boneyard bill
Veteran Member
There are a number of threads here that deal with profit, but they have been up so long that they are bogged down in narrow issues. So let me re-new the debate by focusing on the role and functionality of profits.
The role of profit for an individual, a partnership, or a corporation is the same. Profit is how you know that you haven't used more resources to provide a product or serve than you have received for it.
Consider the Soviet Union. They didn't have a role for profit in their 5-year economic plans. As a result, they didn't know which industries were increasing productivity and which ones were being subsidized. Not only were they failing, but they couldn't even tell which enterprises were the failing ones.
"So what?" You may ask. "We're not against profit. We're only against EXCESS profit. We agree that businesses need to make money, but they should only be allowed to make a legitimate profit, not the obscene profits that many companies are making."
Actually, I agree with that. But what IS an obscene profit? What IS an illegitimate profit? If the profit gained is the result of coercion or through government subsidies and regulations and favoritism, then it is obscene and illegitimate. But how can you say how much profit is excessive?
Let's consider Henry Ford. He set out to make a car that the common man could afford. That was his dream, and he expected to make money at it. After all, if he didn't make money he wouldn't stay in business very long and very few people would have benefitted from his efforts. So he found a way to produce an automobile for $800, and he made money at it. But he didn't stop there. He found a way to make them even cheaper and so now even more people could afford it. And guess what? He made even more money. Eventually, he got the Model T down to a mere $125 and made even more money. At what point must we claim that Ford's profit was "excessive"? Should he have stayed at $800? Should he have stopped at $600? When did his profit become excessive? When should we tell him to stop lowering his price because he's making too much money?
Walmart became the nation's largest retailer by lowering prices. When should they have stopped lowering prices? But, you may object, Walmart can keep lowering prices but they should use some of that profit to pay higher wages. Why? They already pay more than minimum wage. They are paying what they have to pay to attract the people with the skills and reliability that they need. Why should their profits go to their employees when there are many people out there who need help a whole lot more than Walmart employees. What about people who are unemployed? What about disabled people who can't work? What about children with special needs? Why should Walmart give its profits to its employees? Isn't that a rather arbitrary choice.
Now, if Walmart is typical they already give about a third of their profits to the government in the corporate income tax alone. And more goes to the government when their stockholders pay personal income tax on the dividends. And then there are state and local income taxes as well. So probably half of Walmart's profits already go to the government. So if they gave more of their profits to their employees, the government would lose about half of that in income taxes. And what do most billionaires do with their money anyway? They give it away. They some for their kids but they know that even their kids can't spend all that money so they give it to charity. So most of the money that would go to the employees would mean less money to people who are probably more needy than the employees.
So we really can't say how much profit Henry Ford or Walmart or whomever ought to be making. At the same time the demand that they pay higher wages is really just an arbitrary choice that doesn't even care for the truly needy and probably reduces the money available for legitimately charitable purposes.
But what about workers? How are we to assure that workers can make a decent living? The answer is that we need MORE Henry Fords. We need MORE John D. Rockefellers who brought the price of a barrel of oil down to $.10 a barrel. Imagine! $.10 a barrel! That would be a dollar or a dollar fifty in today's money but that still a far cry from the $100 a barrel that is common today. These entrepreneurs lowered prices, gave us new products AND employed people, and when more people are employed, wage rates go up across the board even without minimum wages or labor unions.
This is the way we want things to work and the way to keep it from working that way is to try to legislate that it should be so because the legislation itself prevents the system from working the way it would work without that legislation.
So that is the role of profit, to assure an efficient allocation of resources. But that efficiency also gets passed on to everyone in the form of lower prices. The exception of course is when government intervenes to demand it. Then it doesn't happen because those very regulations reduce the profitability that is required for the system to work.
The role of profit for an individual, a partnership, or a corporation is the same. Profit is how you know that you haven't used more resources to provide a product or serve than you have received for it.
Consider the Soviet Union. They didn't have a role for profit in their 5-year economic plans. As a result, they didn't know which industries were increasing productivity and which ones were being subsidized. Not only were they failing, but they couldn't even tell which enterprises were the failing ones.
"So what?" You may ask. "We're not against profit. We're only against EXCESS profit. We agree that businesses need to make money, but they should only be allowed to make a legitimate profit, not the obscene profits that many companies are making."
Actually, I agree with that. But what IS an obscene profit? What IS an illegitimate profit? If the profit gained is the result of coercion or through government subsidies and regulations and favoritism, then it is obscene and illegitimate. But how can you say how much profit is excessive?
Let's consider Henry Ford. He set out to make a car that the common man could afford. That was his dream, and he expected to make money at it. After all, if he didn't make money he wouldn't stay in business very long and very few people would have benefitted from his efforts. So he found a way to produce an automobile for $800, and he made money at it. But he didn't stop there. He found a way to make them even cheaper and so now even more people could afford it. And guess what? He made even more money. Eventually, he got the Model T down to a mere $125 and made even more money. At what point must we claim that Ford's profit was "excessive"? Should he have stayed at $800? Should he have stopped at $600? When did his profit become excessive? When should we tell him to stop lowering his price because he's making too much money?
Walmart became the nation's largest retailer by lowering prices. When should they have stopped lowering prices? But, you may object, Walmart can keep lowering prices but they should use some of that profit to pay higher wages. Why? They already pay more than minimum wage. They are paying what they have to pay to attract the people with the skills and reliability that they need. Why should their profits go to their employees when there are many people out there who need help a whole lot more than Walmart employees. What about people who are unemployed? What about disabled people who can't work? What about children with special needs? Why should Walmart give its profits to its employees? Isn't that a rather arbitrary choice.
Now, if Walmart is typical they already give about a third of their profits to the government in the corporate income tax alone. And more goes to the government when their stockholders pay personal income tax on the dividends. And then there are state and local income taxes as well. So probably half of Walmart's profits already go to the government. So if they gave more of their profits to their employees, the government would lose about half of that in income taxes. And what do most billionaires do with their money anyway? They give it away. They some for their kids but they know that even their kids can't spend all that money so they give it to charity. So most of the money that would go to the employees would mean less money to people who are probably more needy than the employees.
So we really can't say how much profit Henry Ford or Walmart or whomever ought to be making. At the same time the demand that they pay higher wages is really just an arbitrary choice that doesn't even care for the truly needy and probably reduces the money available for legitimately charitable purposes.
But what about workers? How are we to assure that workers can make a decent living? The answer is that we need MORE Henry Fords. We need MORE John D. Rockefellers who brought the price of a barrel of oil down to $.10 a barrel. Imagine! $.10 a barrel! That would be a dollar or a dollar fifty in today's money but that still a far cry from the $100 a barrel that is common today. These entrepreneurs lowered prices, gave us new products AND employed people, and when more people are employed, wage rates go up across the board even without minimum wages or labor unions.
This is the way we want things to work and the way to keep it from working that way is to try to legislate that it should be so because the legislation itself prevents the system from working the way it would work without that legislation.
So that is the role of profit, to assure an efficient allocation of resources. But that efficiency also gets passed on to everyone in the form of lower prices. The exception of course is when government intervenes to demand it. Then it doesn't happen because those very regulations reduce the profitability that is required for the system to work.