Entrepreneurial Income

Entrepreneurial Income 

the part of the average profit remaining to the functioning, that is, industrial or merchant, capitalist after payment of interest for a bank loan. Entrepreneurial income arises from the movement of loan capital. Attempting to extract the maximum profit, industrial capitalists resort to the use of borrowed capital in addition to their own. Having received a loan, the functioning capitalist purchases means of production and labor power. By exploiting hired workers, he extracts surplus value, which comes in the form of profit. This profit breaks down into entrepreneurial income, which is appropriated by the functioning capitalist-borrower, and interest, which goes to the loaning capitalist-creditor.

The division of profit into interest and entrepreneurial income camouflages capitalist exploitation and distorts the real nature of these parts of surplus value. This creates the appearance that interest does not result from production but from ownership of capital and that entrepreneurial income is not generated by the workers’ unpaid labor but by the functioning capitalist’s activities as supervisor and manager of an industrial or commercial enterprise. Acting as apologists for capitalism, bourgeois economists pass off appearance as reality and picture entrepreneurial income as a form of the capitalist’s wages.

There exists a bitter struggle between the functioning capitalists and the money capitalists over the division of profit. The former benefit from lower interest rates, and the latter, from higher rates. At the same time, both groups of capitalists oppose the working class, since both have a direct interest in exploitation of the workers. This opposition to the proletariat creates an underlying unity of capitalist class interests. Both money capitalists and functioning capitalists have an interest in increasing surplus value, that is, in intensifying the exploitation of hired labor. Thus, entrepreneurial income is a direct expression of the relations between functioning and money capitalists and, in the last analysis, of the basic production relation of bourgeois society: the relation between labor and capital.