Profits are perhaps the most misconceived subject in economics. Socialists have long regarded profits as simply "overcharge," as Fabian socialist George Bernard Shaw called it, or a "surplus value" as Karl Marx, called it. "Never talk to me about profit," India's first prime minister, Jawaharal Nehru, warned his country's leading industrialist. "It's a dirty word." From all these men's perspectives, profits were simply unnecessary charges added on to the inherent costs of producing goods and services, driving up the cost to the customer.

One of the great appeals of socialism, especially back when it was just an idealistic theory without any concrete examples in the real world, was that it sought to eliminate these supposedly unnecessary charges, making things generally more affordable, especially for people with lower incomes. Only after socialism went from being a theory to being an actual economic system in various countries around the world did the fact become painfully apparent that people in socialist countries had a harder time trying to afford things that most people in capitalist countries could afford with ease and took for granted.

With profits eliminated, prices should have been lower in socialist countries, according to theory, and the standard of living of the masses correspondingly higher. Why then was it not that way in practice?

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