# A Lesson in Arithmetic

### (31 May 1948

From Labor Action, Vol. 12 No. 22, 31 May 1948, pp. 1 & 4.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

The capitalist class does not change its greed for profits any more than the leopard changes its spots. What better proof of this is needed than the present brutal determination of capitalists to beat down the wage demands of the workers? From the 1947 peak of \$17,000,000,000 profits after taxes – more than three times the 1939 profits of \$5,000,000,000 after taxes – the masters of industry look down their noses at the workers and snarl: “You can’t have the share of this that will help you live a little more decently.” The workers, remember, are the guys without whose labor there could be no profits at all for the capitalists.

It is essential for an understanding of the present wage struggle between capital and labor to have the complete profit picture in mind. Let us look at it from several angles.

#### Percentage Return Rises

One might say, trying to excuse the position of the capitalists: “Well,they have more bulk profits, but how about the percentage return on their investments?”

The percentage of return on investment is constantly rising. According to calculations of the National City Bank, the investment return for manufacturing industries as a whole climbed from 8.8 per cent in 1945 to 16.4 per cent in 1947, or little short of double. The little fellow with a few bucks in the bank gets from 1.5 to 2 per cent interest, or if he owns a few government bonds not yet redeemed for living expenses, his “return on investment” is around 3.3 per cent.

Also, let us not forget that much of the expanded production plant of the country is a wartime development, in the final count not paid for by capitalist investment. The paytriotic free enterprisers would not increase their plant capacities until the government gave them “adequate reassurance” by permitting them to write off the entire cost within five years. In effect, the government was mulcted for wartime expansion, now owned free and clear by the capitalists. Since the war the industrialists have held back on capital investment, by no means meeting the needs of the postwar situation. The steel bottleneck is an illustration. But why take greater risks – which the capitalists are supposed to take, you know – when returns are so good anyway.

We’ll shift the camera and get another slant at the profit set-up. Corporation revenue has been so great during and since the war that the undistributed surplus remaining in the treasuries of businesses has mounted from \$46,000,000,000 in 1939 to exactly double in 1947, or \$92,000,000,000. This means that the financial situation of business is even better than excellent. The actual benefit to corporations from being in such a position is that they do not have to make loans and pay interest. Business Week of February 7, 1948, pointed out that 84 percent of new plant and equipment of manufacturing companies is being financed internally, only 16 per cent coming from loans. The CIO’s Economic Outlook concludes from the above: “This, in effect, means that the consumer, by paying exorbitant prices, is largely financing the tremendous post-war expansions in corporate plants and equipment.”

With this backlog of surplus, the corporations still refuse to grant workers a decent living wage. Compare the financial situation of corporations with that of their workers. The Bureau of Labor Statistics budget for the worker allows a pitiful \$85 a year for payment of premium on life insurance, and that is all this niggardly budget permits by way of saving – some family surplus that! Again such wartime savings as workers had are rapidly being depleted. By June 1947 over half of the total Series E savings bonds sold in the lower denominations, were already redeemed. In these lower denominations redemptions run far above sales. The very poor financial situation of the working people is also shown by a Federal Reserve Bank survey of withdrawals from savings banks by low-income groups. Such withdrawals, the survey reveals, are made to maintain purchases of basic necessities – not for that house, car, trip or other “luxury” that savings are supposed to go for.

Working people are also being driven into debt, paying interest rates far in excess of 10 per cent, mortgaging their future, running the chance of losing the merchandise they buy on credit when they cannot make payments. Consumer credit has increased from \$6,600,000,000 in 1945 to \$13,300,000,000 in 1947, more than double. Contrast the workers’ lack of money with the huge surpluses of corporations which make borrowing unnecessary for them.

#### Compare the Two

Here, furthermore, are some Department of Commerce figures that illuminate the ever increasing pile of profits. After deducting from the national salary and wage bill of \$82,100,000,000 for 1945 the neat sum of \$22,100,000,000 paid to corporation officials, the department found that corporations profited \$1 on every \$7 they paid out in wages. However, in 1947 so rapidly had profits climbed that \$1 was made on every \$4 of wages paid.

Still using Department of Commerce figures, comparing the way profits are rising with the income of other social categories, we find that corporate profits increased 89.9 percent in 1947 above 1945, while farm income went up 35.6 per cent in that time, and wages and salaries only 27.9 per cent. But when from the total wages and salaries paid is deducted the compensation of corporation officials, workers’ wages are seen to have risen only 13.3 per cent in 1947 above 1945. A 89.9 per cent increase in profits – a 13.3 per cent increase in wages!

Perhaps these figures seem dry and uninteresting. Indeed they are not. Making this statement concrete, letu s suppose that corporate profits for 1947 were reduced to \$10,000,000,000 and that the other \$7,000,000,000 had been distributed in increased wages. That \$10,000,000,000 of profits would still be double the \$5,000,000,000 profits of 1939. Now what would those additional \$7,000,000,000 in wages have meant? One way to realize the difference to working people is this. The Bureau of Labor Statistics, in its meagre budget for workers, allows \$500 a year for the maintenance of a child, but the great majority of workers’ wages are far from even that low level for child maintenance. Those \$7,000,000,000 more distributed in wages could mean \$500 a year for 14,000,000 children. However, the capitalists are adamant against shelling out even a small fraction of this amount.

As a parting shot at the profit picture, we’ll take in the pictogram of profits in the latest issue of U.S. News & World Report. It shows the 1947 profits after taxes not at \$17,000,000,000 – the basis of the above calculations – but at \$18,500,000,000. And profits for this year, 1948, estimated on first quarter returns, will reach the high of \$21,000,000,000.

With the above picture of profits from several angles, one can gauge the rottenness of the capitalist position in the present struggle of workers for a decent living wage.

Last updated: 3 March 2018