Monday, February 16, 2015

According to the Marxist theory superprofit is the surplus profit above average profit. The economic literature describes it as a surplus profit that was gained above capital gains in a perfect competition. It's nature is temporary since it is the result of special circumstances. Others think that the term is nonsensical since a capitalist always pursues as much profit as possible.

Maximizing profit, obtaining superprofit is the goal of a capitalist market economy. Superprofit is the defining motivation of all business activity.  

Interest rate as a base cost for capita is the initial component of profit
. Globalization has increased liquidity and relative abundance that revalued capita. Official interest rates in developed countries were around 2-4% in the last decade, occasionally they were approaching zero. Real interest rates have rarely exceeded inflation rates. The options to acquire capita have mostly become favorable and globalizing capita markets played a major role. Simple capita has become easy and cheap to acquire. 

The situation is different with quality, enterprising capita. Enterprising capita which owns innovation and development capacity and which is able to optimize resources, manage effectively and to acquire and keep markets. Apart from modern globalization the major partners in this are transnational corporations. This capita bears special abilities, and yields over average.

The main creators and beneficiaries of superprofit in today’s global market are transnational corporations. They are not necessarily large but can be small or medium corporations (transnational networks). A transnational corporation is the product and user of modern globalization, a modern producer and manager organization which is able to maximally utilize global production organization and optimization and the advantages of aquiring a market.  

The increase of superprofits can be traced to many factors.
    a)     Globalization makes utilizing comparative advantages broadly. In the last few decades we could witness the strong liberalization of the world trade which had been fully realized in certain regional integrations. The process has abolished significant obstacles in utilizing comparative advantages.

   b)    Superprofit could be considered the benefit of innovation (which can be lead back to new techniques and products) which as we know it are accompanied by a high but risky yield parallel to technical revolutions and globalization.
c)     The source of superprofit could be the optimal allocation of resources, better efficiency and better management. Some parts of globalization profit could be viewed as dynamic comparative profit because quick innovations and technical development create the possibility of huge profit if they are done in a country that has lower wages and costs. Profits that come from the global allocation of resources and optimization are especially importantt as global management profit. This profit could be substantial.
   d)    Additional incomes that were built in based on some other factor (like land and mine incomes or patent-innovation income)

   e)     Monopolistic profit usually based on the abuse of the producer's technical or market advantage. Monopoly profit is the redistribution of income, it's nothing more than the withdrawal of the income of corporations operating legally. Suboptimal fund allocation and management, the corruption of welfare. In the current world economy transnational corporations dominate certain market structures in an oligopolistic nature and this can provide monopoly profit.
In a closed market or countries with a protectionist economic policy the situation is different. The basis of monopolprofit this time is the protectionist policy of the particular country which hurts efficiency and leads to a loss to welfare.
   f)      Superprofit can come from speculation. Speculation undoubtedly has an important role in regulating and monitoring the economy and correcting an erroneous economic policy. Limiting speculation can easily lead to the impairment of freedom of enterprise.  

The situation is different of course if the bases of speculation is the violation of the law (fraud, stealing, embezzlement) or is possible through the loopholes of the law. With globalization and in the last decades the related liberalization and deregulation the possibilities of speculation have increased dramatically. As the financial crisis has shown us the risk of criminal speculation has grown and with the lack of regulation speculation can lead into a major crisis. Having regard to inequality these factors have a particularly huge role in the hostility towards globalization.

Superprofit coming from comparative advantages, technical innovation and based on a more efficient management like enterprising profit or performance based income contribute to public welfare, they are unquestionably justified. Any kind of discriminative restrictions (i.e. extra taxation) is not just undesirable but can become harmful. In many respects preferential treatment (i.e. incentive taxes to help innovation) is recommended.

Although additional incomes stand close to monopolistic profit however they are legal parts of the creation of income. The base of additional income could be the quicker and favorable return of a large-scale reconstruction investment. This is what happened in some sectors (bank, energy or infrastructure) of transforming countries. Later on without competition and regulation these could transform into monopoly profit.

However market and other monopolies are not desirable by society and are regarded as illicit or illegal. Serious problems can arise of monopolization and speculation because there is a wide grey zone between legal and illegal speculation. Hidden and informal monopolies have a wide variety which are usually intertwined with politics and can be the source of abuses that are hard to identify.  

In developed democratic countries abusing monopoly position is regulated by rigorous competition policies. This has arose seriously about the European common market. The conditions of competitive market was already regulated by the Treaty of Rome, the treaty banned for example „directly or indirectly fix purchase or selling prices or any other trading conditions” or  „share markets or sources of supply” (article 85). To enforce regulation fees and penalty fees can be issued (article 87).
With the unified market and the validation of the four principles of liberty competitive market has been valorized. The Treaty of Lisbon has endeavored to answer questions such as:

  • The protection and improvement of efficient competition in the domestic market
  • Protecting the unified market from attitudes restricting competition of the member states and corporations
  • Regulations about corporations: controlling competition restricting deals, abusing economical superiority and fusions
  • Regulations about states: public sector, regulation of state subsidies, preventing state owned enterprises from gaining unfair advantage, eliminating the distortion of the competition from the economical engagement of states
  WTO and OECD have similar authority, actions against discrimination (WTO) or regulating investments and profit transfers (OECD)
Discriminating monopolprofit in superprofit has a very importantt practical context besides academical discussions. We must act decisively against the pursuit of monopolies or illegal speculation. Reducing monopolprofit (domestic and foreign) is not just a national interest but an international duty. 

Tags: profit, capital, trade, world

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