Profit is not justified by entrepreneurial risk.

The “libertarian” capitalists often use risk as their rationale for accepting the profit motive. In this reasoning, profit is the reward that capitalist owners get for taking the risks that the workers aren’t taking.

For one thing, this is absolute bollocks, since the workers take just as much risk as the owners. Workers have to contend with losing their jobs and taking a major hit while looking for another one, while the rich owners benefit from lenient bankruptcy laws.

But more importantly, if it’s true that risk-taking is a skill that capitalist owners must have in order for their business to be successful, then it should be a job rewarded like any other. Just as mutual banks providing capital should be rewarded for their work, not with rent on capital but with a wage, risk assessers should be rewarded for their work, not with rent on capital but with a wage.

Let us be clear on this: the capitalist concept of profit is nothing more than a rent on capital, predicted on the concept that capital participates in the making of the full product. Benjamin Tucker has already refuted this nonsense 120 years ago. Capital is not owed a wage because only people produce, not money or tools. Profit is therefore nonsense. To use risk as a justification for it, is equally nonsense: nothing will magically turn money or tools into economic agents.

If the “entrepreneur” is providing a valuable service, then let him provide it, on the free market. If he’s not, if his job is nothing but exploitation, then let him starve.

9 thoughts on “Profit is not justified by entrepreneurial risk.

  1. George Donnelly June 30, 2009 at 06:35

    Bollocks? Owners risk their own money and copious amounts of unpaid time to get a business off the ground. Employees are paid for every hour of their time. Lenient bankruptcy rules? So what, all that investment of money, assets and/or time has still been lost of the business fails.

    “then it should be a job rewarded like any other”

    Who is doing the alleged rewarding here? You left out the doer of this scheme of yours.

    Money or tools may not produce on the own but they do augment the person’s ability to produce.

  2. Francois Tremblay June 30, 2009 at 15:50

    “Bollocks? Owners risk their own money and copious amounts of unpaid time to get a business off the ground.”

    Yes…? I never denied that.

    “Employees are paid for every hour of their time.”

    HAHAHAHA! Be serious now. No employee is paid for the full product of his hour.

    “Who is doing the alleged rewarding here? You left out the doer of this scheme of yours.”

    What do you mean, the doer? In a socialist system, employees determine their own wages and pay each other through the money made from selling products. If you are a risk assesser, you get paid for your full product like everyone else.

    “Money or tools may not produce on the own but they do augment the person’s ability to produce.”

    Yes…?

  3. rob July 1, 2009 at 08:12

    The Capitalist Statist view is that the employer uses his/her initiative in a risky world and therefore deserves higher rates of profit than the subordinate workers. There may be some justice in this, but only if we ignore the fact that the State and Capitalists have already pre-set laws and systems in place which allow some to gain unfair advantage over the many. The concept of private property endorsed by the State, the way in which employer/employee (Master/Servant)relations are defined by the State etc.

  4. biteme July 3, 2009 at 20:27

    “Workers have to contend with losing their jobs…”

    Yeah, that are provided by entrepeneurs.

    How could it possibly be anyone’s resposibility to provide a job for anyone else?

    Inane.

  5. Francois Tremblay July 4, 2009 at 02:59

    I never said that it was anyone’s responsibility to provide jobs for anyone else.

    What is “inane” is for you to respond without actually understanding my post. Take your undeserved attitude somewhere else.

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  8. Sam February 5, 2010 at 17:30

    The world is full of would-be capitalists whose ventures failed. All we see is the ~10% who succeeded. With odds like that, it is a real, real risk. Furthermore, the vast majority of businesses are small, that is, they employ the entrepreneur (and his/her family) just like any job the oh so exalted ‘worker’ may have.

    Think about how the capitalist has to decide where to invest, how to obtain capital, how much is needed, how to allocate it amongst VARIOUS business needs. The capitalist also needs to establish contacts and reputation for the business. These are all unseen, unglamorous actions.

    As for the worker? Assuming he has the necessary skills, he just shows up and uses the available tools. A whole RAFT of decisions have been simplified for him, and he makes money really on the strength of the business’ networks.

    The contributions of the business owners are REAL and deserve reward. Besides, if being a capitalist is so easy, why doesn’teveryone just become one? there is, after all, free entry in to most markets!

  9. Francois Tremblay February 5, 2010 at 17:35

    I never said it wasn’t a “real risk.” So what? That doesn’t imply that you deserve to exploit others as your reward.

    If the “entrepreneur” is providing a valuable service, then let him provide it, ON THE FREE MARKET. If he’s not, then let him starve.

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