Commodity Profits of The Role

Capitalism involves the acquisition of expensive assets that usually necessitate financing of positions in those assets. A firm must have sufficient market power to assure lenders that it will earn enough to service its financial liabilities. Thus a goal of every firm is to gain market power in order to control its markup. The ability to set price is critical in determining who gets credit.  

At the micro level, each firm must be able to obtain a markup over labor costs. However at the macro level there won’t be any profit unless there is spending in excess of aggregate wages in the consumption sector. Aggregate profit of firms is equal to the sum of investment plus consumption out of profits, plus the government’s deficit, plus the trade surplus, less saving out of wages.  

In the simple case with no government deficit, no trade imbalance, and no saving out of wages, capitalist profit equals investment plus capitalist consumption. As long as the price is set high enough that workers cannot buy all the output, capitalists can get the rest so long as they spend. The amount of surplus available at the aggregate level depends on the aggregate markup. It is aggregate spending on investment that generates the profit, and validates the accumulated capital. Neither thriftiness nor technology has anything to do with capital accumulation.

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