Introducing the Question of Profit

The existence of profit under socialism is a question with surprising relevance and longevity. It is a question which has been answered time and time again, with consistent results, yet it continues to be asked as though this long history doesn’t exist. Moreover, it remains relevant and pressing. It is a present, pertinent issue which must be as resolutely answered today as it has been throughout history. All sorts of distortions assert that profit is immortal, that it is an immutable element of civilisation that will necessarily exist in the next mode of production. There are proponents of nationalisation who claim that state control over the means of production is socialism, or at least, will evolve into socialism.

Other elements take another approach. These marketeers seek to preserve the current system of commodity exchange that characterises contemporary capitalism, only seeking to shift private ownership from individual capitalists to the workers. Both dogmas necessitate profit. Nationalisation is often justified with the notion that the state will redistribute or more wisely spend profits through welfare programs, education funding, and the construction of infrastructure. The marketeers hold no qualms with commerce, which requires the allure of profit to function and grow. Thus, whilst these tendencies do a great deal of bickering amongst themselves, they ask the same question: “can profit exist under socialism?”

No.

First and foremost, let us ask: “what is profit?” The simple Marxist answer is that it is surplus value, and this is correct. The question then becomes “what is surplus value?” There is a vulgar vision of what surplus value is, and it is an incorrect view. This view is that surplus value is some sort of scam, that it is money being ‘ripped off’ from the workers/buyers. This is an intuitive approach, but it dissolves under scrutiny. A rip-off for consumers makes sense in isolated circumstances, for example, if a t-shirt is typically worth £20 but it is sold for £40 at a concert, this is a transparent markup. But this is only a scam because there was already a certain value to the commodity. We recognise that a £40 t-shirt is a scam because this price is far above what we expect a t-shirt to cost. However, under the vulgarised viewpoint, value itself is a scam; the £40 price is no more or less ‘fair’ than the £20. Under this view, the ‘true’ value of commodities is either subjective or concealed from consumers.

Such a viewpoint is followed by the Austrian School, the intellectual forebearers of neoliberalism. In contrast, the theory that workers are being ripped off is correct in the sense that their labour is being purchased for less than the value it creates, but this is the limit of their analysis. Notably, how this scam takes place is typically under-examined. Instead, the proponents of this theorem often appeal to ‘common sense’ arguments about the coercive powers of capitalism or an inverse of the buyer’s scam: that the capitalist, purchaser of labour power, has duped the workers into underselling themselves. Such arguments play neatly into the moral paradigm that words like ‘scam,’ ‘power,’ and ‘coercion,’ invoke, but don’t dig deeper than that. The vulgar materialist claims that capitalism depresses wages by perpetually threatening workers to sell their labour for less, and this is wrong. Whilst the threat of starvation is effective in coercing workers to sell their labour power, it ignores the fact that capitalism also requires buyers to purchase the products these workers create, and thus, cannot leave the majority of workers brutally impoverished. Doing so would eliminate the market needed to uphold the mass consumption inherent in modern capitalism. Rather, capitalism must leave workers impoverished enough that they cannot retire, homestead, or otherwise escape the market, yet not so poor as to prevent them from consuming. Additionally, the theory that capitalists are swindling workers by deceiving workers about the value of their labour is, on a systemic scale, impossible. We thus find that many modern analyses of surplus value are wrong for varying reasons. If surplus value is extracted from consumers, it would mean value itself is imaginary. As materialists, we reject the notion that economic laws are but the whims of capitalists. If surplus value is the product of artificially depressed wages, wages would be universally Spartan, and many capitalists would struggle to find consumers for their commodities. We thus see that these explanations are unsatisfactory.

Fortunately, Marx himself explained surplus value, and by extension, value itself, in a manner which coherently solves this problem without neoliberal or leftist handwaving. Essentially, the value of a commodity comes from the labour power utilised to create or harvest it¹. Timber receives its value from the labour power of the lumberjack, and the chair crafted from it derives its value from that of the carpenter’s. Labour power is the commodified form of labour, the commodity which capitalists hire with wages for a certain amount of time². Labour time, in turn, is the timeframe for which labour power is purchased³. The cost of labour power is calculated by what is required to replenish a worker after a given period of toil. The worker must be able to afford necessities such as food and shelter if they are to recover and continue labouring. A worker is paid based on the value of their labour power, but not their labour time, and this discrepancy is where profit originates⁴. This is because their payment only covers a portion of the time spent working⁵. For instance, if a carpenter requires £100 each day to meet their needs, and they can make a chair that costs £150 in two hours, then they can easily meet this requirement in less than two hours’ labour. Of course, a capitalist cannot profit from such an arrangement, so they instead keep the carpenter working for eight hours, thus producing multitudes more value than they hired the worker for. Thus, in terms of the value of labour power, no deception has taken place. The worker knows what funds they will need to replenish their labour power; they know what they will need to spend on food, water, shelter, clothes, etc. to survive, and enter hiring negotiations with this number in mind. Where a rip-off does occur is the timeframe needed to produce the value of the worker’s labour power. In most cases, the worker produces commodities of equal value to their labour power early in their shift and spends the rest of it producing additional commodities for free⁶. The value produced after the labour power has been compensated is then superfluous, it is surplus value, i.e., profit.

To clarify, Marx’s model of profit therefore requires three components: the exploitation of labour, bourgeois control over the means of production, and commodity production. It requires the exploitation of labour, as profit comes from the unpaid, surplus labour of the working class. It requires a capitalist class who profits from this exploitation of labour, and thus, maintains the system of production for exchange. Finally, it requires the production of commodities, items created for the purpose of exchange, for sale to happen at all. Within these three points lays all the evidence needed for why profit cannot exist under socialism, but we must postpone connecting these pieces for a few moments more.
 

The Perversions of Iosif Dzhugashvili and their Significance

Before we consider profit’s incompatibility with socialism, let us examine a passage from a great work of socialist economics: ‘Economic Problems of the USSR’ by Iosif Dzhugashvili (Stalin). Dzhugashvili argues that commodity production is a necessary step within socialism, one that will abolish itself⁷. The means of this self-abolition is not explained. He also claims that wage labour had been abolished in the USSR yet does not enlighten us as to why workers still received Rubles for their labour. Moreover, Dzhugashvili writes:

“I think that we must also discard certain other concepts taken from Marx’s Capital – where Marx was concerned with an analysis of capitalism – and artificially applied to our socialist relations. I am referring to such concepts, among others, as “necessary” and “surplus” labour, “necessary” and “surplus” product, “necessary” and “surplus” time. Marx analyzed capitalism in order to elucidate the source of exploitation of the working class – surplus value – and to arm the working class, which was bereft of means of production, with an intellectual weapon for the overthrow of capitalism. It is natural that Marx used concepts (categories) which fully corresponded to capitalist relations. But it is strange, to say the least, to use these concepts now, when the working class is not only not bereft of power and means of production, but, on the contrary, is in possession of the power and controls the means of production. Talk of labour power being a commodity, and of “hiring” of workers sounds rather absurd now, under our system: as though the working class, which possesses means of production, hires itself and sells its labour power to itself. It is just as strange to speak now of “necessary” and “surplus” labour: as though, under our conditions, the labour contributed by the workers to society for the extension of production, the promotion of education and public health, the organization of defence, etc., is not just as necessary to the working class, now in power, as the labour expended to supply the personal needs of the worker and his family.”⁸

In summary: commodity production can coexist with socialism, but wage labour cannot. Marx also spoke about such concepts, relating them to others, such as surplus value. In doing so, Marx argued that surplus value, and by proxy its constituent parts: commodity production and wage labour, cannot exist within socialism. To be sure, Dzhugashvili’s summary of Marx’s work here is correct. From this, he argues that Marx’s analysis is no longer applicable because commodity production and profit existed in the Soviet Union, which called itself a socialist economy. It is therefore inadequate to call these capitalist relations capitalism because they occur within a self-described ‘socialist state.’

To quote Engels: “These gentlemen think that when they have changed the names of things they have changed the things themselves.”⁹ The crux of Dzhugashvili’s argument is that commodity production existed in the Soviet Union, but that this was not a capitalistic form of production. Clearly, our friend Dzhugashvili had forgotten Marx’s ‘Capital,’ whose first two sentences state the opposite¹⁰. Indeed, he even forgot his own words from 1906, where he argued the correct, Marxist stance- that commodity production cannot exist under socialism!¹¹ Commodities, as established, require both a buyer and a seller. If there’s no seller, commodities cannot be produced; if there’s no buyer, the seller cannot profit from them. Notice that word- profit. To make the sale of commodities worthwhile, they must be sold for profit. Where does profit originate? In surplus value. Notice another word- buyer. Commodities must be bought by someone, and a market must exist to incentivise their coordinated, continuous production. Now, according to Dzhugashvili, the USSR was a workers’ state, and therefore, these commodities were produced first and foremost for the workers. Setting aside ideological and factual inquiries into this statement, observe that this would mean that it is the workers who consume these commodities. How do workers earn the money to pay for commodities? Through the sale of their labour power. What is this called? Wage labour. Both phenomena, surplus value and wage labour, are symbiotic to the production and circulation of commodities. Commodity production can only exist in the context of exchange. Commodity exchange necessitates exploited labour to extract profit from, and wage labour to build a consumer base. None of these can exist without the others. Thus, since the Soviet Union self-admittedly had commodity production, it also necessarily extracted surplus value from its workers. Moreover, because Soviet workers also bought these commodities, this means they had money. Thus, the workers must have attained payment for their labour power, which is precisely what the term ‘wage labour’ indicates. Dzhugashvili could argue all he liked, for his words could not, and will not, abolish the economic laws of production. By admitting to commodity production, Dzhugashvili implicitly admitted that the Soviet Union practiced wage labour and the extraction of surplus value. As established both by Marx and our own inquiry, the extraction of surplus value necessitates bourgeois control of the means of production to function. Call it what he will, Dzhugashvili cannot rebuke reality. Through an entry-level understanding of Marxist economics and Dzhugashvili’s own words, we now see precisely how profit, commodity production, and wage labour all interconnect.

From our analysis of Dzhugashvili’s argument, the incompatibility of profit and socialism is obvious. Profit is surplus value, necessitating commodity production and wage labour to exist. Commodity production, as written by both Marx and Dzhugashvili, is the building block of capitalism. To paraphrase Marx, ‘capitalist society presents itself as an immense accumulation of commodities, its unit being a single commodity. It is therefore from the commodity which an analysis of capitalism must begin.’¹² The commodity is the embodiment of capitalist relations. It is not produced unless profit can be assured, and what does profit necessitate? The extraction of surplus value. To extract surplus value, wage labour must exist to fund the workers’ existence, all whilst vast multitudes of their labour power are robbed of them. This is not the product of a deliberate depression of wages, but rather an economic law. Therefore, capitalist production is but a highly-developed form of these relations. The objective of the workers’ movement is thus to transcend and abolish these relations. Marx elaborated on commodity production, the circulation of commodities, and the abuses that emerge from exploited labour not simply to say ’19th century capitalism was rather unpleasant for the proletariat,’ but also to say ‘these are the components of capitalism, and it is these components which must be done away with to emancipate the workers.’ Other architects of the Soviet state understood this well. Reckoning with the incompatibility of ‘war communism,’ which held much in common with ‘regular’ communism, and the largely feudal society which it presided over, the Soviet state was forced to concede to local capitalists to end the widespread corruption, famines, and black-market, underpinning early Soviet society. This approach was known as the ‘New Economic Policy’ (NEP), and involved formally legalising commodity production, private ownership of the means of production, and disempowering the workers’ councils (soviets). Unlike Dzhugashvili who, in later years, falsely believed this to be socialistic, other, more consistent, Bolsheviks knew otherwise¹³.

On the NEP, Vladimir Lenin wrote:

“If Communists deliberately examine the question of the New Economic Policy there cannot be the slightest doubt in their minds that we have sustained a very severe defeat on the economic front. […] The surplus-food appropriation system in the rural districts—this direct communist approach to the problem of urban development—hindered the growth of the productive forces and proved to be the main cause of the profound economic and political crisis that we experienced in the spring of 1921. That was why we had to take a step which from the point of view of our line, of our policy, cannot be called anything else than a very severe defeat and retreat.”¹⁴

On the NEP, Nikolai Bukharin wrote¹⁵:

“When the State apparatus is in our hands we can guide it in any desired direction. But unless we are at the helm we can give no direction at all. Consequently we must seize power and keep it and make no political concessions. But we may make many economic concessions. But the fact of the matter is we are making economic concessions in order to avoid making political concessions. We shall agree to no coalition government or anything like it, not even equal rights to peasants and workers. We cannot do that. The concessions do not in any way change the class character of the dictatorship. When a State makes concessions to another class it does in no way alter its class character, no more than a factory owner, who makes concessions to his employees, becomes a worker.”¹⁶

On the NEP, Lev Trotsky wrote:

“From the Urals I brought with me a store of economic observations that could be summed up in one general conclusion: war communism must be abandoned. My practical work had satisfied me that the methods of war communism forced on us by the conditions of civil war were completely exhausted, and that to revive our economic life the element of personal interest must be introduced at all costs; in other words, we had to restore the home market in some degree. I submitted to the Central Committee the project of replacing the food levy by a grain-tax and of restoring the exchange of commodities.”¹⁷

To surmise, the consistent segments of the Bolshevik party held a common consensus: that Russian society was incapable of supporting communism, and, to prevent disaster, capitalist production had to be permitted. This move was intended to be a short-term one, a policy that would be repealed once a revolution in an industrialised country, such as Germany or France, could utilise its vast array of productive forces to alleviate these issues and continue the communist program. Such a revolution failed to manifest for a variety of reasons, leaving room for Dzhugashvili and other opportunists to ‘modernise’ the workers’ program. This ignores not only what the rest of the Bolsheviks understood, that these concessions were setbacks, not successes, but also the very foundations of Marx’s critique of capitalism! Whether one prefers the ‘right’ opposition of Bukhrainists or the ‘left’ opposition of Trotskyists, whether one wishes to centre themself on Marx or Lenin, they all held the same position on the matter. It is then abundantly clear why profit is incompatible with socialism: because it is a resolutely bourgeois social relation. It is, with no exaggeration, akin to asking “why must we abolish capital when we abolish capitalism?” The answer is obvious.
Whilst this explanation certainly illuminates why profit is incompatible with socialism, it hardly explores the full depth of Marxist studies into profit, nationalisation, and the market. For this reason, we will delve deeper. To give the reader a well-rounded view of the communist opposition to profit, a further inquiry into Marxist thought will be provided.
 

Blackshirts and Marketeers: ‘Rational’ Capitalism and the Overthrow of Marxism

The incompatibility between profit and socialism is now clear. Profit is surplus value, which necessitates the exploitation of labour to produce. Moreover, profit necessitates other pillars of capitalism to emerge- commodity production and wage labour. Commodity production is the cornerstone of capitalism, its very building block, according to Marx. Wage labour is the process by which labour power is not only purchased from workers by capitalists, but also the relationship which facilitates the extraction of surplus value, or in other words, the exploitation of labour. Dzhugashvili was right to write that the proletariat would not exploit itself, and was forced to work backwards from this conclusion to refute the realities of the Soviet economy. We do not make the same error here. Rather, we utilise the same scientific approach that Marx did, beginning with commodities and the relationships that produce them, and using them to construct a coherent image of capitalism. Profit, therefore, is incompatible with socialism because profit is the product of both capitalist production and capitalist exchange; it is the driving force of capitalism. Ideologues of various strands seek to say otherwise, be it out of opportunism or ignorance, and these misunderstandings must be corrected. We thus return to the two largest strands of the economically uneducated: the proponents of nationalisation and the marketeers. Both make similar errors, errors which we already corrected when analysing Dzhugashvili’s work, but both also possess unique theoretical and historical inadequacies worth further dissection. We will thus pursue these loose ends to clear any doubt regarding the thoroughness of our investigation.

A simple skim of Fredrich Engels’ ‘Socialism: Utopian and Scientific’ is enough to see that even one of Marxism’s founders understood nationalisation to be but another tool of the bourgeoisie. He writes “the transformation — either into joint-stock companies and trusts, or into State-ownership — does not do away with the capitalistic nature of the productive forces.”¹⁸ But why? As he explains, the centralisation of capital, be it into conglomerates or into state ownership, simply “demonstrate[s] the incapacity of the bourgeoisie for managing modern productive forces.”¹⁹ It is nothing but capitalism with a new form of ownership, one where the role of individual capitalists is minimised in favour of bureaucratic management. Capitalists still own and profit from these enterprises, be it through executive statuses within these corporations, taking a portion of  revenue as a ‘salary,’ or simply reaping from investments in such firms, all that changes is that they are no longer directly responsible for the day-to-day management of such businesses. Nationalisation then is simply a tool to prevent incompetent bourgeois from undermining themselves. Engels remarks, “the modern State, again, is only the organization that bourgeois society takes on in order to support the external conditions of the capitalist mode of production against the encroachments as well of the workers as of individual capitalists. The modern state, no matter what its form, is essentially a capitalist machine — the state of the capitalists, the ideal personification of the total national capital.”²⁰ Nationalised enterprises are then nothing remarkable. Organisationally, they are little different from the massive private firms they stand alongside. Practically, they serve the same ends: to extract surplus value from workers and deliver dividends to capitalists. All that’s altered is the role of individual capitalists, a role which is minimised for the sake of consistent, coherent management. It is with this that Engels offers an alternative, stating, “with the taking over by society of the productive forces, the social character of the means of production and of the products will be utilized by the producers with a perfect understanding of its nature, and instead of being a source of disturbance and periodical collapse, will become the most powerful lever of production itself.”²¹ Indeed, the only genuine alternative to bourgeois control of the means of production is the capture and utilisation of productive forces by the proletariat.

Lenin elaborated on Engels’ work. For one, he condemned nationalisation with similar straightforwardness on several occasions. He condemned the tactic in 1916, writing, “We see plainly here how private and state monopolies are interwoven in the epoch of finance capital; how both are but separate links in the imperialist struggle between the big monopolists for the division of the world.”²² One year later, he wrote “[It] must be emphasized because the erroneous bourgeois reformist assertion that monopoly capitalism or state-monopoly capitalism is no longer capitalism, but can now be called “state socialism” and so on, is very common. The trusts, of course, never provided, do not now provide, and cannot provide complete planning. But however much they do plan, however much the capitalist magnates calculate in advance the volume of production on a national and even on an international scale, and however much they systematically regulate it, we still remain under capitalism–at its new stage, it is true, but still capitalism, without a doubt.”²³ It is then clear that whether a given conglomerate is private or nationalised, they still perform the same functions. This is to be expected. Where Lenin carries the argument forward is in illustrating the generally-cooperative relationship between the state and privately-owned firms. In some cases, this takes shape as corruption. Lenin recalls, “The export of capital thus becomes a means of encouraging the export of commodities. In this connection, transactions between particularly big firms assume a form which, as Schilder ‘mildly’ puts it, ‘borders on corruption.’ Krupp in Germany, Schneider in France, Armstrong in Britain are instances of firms which have close connections with powerful banks and governments and which cannot easily be ‘ignored’ when a loan is being arranged.”²⁴ Moreover, one of the central theses of Lenin’s ‘Imperialism: the Highest Stage of Capitalism,’ the source of this quote, is to illustrate the close coordination between private conglomerates and the state. Even though many corporations are legally independent of governments, cooperation between the two is often mutually beneficial. Thus, even in cases where conglomerates are not nationalised, they still act similarly to nationalised companies. The inverse then logically follows: that nationalised corporations operate much the same, and are therefore equally exploitative as, their private counterparts. Such an argument is precisely what led to Lenin’s outright condemnations of nationalised corporations from the start of this paragraph.²⁵

We thus see that nationalisation is nothing revolutionary. It is nothing but a change of management, switching incompetent capitalists for bureaucrats. It does not in any manner make these enterprises more or less exploitative, and any changes that indicate as much are mere pragmatic concessions to prevent industrial action. Whether a corporation is private or state-owned will not undo the extraction of surplus value from the workers, it will not remove corruption from the sphere of politics, and it will not mollify the struggle between imperial blocs for control over capital²⁶. What the proponents of nationalisation seek is not socialism, it is sensible capitalism. It is a capitalism that is not operated in the interests of individual bourgeois, but in the interests of the bourgeoisie as a class. They believe that “private organisation of production is a function of national concern, the organiser of the enterprise is responsible to the State for the direction given to production.”²⁷ If only the proponents of nationalisation knew who they were agreeing with!
The doctrine of market ’socialism’ holds the same issues as nationalisation. Whilst marketeers seek to alter how firms are managed, they entirely ignore that their proposals do not negate capitalist production, but reinforce it. The marketeers, pending the perspective of the individual follower, either seek to construct socialism through replacing ’regular’ businesses with cooperatives, or to create a ‘humane’ capitalism through the same means. In either case, they wear profit not as a sign of shame, as the consistent Bolsheviks did, but as a symbol of success. For all their critiques of Dzhugashvili’s economic policies, they ultimately agree on the matter of profit. Thus, all that’s different is that they wish for the individual bourgeois to be replaced by multiple bourgeois, to transform every worker into a petite-bourgeois. This ‘theory’ is nothing short of naive fantasy.
What cooperatives accomplish is the same obfuscation of bourgeois control that liberalism achieves. Through the introduction of elections, workplace democracy, and employee ownership, they conceal the same corporate structure latent in private and nationalised enterprises. Just as liberal democracy shrouds bourgeois dictatorship behind elections, debate, and negotiation, so too do cooperative firms. At the end of the day, whether it chooses to lay bare its oligarchic tendencies or hide them behind layers of democracy, the bourgeois dictatorship is equally hostile to workers. Let us look at the Mondragón Federation as an example. In 2013, Spain, where Mondragón is headquartered, was struck by an economic crisis that caused over 30,000 businesses to declare bankruptcy²⁸. During this crisis, the cooperative firm elected to sever its connections with the Fagor cooperative, cutting its funding, and throwing the lives of 5,600 workers into jeopardy²⁹. Only two years earlier, hundreds of Mondragón workers in Poland went on strike³⁰. The strike was over the “appallingly low” wages of the workers- a mere 400 euros a month³¹. This strike was met with two-hundred armed guards, searches of workers and their belongings, as well as the firing of at least two-dozen workers³². Additionally, Mondragón owns several subsidiary plants in China, utilising these centres to produce labour-intensive goods before they are exported and refined in Europe³³. None of these subsidiaries are cooperatives, and thus, Mondragón renders itself equally exploitative of ‘foreign’ labour as it does ‘local!’ Indeed, whilst each of these choices- the choice to leave Fagor’s employees out to dry, the choice to crush Polish strikers, the choice to exploit Chinese workers, were all preceded by a democratic vote. Thus, even in the example of a successful cooperative enterprise, the exact sort marketeers like Richard Wolff and Carl Davidson hail as exemplary, it is evident that they’re much the same as any ‘typical’ capitalist enterprise³⁴. May the democratically exploited workers find solace that there was a democratic vote before they were democratically fired!

The marketeers may try to bite back against the example of Mondragón, claiming it’s a single ‘bad apple’ in a barrel of ‘good’ cooperatives. Allow us to remind them that this example was not a cherry-picked choice of the author’s, but rather sourced directly from market socialist theorists who exalt it as exemplary of their views. Moreover, a rudimentary understanding of materialist thinking is satisfactory to understand the counterproductive nature of cooperatives. In the article ‘Economic Prosperity and Economic Democracy: The Worker Co-Op Solution’, Richard Wolff explains the ‘revolutionary’ doctrine of market socialism. In transforming the capitalist mode of production into socialism via cooperatives, he proposes:

“Governments’ dependence (at municipal, regional and national levels) on enterprise tax payments thereby becomes dependence on the people as workers. No longer will a separate interest – capitalists within enterprises – use taxes or any other distributions of net revenues to shape government policies against workers or citizens. Enterprise decisions on what, how and where to produce will likewise no longer be capitalists’ decisions, but instead will reflect enterprise workers’ democratic choices.
“[…] In economies where WSDEs [cooperatives] prevail, key financial resources of the state – its taxes on and/or borrowings from enterprises – represent distributions of those enterprises’ net revenues made by their workers. Likewise, the use of any enterprise’s net revenues to fund political parties, politicians, lobbying efforts and think tanks would reflect its workers’ democratic decisions. A key structural feature of capitalism – capital’s dictatorship inside enterprises – always generated the incentives and provided the resources for capitalists to bend government to the service of capital against labor. In contrast, a WSDE-based economy would abolish that dictatorship and thus its political effects.”³⁵

Wolff’s essential argument is that the capitalist state relies on capitalist enterprises to function. Thus, by taking control of capitalist corporation away from capitalists and giving control to the workers, a new, more democratic, form of governance can be created. May he be reminded that “communism is for us not a state of affairs which is to be established […] We call communism the real movement which abolishes the present state of things.”³⁶ We are not building a movement which establishes a new status quo within capitalist enterprises and states, but one that abolishes them. Attempting to create a ‘democratic’ or ‘progressive’ capitalism only obscures this aim by distracting the workers with short-term, easily-revoked successes. This is why Wolff’s agenda to out-compete capitalists both economically, in terms of profits and taxes, and politically, through lobbying and think tanks, is inadequate. It is resolutely utopian. 

The utopian socialists of the 19th century attempted a similar ‘revolution,’ establishing communes and businesses run ‘socialistically’ for the purpose of outcompeting and transforming capitalism in a progressive manner. Marx and Engels understood the failings of these experiments, detailing why they are insufficient for the needs of the proletariat. Their only claim to power was ‘reason,’ that by virtue of being ‘socialistic’ they would outshine the ‘illogical’ enterprises of capitalism and thereby render them obsolete³⁷. This claim is meaningless. To define capitalist states and enterprises by their purported ‘lack of rationality’ is to disregard the materialist motives underlying their actions. The author has already written a work on one such example, the Trump administration’s mass deportations of immigrants, and the same point stands in this case³⁸. Though irrational ideals may be appealed to, such as bigotry in the aforementioned case study, these are merely the facade masking the genuine, material motivations behind such actions. Moreover, because these utopian experiments are not revolutionary, because they do not abolish the capitalist mode of production, Marx and Engels explained that they are doomed for three reasons. One, their localised nature confines them to a small geographic area, making them incapable of becoming a new, generalised, mode of production³⁹. Two, they remain backwards and primitive on accounts of being ‘cut-off’ from the wider world⁴⁰. Three, over time, the surrounding mode of production would overwhelm this ‘local communism.’⁴¹ This can be seen with the example of Mondragón, whose promises of ‘workplace democracy’ are subsumed by the exploitation it must undertake to survive in the market. Thus, trying to ’out-logic’ or ’out-progress’ capitalism through cooperatives is nothing but a fool’s errand. All the marketeers accomplish is reinventing capitalist exploitation and capitalist exchange, this time with a red paintjob.

Finally, we must understand that the state is a tool, not a neutral party. May it be remembered that Engels characterised the modern state as “essentially a capitalist machine,” and that he broke it down further by explaining it as such⁴²:

“The state is, therefore, by no means a power forced on society from without; just as little is it ’the reality of the ethical idea’, ’the image and reality of reason’, as Hegel maintains. Rather, it is a product of society at a certain stage of development; it is the admission that this society has become entangled in an insoluble contradiction with itself, that it has split into irreconcilable antagonisms which it is powerless to dispel. But in order that these antagonisms, these classes with conflicting economic interests, might not consume themselves and society in fruitless struggle, it became necessary to have a power, seemingly standing above society, that would alleviate the conflict and keep it within the bounds of ’order’; and this power, arisen out of society but placing itself above it, and alienating itself more and more from it, is the state.”⁴³

Lenin reaffirmed this point in writing:

“The state is a product and a manifestation of the irreconcilability of class antagonisms. The state arises where, when and insofar as class antagonism objectively cannot be reconciled. And, conversely, the existence of the state proves that the class antagonisms are irreconcilable.”⁴⁴

Thus, the dogma of market socialism is, quite clearly, the very same utopianism Marx and Engels corrected over a century ago. It seeks to establish a new, democratic form of capitalism, utterly failing in this goal, as Mondragón’s experience proves. These ‘progressive’ values may succeed in turning businesses here and there into cooperatives, but these ‘successes’ exist under highly localised, backwards, and short-lived circumstances. The idea that this economically insignificant scattershot of businesses can bend the capitalist state to their will is absurd from a realist perspective, and laughable from a Marxist one. Moreover, as Wolff’s language implies and market socialism outright purports, the enterprise, like the state, supposedly exists ‘above’ the proletariat and bourgeoisie! This is perhaps market socialism’s greatest failing and most laughable point. That enterprises, organisations created by bourgeois to facilitate production and exploitation, are somehow independent of the class that creates them is patently absurd. The marketeers see the state and believe it is independent of the class conflict between workers and capitalists, and this is an understandable, if incorrect, view. Such is the propaganda the state creates around itself. The marketeers then see businesses and believe they too are independent of those who create, own, and often manage them. Is the absurdity of this theory not self-evident? Not even the most ardent bourgeois ideologues make such a claim! It is thus overwhelmingly apparent that market socialism is merely a mirage, a fantastic illusion that guides the working class toward an immaterial endpoint.

The solution to the question of profit then remains the same as it always has. It, alongside commodity production, private ownership, and the market, will be abolished in the next mode of production. This understanding is built on one-hundred-and-fifty years of study and revolutionary experience. It is thus the task of the workers to overturn their exploitation, and with it, the commodity form and the profits which facilitate it. Without commodity production, the worker is no longer exploited for profit nor alienated from their labour. Without the exploitation of labour, profit becomes impossible. Without profit, the bourgeoisie, the class which vampirically leeches surplus value from the working class, can no longer exist. Those who seek to preserve profit are then at odds with Marxism. Nationalisation is a corporatisation of capital, it is the replacement of individual, unreliable, capitalists with a capable force of managers. At the end of the day, the bourgeoisie still receives its due from these enterprises, and the workers are still exploited. All that has changed is that periodic collapses in enterprises and economies are postponed whilst the bourgeoisie innovates new means to syphon funds from these ‘institutions.’ The marketeers put on a similar charade, hiding its bourgeois nature behind democracy rather than bureaucracy. They seek a ‘capitalism with a human face,’ and this is, at best, all they can create. These enterprises appeal to leftist fancies of petty-bourgeois ‘socialism,’ an economy of grassroots entrepreneurship, community engagement, and workplace democracy. Their farcical fantasies are then realised in grassroots exploitation of foreign labour, engaging communities with armed guards, and the democratic layoffs of thousands. Neither of these movements propose a future to the socialist movement. The proponents of nationalisation only serve to nationalise socialism. The marketeers only serve to sell fantasies to the uninformed.

There is then only one way forward: the same line that had been followed by over a century of Marxists. It is only through the workers’ seizure of the means of production that the epoch of socialism may begin. It is only through the abolition of commodity production and the value form that a socialist economy can emerge. It is only through these elements combined that communism will rise from the coffin of capitalism. The foe faced by socialists today is the same encountered by our comrades since the dawn of capitalism, and the solution to this question is the same today as it has always been.

References

1. Marx, Karl. Capital. Edited by Fredrich Engels. Translated by Samuel Moore and Richard Aveling. Vol. I. 1867. Reprint, Moscow: Progress Publishers, 1887. https://www.marxists.org/archive/marx/works/1867-c1/ch01.htm#S2 . ↩︎
2. Marx, Karl. Capital. Edited by Fredrich Engels. Translated by Samuel Moore and Richard Aveling. Vol. I. 1867. Reprint, Moscow: Progress Publishers, 1887. https://www.marxists.org/archive/marx/works/1867-c1/ch06.htm.  ↩︎
3. Ibid ↩︎
4. Marx, Karl. Capital. Edited by Fredrich Engels. Translated by Samuel Moore and Richard Aveling. Vol. I. 1867. Reprint, Moscow: Progress Publishers, 1887. https://www.marxists.org/archive/marx/works/1867-c1/ch07.htm#S2. ↩︎
5. Marx, Karl. Capital. Edited by Fredrich Engels. Translated by Samuel Moore and Richard Aveling. Vol. I. 1867. Reprint, Moscow: Progress Publishers, 1887. https://www.marxists.org/archive/marx/works/1867-c1/ch09.htm#S1. ↩︎
6. Ibid ↩︎
7. Dzhugashvili, Iosif. Economic Problems of the USSR. Translated by Hari Kumar. 1952. Reprint, Beijing: Foreign Languages Press, 1972. https://www.marxists.org/reference/archive/stalin/works/1951/economic-problems/ch03.htm. ↩︎
8. Ibid ↩︎
9. Engels, Fredrich. On Authority. Translated by Robert Tucker. 1872. Reprint, New York City: W.W. Norton and Co., 1978. https://www.marxists.org/archive/marx/works/1872/10/authority.htm. ↩︎
10. Marx, Karl. Capital. Edited by Fredrich Engels. Translated by Samuel Moore and Richard Aveling. Vol. I. 1867. Reprint, Moscow: Progress Publishers, 1887. https://www.marxists.org/archive/marx/works/1867-c1/ch01.htm#S1. ↩︎
11. Dzhugashvili, Iosif. The Agrarian Question. 1906. Reprint, Foreign Languages Publishing House, 1954. https://www.marxists.org/reference/archive/stalin/works/1906/03/x01.htm. ↩︎
12. Ibid ↩︎
13. The well-read reader may note that Dzhugashvili actually opposed the NEP later in his career and even did away with the policy long before writing Economic Problems of the USSR. It is true that he abolished the NEP itself, though he obviously did not do away with the capitalist relations which the NEP first tolerated. Commodity production, private property, and wage labour, all continued to exist after the NEP was abolished. Further, rather than taking the prior approach under War Communism which saw capitalist enterprises seized by the workers and the suppression of wage labour and commodity production, Dzhugashvili encouraged such practices. Hence, whilst he did indeed oppose the NEP, to claim this opposition was socialistic in nature is false. ↩︎
14.  Lenin, Vladimir “The New Economic Policy And The Tasks Of The Political Education Departments  Report To The Second All-Russia Congress Of Political Education Departments October 17, 1921.” Presented at the All-Russia Congress Of Political Education Departments, October 17, 1917. https://www.marxists.org/archive/lenin/works/1921/oct/17.htm. ↩︎
15. Bukharin, Nikolai. “The New Economic Policy Of Soviet Russia.” Presented at the Third World Congress of the Comintern, July 8, 1921. https://www.marxists.org/archive/bukharin/works/1921/07/08.htm. ↩︎
16. Whilst Bukharin’s statement supports the argument that the re-emergence of private ownership, wage labour, and commodity production, was understood to be a failure by the consistent Bolsheviks, rather than the success Dzhugashvili characterises it as, the keen-eyed Marxist will notice a discrepancy in his words. Bukharin makes the error of assuming economic concessions are of lesser significance than political concessions. The inverse is true. Marx so thoroughly studied the mechanisms of capitalism and the workings of capitalist production not because he was solely interested in economics, but because he understood that production is what shapes social relations. For example, in his essay ‘Comments on James Mill,’ Marx laid out an example of this premise in relation to the capitalist origin of individualist ideology. To paraphrase: ‘wage labour contains: 1. alienation between the worker and their toil, 2. alienation between their toil and the commodity it produces, 3. the worker is subjected to a system which alienates and violates them, engaging in it so they may survive, 4. the purpose of workers’ toil thus becomes to simply survive; the workers’ lives thus turn inward as all their efforts go toward survival.’ In fact, the inverse of Bukharin’s argument can easily be made: that political concessions can be spent superfluously whilst economic ones cannot. Countless governments have invited workers and their representatives to take part in the political system- this is practically the framework of social democratic governance! The Labour parties of the United Kingdom, Australia, and New Zealand, the Socialist Workers’ Party of Spain, even elements of the Democratic Party in the United States- indeed, the very fact that trade unions are often invited to provide feedback and guidance on industrial relations policy -all demonstrate the inverse. These governments pay plenty of political lip service and concessions to placate the workers, and not a single one can in any way be called a workers’ state. Thus, Bukharin made one of two errors. First, this speech was written in a lapse of thought, one where this fundamental Marxist understanding was forgotten. Second, that Bukharin underestimated the scope and strength of the NEP, not realising the severity of the situation. Which error was made is up for the reader’s interpretation.
    
    Citation for Marx’s ‘Comments on James Mill:’ Marx, K. (1932). Comments on James Mill (C. Dutt, Trans.). J.T. Parisot. https://www.marxists.org/archive/marx/works/1844/james-mill/ (1844) ↩︎
17. Trotsky, Lev. My Life. New York City: Charles Schribner’s Sons, 1930. https://www.marxists.org/archive/trotsky/1930/mylife/ch38.htm. ↩︎
18. Engels, Fredrich. Socialism: Utopian and Scientific. 1880. Reprint, Progress Publishers, 1970. https://www.marxists.org/archive/marx/works/1880/soc-utop/ch03.htm. ↩︎
19. Ibid ↩︎
20. Ibid ↩︎
21. Ibid ↩︎
22. Lenin, Vladimir. Imperialism: The Highest Stage of Capitalism. Translated by Kevin Delaney and Kevin Goins. 1916. Reprint, Progress Publishers, 1963. https://www.marxists.org/archive/lenin/works/1916/imp-hsc/ch05.htm. ↩︎
23.  Lenin, Vladimir. The State and Revolution. Translated by Zodiac and Brian Baggins. 1917. Reprint, Lenin Internet Archive, 1993. https://www.marxists.org/archive/lenin/works/1917/staterev/ch04.htm#s4. ↩︎
24. Lenin, Vladimir. Imperialism: The Highest Stage of Capitalism. Translated by Kevin Delaney and Kevin Goins. 1916. Reprint, Progress Publishers, 1963. https://www.marxists.org/archive/lenin/works/1916/imp-hsc/ch04.htm. ↩︎
25. Whilst this statement is generally true, a clarification must be made for the sake of transparency. Lenin’s 1917 quote where he condemns the misunderstanding of nationalisation as ‘state socialism’ is sourced from his book ‘The State and Revolution.’ As one can guess from the title, the book is about how the capitalist state functions, and how the proletarian revolution must ‘smash’ the state apparatus and construct a socialist administration in its place. It is thus true that he acknowledged the equally exploitative nature of nationalised and private corporations, but that is not the end of his argument. Rather, it is that nationalised corporations serve to entrench the bourgeois state, both by directly empowering its role in certain industries, and by legitimising the bourgeois state in the eyes of those favouring nationalisation. It is then not only an economic imperative, but a political one, too. One can easily find examples of this exact phenomenon, from how the nationalisation of healthcare bolstered support among social-democratic workers in countries like the UK, Germany, France, etc. or how nationalising key industries, such as oil in Iran and Mexico, has historically been a rallying cry for nationalists. ↩︎
26. Whilst not directly quoted anywhere in this article, Mansoor Hekmat’s ‘The Myth of the National and Progressive Bourgeoisie’ is an excellent analysis of the national bourgeoisie, nationalisation, and the irreconcilability between the national bourgeoisie and their leftist supporters on one side, and the proletarian movement on the other. Thus, if one wishes for a further explanation of these points, as well as other arguments employed throughout this article, Hekmat’s pamphlet would be a strong starting point. ↩︎
27.  Mussolini, Benito, and Giovanni Gentile. Fascism; Doctrine and Institutions. 2nd ed. 1935. Reprint, H. Fertig, 1968. https://openlibrary.org/books/OL5602860M/Fascism_doctrine_and_institutions. ↩︎
28. euro2day.gr. “Mondragon Feels Pain as It Cuts off Its Own Arm.” Euro2day.Gr, December 9, 2013. https://www.euro2day.gr/ftcom_en/article-ft-en/1163780/mondragon-feels-pain-as-it-cuts-off-its-own-arm.html. ↩︎
29. Ibid ↩︎
30. Związek Syndykalistów Polski. “FagorMastercook Protest.” ZSP, July 21, 2008. https://zsp.net.pl/fagormastercook_workcamp. ↩︎
31. Ibid ↩︎
32. Ibid ↩︎
33. Kasmir, Sharryn. “The Mondragon Cooperatives: Successes and Challenges.” Global Dialogue, February 13, 2016. https://globaldialogue.isa-sociology.org/articles/the-mondragon-cooperatives-successes-and-challenges. ↩︎
34. Davidson, Carl. “Mondragon Cooperatives and 21st Century Socialism: A Review of Five Books with Radical Critiques and New Ideas.” Carl’s LeftLinks Newsletter, January 31, 2024. https://carldavidson.substack.com/p/mondragon-cooperatives-and-21st-century.
    
    Wolff, Richard. “Worker Cooperatives and WSDEs.” RDWolff, 2016. https://www.rdwolff.com/faq_worker_coops_wdes. ↩︎
35. Wolff, Richard. “Economic Prosperity and Economic Democracy: The Worker Co-Op Solution.” Truthout, January 12, 2014. https://truthout.org/articles/worker-coops-and-left-strategy/. ↩︎
36. Marx, Karl, and Fredrich Engels. The German Ideology. 1845. Reprint, Lawerence & Wishart, 1932. https://www.marxists.org/archive/marx/works/1845/german-ideology/ch01a.htm#a4. ↩︎
37. Engels, Fredrich. Socialism: Utopian and Scientific. 1880. Reprint, Progress Publishers, 1970. https://www.marxists.org/archive/marx/works/1880/soc-utop/ch01.htm. ↩︎
38. Garcia, Antonio. “The Deportations in America: A Materialisation of the Mythology.” Prometheus, September 25, 2025.,
    https://prometheus-mag.com/2025/09/25/the-deportations-in-america-a-materialisation-of-the-mythology/ ↩︎
39. Marx, Karl, and Fredrich Engels. The German Ideology. 1845. Reprint, Lawerence & Wishart, 1932. https://www.marxists.org/archive/marx/works/1845/german-ideology/ch01a.htm#a4. ↩︎
40. Ibid ↩︎
41. Ibid ↩︎
42. Engels, Fredrich. Socialism: Utopian and Scientific. 1880. Reprint, Progress Publishers, 1970. https://www.marxists.org/archive/marx/works/1880/soc-utop/ch03.htm. ↩︎
43.  Engels, Fredrich. Origin of the Family, Private Property, and the State. Translated by Alick West. 1884. Reprint, Dietz Verlag, 1942. https://www.marxists.org/archive/marx/works/1884/origin-family/ch09.htm. ↩︎
44. Lenin, Vladimir. The State and Revolution. Translated by Zodiac and Brian Baggins. 1917. Reprint, Lenin Internet Archive, 1993. https://www.marxists.org/archive/lenin/works/1917/staterev/ch01.htm#s4. ↩︎