The Third International after Lenin

Thursday, January 27, 2011

Against the theory that US workers are bribed through the super-profits of imperialism.

A pamphlet from The New Voice group argues against the theory that US workers are bribed through the super-profits of imperialism.


The New Voice

Imperialism Today: An Economic Analysis

December 1973


Imperialism & the Working Class

Will U.S. workers fight U.S. imperialism? Is there a material basis for this struggle? These questions must be answered in detail, because some people in the movement are distorting the nature of imperialism. They state or imply that the U.S. imperialists derive most of their profits from the colonies whose economies they control. Furthermore, U.S. workers are said to receive a “bribe” consisting of part of these colony-derived profits, rather than being exploited. If this were true, then the great slogan “Workers and oppressed peoples of the world, unite!” would have no basis in reality. Unity between classes requires that they share a common material interest. So let us investigate these questions.

Where do the profits of U.S. capitalists come from? Do they come from outside the U.S., and from the colonies in particular, or are they still mainly extracted from” the U.S. working class? Overwhelmingly, the profits of U.S. capitalists are exploited from U.S. workers (wage and salary earners). In 1969, the sum of earnings on direct investments abroad, net interest income, and royalties and fees from foreign affiliates of U.S. companies totaled $9.6 billion. (Survey of Current Business, October 1970, pages 27, 33, 34). Unadjusted earnings excluding net interest, royalties and fees were $7.955 billion, and this was divided as follows:
–from other developed capitalist countries, $3-971 billion, or 50%
–from underdeveloped, colonial countries, $3.747 billion, or 47%
–from unallocated international sources (for example, shipping), $237 million, or 3%. (Same source, p. 27).

On the other hand, corporate profits in 1969 of U.S. non-financial corporations amounted to $73.8 billion before taxes and an estimated $39.2 billion after taxes. (Survey of Current Business, July 1970, p. 41).

In short, overseas profits on investment amounted to about $9 billion, while domestic profits on investment amounted to $40 billion. Furthermore, foreign profits from developed countries outrank profits from underdeveloped colonies.

Let us now get behind these summary dollar figures. On the table on page 2 [not reproduced here – EROL] a number of U.S. corporations are described according to where their production facilities are located in the U.S. and outside it, in other developed capitalist countries and in colonies.

Three-quarters of the factory space of General Motors is in the U.S. and only one-fourth in other oountries. Only 18 of Goodyear’s 96 plants are in the colonies. And so on it goes down the roster of U.S. corporate giants. These corporations, which were deliberately chosen to represent not an average business but the largest corporations most heavily involved overseas, still have the majority of their production facilities in the United States. (Oil is an exception.) And where information is available, the overseas production facilities are shown to be primarily in other developed capitalist countries, and only partially in underdeveloped colonies.

Some object that because of cheap wages in colonies, profits on investments there are larger, a fact which would not be reflected in production facility statistics. However, the wage level is only one factor in determining profits. Another factor is the productivity of the workers. The higher the productivity, the less of their working day that goes into producing the equivalent of their basic needs. More of their working day goes into producing surplus-value for the businessman. Productivity is mainly determined by the level of technology. In Marxist terms, the relative surplus-value is higher. The type of industries to be found in the colonies is labor intensive and has a low productivity. For example, the statistics for General Motors’ car and truck production are calculated for the final assembly lines. But the engines assembled into cars in Brazil are not made in Brazil; this higher technology process, the forges and foundries, remain in the United States and other developed countries. Then the engines and other parts are shipped to Brazil for assembly. Similarly, in the electronics industry, a company like Motorola makes the basic integrated circuits and transistors in places like Phoenix, Arizona. The basic parts are then shipped to Seoul, South Korea for assembly into finished radios and other products pretty much by hand.

The two factors, cheaper wage rates but lower productivity, must both be taken into account. And, in fact, the rate of return in 1969 on manufacturing investments by U.S. corporations was as follows:
–in the U.S. 12,6%,
–in other developed countries, 12.9%
–in underdeveloped countries, 12.7%. (Survey of Current Business, October 1970, p. 32)

To sum up, the majority of profits of U.S. corporations are sweated out of U.S. workers, and profits overseas come from both developed and underdeveloped countries. The October League, for example, is wrong when it says that “the aggressive nature of imperialism has driven it around the world in search of superprofits from the labor of the world’s peoples.” (The Call, May 1973, p. 14) Other, more fundamental reasons have driven the U.S. businessmen around the world. So, too, the Revolutionary Union is wrong when it says, “The U.S. ruling class not only exploits our own working people; it extends its exploitation throughout the world by a system of imperialism. Its oppression is most vicious in Asia, Africa, and Latin America, where large U.S. corporations extract, at the point of a gun, super-profits from super-exploitation.” (The Red Papers, p. 3)

The theory which places main emphasis on super-profits is not true, hides the exploitation of U.S. workers, and does not state the real drives behind the global activity of U.S. corporations and the U.S. government.

Investigation of the origin of profits of U.S. businessmen has proved that U.S. workers have a material interest in opposing U.S. imperialism. This material interest can be measured in tens of billions of dollars and the toil of which they are the product.

Most U.S. business profits are extracted from U.S. workers, not colonial populations. The “cheap labor and superprofits” theory of imperialism has been shown to be false. What, then do U.S. companies get out of the colonies? The major reason for holding underdeveloped countries as colonies remains what it was when Lenin first analyzed imperialism–for assured supplies of raw materials. The Rockefeller companies go to Venezuela for oil (standard Oil) and to Guatemala for bananas (United Fruit); Firestone holds Liberia for rubber supplies; Phelps-Dodge gets copper from Peru.

The problem is not a lack of oil, rubber, or copper in the world to meet “our” needs. There is more than enough; but each monopoly needs an assured supply of its raw materials. If it does not have this supply, it can only go to a competitor to buy them–and the price charged will drain away most of the profit of the business. For example, when Morgan brought together a number of steel companies into the U.S. Steel monopoly in 1901, it controlled most of the iron ore supplies in the United States (e.g., the Mesabi range). Other companies like Bethlehem Steel had to go overseas for iron ore of their own.

“The principal feature of the latest stage of capitalism is the domination of monopolist combines of the big capitalists. These monopolies are most firmly established when all the sources of raw materials are captured by one group, and we have seen with what zeal the international capitalist combines exert every effort to make it impossible for their rivals to compete with them by buying up, for example, iron ore fields, oil fields, etc.” (Lenin, Imperialism, The Highest Stage of Capitalism, Peking edition, p. 98).

The natural place for other companies to go for raw materials was undeveloped colonies. They had the resources but were not using them in any industry of their own, and they could be dominated by the superior power of the policemen of the world, the governments of the economically most powerful countries, which did the bidding of the monopolists.

About the time that small-scale capitalism developed into monopoly capitalism–around 1870 to 1900–the capitalist powers grabbed the less developed, pre-capitalist areas of the world. France took over Indochina in the 1870’s and 1880’s; Britain, France, and Germany carved up Africa. The United States government fought imperialist wars of aggression in Cuba and the Philippines. The scramble became so frenzied that the government grabbed a colony first and then evaluated its resources second–simply to prevent another power from getting it. Some areas became important because transport to and from other colonies had to cross through them–for example, the Middle East, which lies between capitalist Europe and India and south Asia. Underlying this wave of colonial appropriation was the need of every big business to assure itself a supply of raw materials and to squeeze its rivals out if at all possible.

The imperialists have a vested interest in preventing the industrial development of these colonies (whether along socialist or independent capitalist lines). If the colonies were to industrialize, they would take back their own natural resources; furthermore, they would become unwelcome new industrial competitors among the existing developed countries. Forcible prevention of development Is the major form of oppression of the colonies. The colonial peoples are coming to realize that they cannot make a better life for themselves until they kick out the imperialists. First the imperialists must be ousted from Vietnam, the Philippines, Latin America, etc., before these people can go on to settle their internal problems and develop a better standard of life.

To see that resource control, not manufacturing, is the major reason for imperialist oppression of the underdeveloped countries, let us look at the direct private investments by U.S. companies in the world. As Table 2 [not reproduced here – EROL] for 1970 shows, investment in underdeveloped colonies is directed to mining and smelting, and pumping oil– extraction of raw materials. A small part (26%) is directed to manufacturing. On the other hand, when U.S. companies do set up overseas manufacturing operations, they are in other capitalist countries. The amount of U.S. direct private investment in manufacturing in other developed countries outranks similar investment in colonies by $26 billion to $5 billion.

This picture is confirmed by the worldwide distribution of wage and salary earners in manufacturing. In 1964 there were 66 million such workers in the developed capitalist countries but only 19 million in all the underdeveloped colonies. (Year Book of Labour Statistics, ILO, Geneva, 1964). Business profits are derived from the exploitation of wage and salary earners, and they are in the developed capitalist countries.

There is some capital invested in manufacturing in the colonies. It tends to go into labor intensive industries. These industries are a fringe part of contemporary capitalism. There is more competition and less monopoly in them. Large-scale application of high-level technology is not used, so there is little danger of industrializing the colony in the course of exploiting some of its people. (See a later section of this pamphlet for further discussion of this question.) That is why we see shirts from Taiwan and kitchen utensils from Hong Kong in the stores. But as part of any scientific, overall summary of the facts, these prominent examples are totally unrepresentative.

There is a sizeable export of capital, especially to other developed capitalist countries–over $53 billion. Along with the search for monopolized supplies of raw materials, the export of capital is one of the two main reasons for the drive of U.S. corporations overseas. In all the major Industries, a handful of large corporations control most of the production. To increase their profits they restrict production and jack up the price. Monopoly is the artificial creation of shortages in order to hold up the community for superprofits.

Where are these profits to be reinvested? Not much can be used to expand production in the home industries, because restriction of production is the foundation of the whole system. An outlet must be sought elsewhere. Especially since World War II, U.S. companies have been exporting capital to Europe and other capitalist areas.

The export of capital hurts the wage rates of U.S. workers. Capital exported instead of being reinvested within the country means less demand for labor. This puts workers in a worse bargaining position to fight for higher wages and better working conditions. U.S. workers do not gain by imperialism; they lose, and they have a material Interest in destroying the monopoly capitalist system which requires export of capital.

Some persons. however, comparing the living conditions of U.S. workers and colonial peoples conclude that U.S. workers must be getting some benefits from Imperialism. It is certainly true that life expectancy, literacy rates, meat consumption, etc., are higher in the U.S. than in the colonies. Why? Because the U.S. is more industrialized, the productivity of labor is higher, and U.S. workers have, in struggle, kept up a share in the gains” of an increasingly fruitful apparatus of production. Higher productivity means that the working class can reproduce its food, shelter, clothing, and other needs in a shorter portion of the working day. More time is left for the production of profits for businessmen, embodied in goods workers do not directly or indirectly consume. If productivity is growing, it is possible for workers to have a higher standard of living while the businessmen exploit more surplus-value than with lower productivity. But businessmen do not pay wages any higher than they are forced to; U.S. workers’ struggle has turned the possibility into the fact. The difference in productiveness, not any transfer of colony-based profits as a “bribe”, explains the difference in living standards between U.S. workers and peasants in Ecuador or Thailand, etc.

The struggle between workers and business in the United States is a sign of the internal contradictions in U.S. capitalism. These contradictions can develop without first requiring that some “bribe” from overseas colonial operations and paid to U.S. workers (!) be exhausted.

U.S. corporations, we have seen, derive most of their profits from U.S. workers, and imperialism (monopoly capitalism) heightens the exploitation of U.S. workers. How can such a system of artificial scarcity, unemployment, unused productive capacity, war and crisis be put over on the workers? There are basically two tools that any ruling class uses, force and fraud.

Of these, the major weapon is fraud or systematic mis-education of the masses. For when the truth grips the masses, they cannot be stopped; the force which a minority ruling class can muster against a clear-sighted population is like a straw in a tornado. On the other hand, if the masses can be mis-educated, taught that things can be no better, channeled into ineffective methods of trying to change the system, or demoralized, then force can be applied locally against isolated outbreaks and as a terror device. But force and fraud are the two tools of rule–it is obviously impossible to bribe the majority of the people from which the privileges of the ruling class are sweated out. As most U.S. profits are derived from U.S. workers, who compose the bulk (over 85%) of the population of this country, there can be no “bribe” of most U.S. workers.

However, it is necessary to have a machinery of fraud to mis-educate and mislead U.S. workers. The expense of this political and ideological machinery can be borne by monopoly capitalism. This is the truth which Lenin taught in his thesis on the “aristocracy of labor.”

Lenin always recognized that “The extent to which monopolist capital has intensified all the contradictions of capitalism is generally known. It is sufficient to mention the high cost of living and the tyranny of the cartels.” He spoke of “huge, monopoly capital, which operates under conditions in which the masses of the population live in want...”

“As long as capitalism remains what it is, surplus capital will be utilized not for the purpose of raising the standard of living of the masses in a given country, for this would mean a decline in profits for the capitalists, but for the purpose of increasing profits...” “Where, except in the imagination of sentimental reformists, are there any trusts capable of interesting themselves in the condition of the masses instead of the conquest of colonies.” (Imperialism, The Highest Stage of Capitalism, Peking edition, pp. 150, 40, 73. 99).

But Lenin also said that “it is possible to bribe the labor leaders and the upper stratum of the labor aristocracy.” (p. 9). These labor leaders are the functionaries in the machinery of fraud needed to mis-educate and mislead workers in their struggle against monopoly capitalism. Perhaps the most specific and concrete description Lenin gave of these persons was in his essay “Imperialism and the Split in Socialism.” There he wrote,

“Lucrative and soft jobs in the government or on the war industries committees, in parliament and on diverse committees, on the editorial staffs of ‘respectable,’ legally published newspapers or on the management councils of no less respectable and ’bourgeois law-abiding’ trade unions–this is the bait by which the imperialist bourgeoisie attracts and rewards the representatives and supporters of the ’bourgeois labor parties.’” (Collected Works, volume 23, P. 117).

Lenin then goes on to explain that these persons are part of the “mechanics of political democracy” under capitalism. A system of fraud is necessary; “it is impossible to make the masses follow you without a widely ramified, systematically managed, well-equipped system of flattery, lies and fraud...” (same article as translated in Collected Works, volume 19, International Publishers, 1942, P. 348).

“And how this little sop is divided among the labor ministers, ’labor representatives’ (remember Engels’ splendid analysis of the term), the labor members of war industries committees, labor officials, workers belonging to the narrow craft unions, office employees, etc., etc., is a secondary question.” (volume 23, p. 115; emphasis added).

We see that Lenin mentioned the old trade unions, the craft unions. They were organized on the basis of restricting entry into skilled trades more than upon unity of all workers in an industry. Lenin always pointed out that this stratum was a minority; in his days the great masses were not organized in trade unions; today, many remain unorganized, while in industries like steel and auto there are industrial unions. Also, “office employees” were a small group in Lenin’s day, often under the illusion that they were close to the owners. Today, white-collar workers are a majority of the working class with few illusions of being in line to become capitalists. For the rank-and-file strata, Lenin’s references to the masses, not to the labor aristocracy, apply.

Thus, the possibility of a material bribe for more than a small minority of the working class is out of the question. The duty of the most consciously hired hacks– top bureaucrats of trade unions, men who serve on Pay Boards and make up the AFL-CIO Executive Council, the liaison men between Jay Lovestone and the CIA and the State Department, etc.– is the duty of misleading the workers, of enveloping them in “flattery, lies and fraud.” As a result of this fraud, the labor movement divides into two currents, “the revolutionary mass stream” and “the opportunist-petty bourgeois stream.” (volume 23, p. 119). The first stream is always the majority:

“Neither we nor anyone else can calculate precisely what portion of the proletariat is following and will follow the social-chauvinists and opportunists. This will be revealed only by the struggle, it will be definitely decided only by the socialist revolution. But we know for certain that the ’defenders of the fatherland’ in the imperialist war represent only a minority.” (p. 120).

Always it is true that “while trusts, the financial oligarchy, high prices, etc., permit the bribing of small upper strata, they at the same time oppress, crush, ruin and torture the masses of the proletariat and the semi-proletariat more than ever.” (volume 19, p. 347).

In order to connect this question with the question of racism, the following calculation may be made: if the opportunist-petty bourgeois stream represented as much as ten per cent of the working class, and if this stream were lily white, then the overwhelming majority of the revolutionary mass stream of the working class would still be white. Only ten to fifteen per cent of the U.S. working class is nonwhite; therefore, eight out of nine exploited, unbribed, untouched workers– workers who perform absolutely no political function in the machinery of fraud as do the labor politicians–would be white. Class lines are primary.

The attempt to portray class lines as less important than, or coinciding with, color lines is a racist, capitalist falsehood.

Finally, we see that the basic force we must rely on is the U.S. working class. There is no choice necessary between revolutionary people in the colonies and in the U.S. They have a common enemy in U.S. Imperialism. The theory sometimes voiced or implied that we must wait until all the colonial peoples have won liberation before class contradictions in the United States will develop is false. This is a petty bourgeois theory of imperialism. It is betrayed in 95% of the activity of the Revolutionary Union, the October League, and other groups of a similar opportunist nature; this activity concentrates on the “united front against imperialism” and the struggles of external and “internal” colonies to the point of denying that the main contradiction within the United States is the contradiction between the working class and the monopoly capitalists.

This approach is false because 1) there is no bribe for the bulk of U.S. workers, financed out of profits from the colonies. On the contrary, most U.S. corporate profits are sweated out of U.S. workers. 2) The contradictions of monopoly capitalism are intense, multiple, and may quite possibly reach the point of crisis within the United States first. The dollar crisis and contra-dictions between the U.S. and other imperialists, the parasitic and decayed nature of the society under monopoly, the movement which the attempt to suppress a single colony(e.g., Vietnam) can give rise to, and the struggle over the standard of living–all these tensions are developing. No simple sequence exists which requires the victory of the national liberation struggles first and only then the intensification of class struggle in the U.S.

Instead, any particularly sudden and sharp event or conjunction of separate events may cause a revolutionary crisis. Therefore, we must conduct all-around education and organization among the working class, and not subordinate this integral activity to a single aspect, to waiting for and giving a small helping hand to one or another national liberation struggle. Nor should we set up a timetable of tasks based on the outcome of these struggles.

A liberal in England, Hobson, saw no force capable of counteracting imperialism. Some persons today rely almost entirely on the colonial peoples as the counteracting force. But Lenin said, ”Hobson, the social-liberal, fails to see that this ’counteraction’ can be offered only by the revolutionary proletariat and only in the form of a social revolution.” (volume 23, p. 110).



Where Do Profits Come From?

The left wing movement in the U.S. admittedly has a lot of problems. First of all, they have to deal with the most powerful (at least superficially) of the imperialist countries. Secondly, imperialism is a most complex economic and political system. Being complicated, this makes it easy for the ruling class to fool present and potential opposition by the use of deliberate fraud. This fact leads to the principal problem of the left in this country–understanding how the system of imperialism operates.

Imperialism is basically an economic system. As Lenin says, it is capitalism in its monopoly stage. Hence, such terms as profits, wages, or exploitation, refer to economic phenomena. This point should be kept in mind. Exploitation refers to the economic sphere not to military or political suppression. In order to understand imperialism it is necessary to understand economics. Marxism-Leninism is the only rational scientific approach to economics. It is the only approach which describes how the imperialist economic system operates. Basically, there are only two approaches to economics or any other discipline: the capitalist approach and the working class approach (Marxism-Leninism).

Capitalist economics (economics from the businessman’s point of view) is the economics that is taught in the schools and universities. It is the economics that is used by newspapers, TV commentators, government officials for propaganda purposes, etc. Consequently, businessman’s economics is the only one that the average person comes in contact with. Very few people are familiar with M-L economics. This statement applies to the left as well. Namely, many people on the left are unfamiliar with M-L economics. They might be familiar somewhat with what Lenin said about the state or what Mao said about dialectics. But many leftists and leftist groups have not understood and/or read Marx’s “Capital.” Since these people are unfamiliar with working class economics, they draw on the only economic analysis they are familiar with–businessmen’s economic analysis. Thus capitalist systems of fraud are smuggled into the working class movement by working class theoreticians who quite often have the best of intentions.

One of the theories that has been developed by the capitalist economists to deceive the working class is the theory that workers in imperialist countries are conservative because they have been bought out by the businessmen (or as some phrase it–by the system). This theory was strong in the student movement (S.D.S.) a few years ago. The right wing of S.D.S. put forward the theory that the wage and salary earners were conservative and were the main support of Imperialism, while the well-to-do students (who would become professionals and managers) were the new revolutionary class. The capitalists acted to support this theory by staging “hard hat” demonstrations in opposition to the student anti-war activities.

Well, there is another variation of this anti-working class theory going around. This theory is not only being spread among students but is making headway among certain segments of militant workers. This variant of the theory goes approximately as follows:

The entire working class in imperialist countries is bribed to support the operations of the system, both at home and abroad. The capitalists get the money for these bribes from their exploitation of the people and resources in the underdeveloped countries.

This theory assumes that most (if not all) of the profits of the businessmen of an imperialist country are made from the labor of the people and/or the natural resources of the colonies. Also, since all the workers of an imperialist country are bribed by some of the profits derived from the colonies, workers benefit economically from imperialism. Thus, imperialism is in the interest of the workers in the imperialist country. Or to put it another way, workers benefit from the operation of capitalism in its monopoly stage (Lenin’s definition of imperialism). This means that both workers and capitalists benefit from monopoly capitalism, and hence class conflict disappears. Therefore one of the bases of Marxism-Leninism, the recognition of the class nature of society, along with the irreconcilability of the economic interests of these classes, is repudiated. Consequently, this theory is anti-Marxist-Leninist in an obviously liberal way. (The liberal denies the existence of classes, or at least of irreconcilably antagonistic classes. The state is a neutral body standing above society reconciling the differences between individuals or groups, and even classes if you believe they exist.) This is a particularly clear illustration of how a superficially ”radical” theory, on closer examination turns out to be purely liberal, and hence, objectively speaking, pro-imperialist. This is what comes of not studying Marxism-Leninism in a serious way. What one is left with then (in the absence of M-L theory) are vaguely conceived socialist aspirations combined with petty bourgeois (i.e., liberal) theory. If liberal theory is not replaced by M-L theory, then one is left with the liberal theory he has been taught in this country. In the modem world, your theory is either working class (M-L) or capitalist, there is no third (non-political, above-class, or non-class) path or theory.

Of course, denouncing the “all workers are bribed” theory is not enough. It must be shown what the correct solution is. Thus it is necessary to show where profits do come from, as well as where they do not come from.

The total output of a society, in goods and services, is divided among the different classes in that society. (A TV would be a good, while TV repair would be a service.) The wage and salary earner gets part of this total output in the form of wages and salaries; the landowner gets his part in the form of rent; and the businessman gets his out in the form of profits (which includes interest}. Thus profit refers to the part of the total output of society that is taken by businessmen. Now, note that profit refers to (a part of) the output of goods and services which are a product of labor. That is to say, this output of goods and services is produced by the labor of the wage and salary earners. (The output of independent craftsmen and small farmers is ignored here. Their output is quite small in the U.S.) Also profit is not money. Monetary forms merely represent the relative magnitude of such things as profit. Therefore profit is the product of labor, and represents specific goods and services.

Incorporated in this concept (of “bribery” of workers in the imperialist country) is the idea that profit is gained only or mostly from the people and resources of the colonies. Is this fact true? No, it is not. Very little of the profits of the imperialists is gotten from the exploitation of the labor of the people or the resources of the colonies.

Profit (the principal form of economic surplus produced under capitalism) comes from or is produced by the wage earner who works for the businessman. Economic surplus is produced by the productive labor of people. Under capitalism, the productive labor that produces economic surplus is wage labor, the labor of wage and salary earners. Of course, all the output of the productive labor of wage and salary earners is not economic surplus. Part of the labor force’s productive effort goes to produce wage goods. Wage goods are defined as all goods and services consumed by the wage earning class. The amount of goods and services (the standard of living) of the wage earners is culturally determined. It is determined by: (1) the history of the class struggle, and (2) the level of economic development in each country.

The goods and services produced for the wage and salary earners are subtracted from total production. What is left is called the economic surplus. The labor that is used to produce the economic surplus is called surplus labor. The labor that is used to produce the wage goods is called necessary labor. It is called necessary labor because it 1s the amount of labor necessary to support the working class so that it is possible to produce an economic surplus. (See Marx, Capital, Vol. I, Ch. 9.)

The relation between the necessary labor and the surplus labor, Marx calls the degree of the exploitation of labor-power. Degree of exploitation = Surplus labor/Necessary labor or s/v.

Let us take a look at this from the level of the individual capitalist enterprise. Assume that the capitalist employs a certain number of workers for eight (8) hours a day. Let us also assume that four (4) hours are necessary labor and four (4) hours surplus labor. The workers work half their time for themselves (the equivalent of producing the wage goods themselves) and half their time to produce the capitalist’s profit. (For our purpose let’s assume all the surplus takes the form of profit.) The businessman’s profit is produced by the labor of wage and salary earners. It is not produced for them by farmers (including peasants) or small businessmen.

The next question to consider is what determines the proportion of labor of the wage and salary earners that is devoted to the production of (1) wage goods, and (2) surplus product (the things profits are spent for). There are two principal factors: (1) the standard of living of the wage and salary earners in that country at that time, and (2) the level of industrial development of the country.

In an industrialized country it may only take four hours a day of average labor to produce the wage goods. This would leave four hours a day for the production of the businessman’s profit. Advanced technology (along with greater skills) is what increases the productivity (the output) of a given amount of labor.

In a non-industrialized country, it usually takes a great deal of labor to produce even the wage goods of their low standard of living. Here, a proportion of six (6) hours for the wage goods and two (2) hours for the businessman’s profit may not be inappropriate in most cases. A smaller proportion of the workers’ time is spent providing a surplus when the workers are working with a primitive technology.

Recently, of course, imperialist businessmen have been training and employing workers in colonies in a phase or step of a highly mechanized production process. They have been employed in the labor-intensive end of the operation. In effect, imperialists have been able to import the cheap labor of the underdeveloped country into the productive process of the highly industrialized countries. Therefore, to a limited extent, businessmen are able to make a high rate of profit (that is appropriate to an industrialized labor force) off the labor of laborers of an underdeveloped country.

They have been able to do this mostly because of the development of modern air transportation on those goods that are light and have little bulk (e.g., electronic equipment). The scope for this kind of development is obviously limited. A very small proportion of the total output of Imperialist countries is produced with the labor of people in the colonies.

Despite this development, the great majority of the laborers who produce profits, are in the industrialized countries. And the businessman, on the average, makes more profit on the labor of each worker in the industrialized countries than in the underdeveloped countries. He does this (1) because the proportion of surplus labor to necessary labor is usually greater in the industrialized country and (2) because the amount of surplus produced per hour of labor is greater in industrialized countries.

Even though the great majority of the businessman’s profits is made on the labor of the working class in the capitalist countries, there is still a greater profit made on investments in underdeveloped countries than might be expected (given the information of the past few paragraphs).

The principal reason imperialists have taken over colonial countries is to make use of their raw materials. Access and control of the raw materials that are a necessary component for the production and sale of their product is an absolute necessity for certain monopoly capitalist firms. They can be driven into bankruptcy or bled white by competitors if they do not control their raw materials. Raw materials are more easily monopolized and hence more important in some industries and less in others. They are more important in the steel, aluminum, and oil industries, than they are in the automobile and machine tool industries, for example.

Once these monopolists control their raw materials, they are not only safe (in this regard) from the attack of their competitors, but are generally in a monopoly position in regard to the people or firms who buy their product. The purpose and effect of a monopoly is that profits and usually prices are above the normal. Those higher than normal profits are gained from (1) the transfer of part of the profits of less favorably situated firms (on the average, profit rates are positively correlated with asset size); and (2) a transfer of income (largely from wage and salary earners) through the higher price charged. This is an indirect way of increasing the rate of exploitation of labor power by increasing the surplus labor and decreasing the necessary labor (i.e., by decreasing amounts of wage goods acquired).

To summarize the latest point, the above average profit apparently gained in the colony was really produced in the imperialist country. It was just an accounting manipulation and convention that shows the extra profit as earned in the colonies.

An example of profit being generated in the industrialized country and then being attributed to the colony can be taken from the petroleum industry. The oil industry has been dominated by a cartel (made up of the biggest oil firms) for quite some time. This cartel shared out markets, controlled production, and set prices. These prices were high enough to realize all the profit the cartel thought they could get. In the cartel’s accounting system, most of the profits are allocated to the crude petroleum phase of the process. For example, in 1954, Standard Oil of New Jersey showed only 3 and a half percent of their profits as coming from the refining and distributing (including most transportation) phases of the operation. These two phases use the overwhelming majority of the labor involved in the petroleum industry. This reflects the way the cartel manipulates the accounting system.

The basic price which the cartel controls is the price of crude. The price is set high enough so that the less efficient major producers can make a reasonable profit. (This is the Texas-Gulf Coast field.) All the other cheaper producers would make a greater profit.

“Their (the cartel’s) costs were closely guarded secrets, but the U.S. Department of Commerce in 1946 estimated that Arabian crude cost 30 cents a barrel, and Venezuelan 50 cents, against $1.85 for Gulf Coast crude. At that time Texas crude was selling for $2.65, and that price governed the world price. In 1955 the United Nations Economic Commission for Europe put the Arabian cost of production at 35 cents a barrel.

“In 1955, the Gulf Coast price was $2.90, and foreign oil had gone up proportionately. The differential in favor of Arabian and Venezuelan crude was absorbed in profits, of course, and not passed on to consumers.” (Harvey O’Connor, The Empire of Oil, pp. 219-220.)

“Jersey derives roughly a third of its golden flow of profits from Creole petroleum, its subsidiary in Venezuela, a third from the Near East, and a third from domestic operations, principally through Humble Oil and Refining,” (1960). (Harvey O’Connor, World Crises in Oil, p. 7.)

Superficially, it appears that most of the profits of Standard Oil of New Jersey come from underdeveloped countries like Venezuela and Iraq. According to Jersey’s books, this is so. But as we know, the superficial view is false. The accountants arbitrarily assign the profits to whatever phase of the operations they want to. Actually most of the labor involved in the discovery, production, and distribution of petroleum products is in the refining and distribution end of the process. But the accountants assign most of the profits to the production of crude. And most of the profits in crude are assigned to the operations in underdeveloped countries.

The cheapness of the cost – of production in colonial countries does not come from the cheap labor but from the ease with which the oil is extracted. A gift of nature has been capitalized through monopoly. But this does not mean that the profit has been made in the colonial countries. Just the opposite in fact, since we know that profit can only be produced by labor. And to repeat a point made earlier, the large profits that the oil monopolists attribute to their colonial operations are really made from two sources:

(1) The principal source is a transfer of Income from the wage and salary earners to the monopolists by charging higher prices (monopoly prices). By charging higher prices, they are able to pick the worker’s pocket of part of his Income that was supposedly part of his wage goods. But with less income remaining, he is able to buy fewer wage goods. Consequently the effect is the same as a lowering of necessary labor (V) and a raising of the proportion of surplus labor (S), for all workers who purchase petroleum products or products that are made with petroleum either directly or indirectly. In other words, the rate of exploitation (S/V) of the workers of the imperialist countries is Increased through the cartel’s monopoly.

(2) A second source of the above normal profits (and a far less important one than the first) is a transfer of part of the profits from less favorably situated firms to the petroleum firms. Remember, on the average, profit rates and asset size go together.

Another way of trying to attribute the source of most of the profits of imperialist businessmen to the colonies is to try to attribute the profit to the raw material itself. We will again use the petroleum industry as our example.

Some capitalist theorists claim that the profits are largely created by the petroleum itself. This is similar to the theory that land creates rent and capital equipment creates profit, rather than labor creating both. The only reason given for such contentions is that if it were not for the petroleum there would not be any profits in the petroleum industry, just as there would not be any rent if there were no land. And since petroleum is owned by some families, they should be paid (profit) for allowing society to use their oil, just as the landlords are paid (rent) for allowing their land to be used.

Of course, petroleum and land do not create profit and rent. Private ownership (i.e., monopoly) created profit and rent. They are monopoly Incomes. Further, these incomes do not represent additions to total output, but deductions from the income of the workers who produce food on the land and fuel and lubricants from the petroleum. Profit, interest, and rent are merely bribes paid to owners to allow society to produce and live. To summarize, profit is the product of labor and not of inanimate or non-human objects.

The theory that all workers in imperialist countries are bribed by profit gained mostly in the colonies is false. It is false if profit or surplus value, is produced by the labor of wage and salary earners. The wage and salary earners in the underdeveloped countries are a small percentage of the wage and salary earners in the imperialist countries. Secondly, productivity in relation to living standards (their rate of exploitation) is usually lower in underdeveloped countries than it is in the Imperialist countries. Thirdly, the productivity of an hour of labor spent in producing surplus (profits) is significantly higher in industrialized countries. Consequently, the overwhelming majority of the imperialist businessman’s profits are made on the exploitation of its wage and salary earners in the imperialist country itself. It is a much higher proportion than the 60 to 65 percent shown in the usual corporation and government statistics. And it is higher for the reasons detailed earlier in the article.

A reader might ask, why all this hubbub about where profits come from? What difference does it make? It makes a lot of difference. Many pro-imperialist theories and rationalizations can be deduced from the “all the workers are bribed” theory. Here are a few of the most important.

As mentioned in the first part of this article, this theory supports the imperialist’s contention that all classes in capitalist countries benefit from the imperialists’ exploitation of colonies. And since they benefit from it economically, workers ought to go out and fight to hold and expand the imperialist system. The only basis that the “bribery” theory leaves for opposing imperialism is a moral basis. And this is no basis at all. As all Marxists-Leninists know, there is no “morality” Independent of class (i.e., economic class Interests). This above-class morality is another instance of the petty-bourgeois, liberal, pro-imperialist basis of this “bribery” theory.

Another theory that flows from the “all workers are bribed” theory is the idea that workers cannot successfully oppose businessmen and their system of imperialism until all the colonies have won their independence and consequently the imperialist businessmen have no more profits with which to bribe the workers. Then, presumably, the capitalists would have to reduce the standard of living of the workers down to one like the peasants and workers in the colonies (used to have) in order to make a profit. Then and only then would the economic interests of the workers become opposed to that of the capitalist class. This theory, as we have previously shown, is wrong at every point.

But what is particularly bad about this theory is that it says successful opposition to or class struggle with the businessman is hopeless during the present era. Only after all colonies are free will a sufficient number of workers join a struggle against the businessmen. This theory leads to defeatism and lack of struggle. Consequently, we would expect any group which adhered to this theory to be characterized by little participation in class struggles.

In conclusion, the “bribery” theory is reactionary because it abandons the working class to the businessman, and claims that imperialism is in the economic interests of the working class. This is false. Actually imperialism is very much against the economic interests of the working class of the imperialist countries. As a result of the exploitation of the colonies, they get lower wages, higher unemployment, and many get killed or wounded in defense of imperialism. Therefore, it is in the economic interest of the wage and salary earners of all countries to oppose imperialism now.


http://www.marxists.org/history/erol/ncm-2/nv-imp./section-2.htm

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