a whole day.

If Microsoft could get that computer programmer to work longer hours with no pay increase, then obviously the amount of unpaid labour would increase directly and so would the surplus.

If the trade unions grow in strength at the Microsoft factory then it becomes more difficult for the Microsoft management, although, even today in the second decade of the 21st century there are industries where very long hours are worked at rates much below that of factories where labour is organised into trade unions.

Overtime is a way of lengthening the working day very often with some kind of incentive such as paying time and a half or double time.

Despite the recent Health and Safety Executive warning to a hospital for causing undue stress on employees, the employers have fought bitterly against the reduction of hours without a trade off in lower wages or increased productivity. And in times of boom, like in the building industry, employers demand and get unlimited overtime.

It is obvious that a factory and plant producing silicon chips for a computer is sitting in position for all the 24 hours of the day; and with that go overhead costs such as rent, heat, and so on, which is more or less fixed.

If the Microsoft management can get the workers to work two twelve hour shifts instead of one, then the fixed costs of Microsoft are smaller as a proportion of the total new value created. And if in addition Microsoft can get workers to work the 12-hour shifts at rates which bring them no more than say an eight-hour day in a factory of one of Microsoft's competitors then the owner of Microsoft, Bill Gates, and his fellow shareholders are doubly blessed. Both their rate of surplus value and their rate of profit have increased as a result.

Since the amount of profit is determined by the amount of surplus labour, capitalists will continually attempt to increase the length of the working day in an attempt to increase surplus labour. And they are also obliged to resist attempts of workers to reduce the length of the working day. This conflict is a fact of life of capitalism and is supported by empirical evidence of the actual conflict over the length of the working day throughout capitalism.

The class struggle is not an invention of the Soviet Union in the cold war as one Trade Union leader once remarked (Lord Morris) but is a real and an incontrovertible fact.

b). Increasing the rate of exploitation and profit

Another attack on the working class is the employer's drive to increase both the rate of exploitation and the rate of profit by getting the working class to expend more energy in a given time. This is achieved by speeding up the process of production and by the use of new technology.

In 1983 an architect could produce a set of working drawings for a new four-bedroom house in three days by laboriously drawing with pen, ink and scale rule and then making dye-line copies to be given to the builder to construct from. In 2011 the same architect can produce the same set of drawings in a day with the use of computer aided design and send them to the builder via the internet.

The result of this kind of process is that within a certain given period, the amount of socially necessary labour is cut down as proportion of the total socially necessary labour time.

Of course, there is now the IT consultant to repair the computer when it fails to work; the expensive ink and software for the AutoCAD and so on.

For the capitalist class the most important method of increasing the rate of exploitation is by increasing the pro ductivity of labour.

If increased productivity means that consumer good (or wage goods) need less labour time to produce then a worker will reproduce his value in a smaller proportion of the working day.

That leaves a bigger unpaid portion.

Or increased productivity will mean a smaller amount of labour time needed to produce the machinery necessary for producing wage goods and basically the same result will come about.

Whereas capitalism's economists produce fallacious theories to explain profit, Marx's explanation of profit from the exploitation of the commodity, labour power holds true.

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Object and Declaration of Principles


The establishment of a system of society based upon the common ownership and democratic control of the means and instruments for producing and distributing wealth by and in the interest of the whole community.

Declaration of Principles


1. That society as at present constituted is based upon the ownership of the means of living (ie land, factories, railways, etc.) by the capitalist or master class, and the consequent enslavement of the working class, by whose labour alone wealth is produced.

2. That in society, therefore, there is an antagonism of interests, manifesting itself as a class struggle, between those who possess but do not produce and those who produce but do not possess.

3.That this antagonism can be abolished only by the emancipation of the working class from the domination of the master class, by the conversion into common property of society of the means of production and distribution, and their democratic control by the whole people.

4. That as in the order of social evolution the working class is the last class to achieve its freedom, the emancipation of the working class will involve the emancipation of all mankind without distinction of race or sex.

5. That this emancipation must be the work of the working class itself.

6. That as the machinery of government, including the armed forces of the nation, exists only to conserve the monopoly by the capitalist class of the wealth taken from the workers, the working class must organise consciously and politically for the conquest of the powers of government, national and local, in order that this machinery, including these forces, may be converted from an instrument of oppression into the agent of emancipation and the overthrow of privilege, aristocratic and plutocratic.

7. That as all political parties are but the expression of class interests, and as the interest of the working class is diametrically opposed to the interests of all sections of the master class, the party seeking working class emancipation must be hostile to every other party.

8. The Socialist Party of Great Britain, therefore, enters the field of political action determined to wage war against all other political parties, whether alleged labour or avowedly capitalist, and calls upon the members of the working class of this country to muster under its banner to the end that a speedy termination may be wrought to the system which deprives them of the fruits of their labour, and that poverty may give place to comfort, privilege to equality, and slavery to freedom.