November 10, 2005 

WRTA

Brown Shoes Diary

American Self-Destruction

In 1986 Ronald Reagan made one of his many telling and humorous observations.  According to the Gipper, government policy amounts to, "If it moves, tax it; if it keeps moving, regulate it; if it stops moving, subsidize it."  But what if after taxing and regulating a business, it not only keeps moving, but moves quite well? Then, I guess, it's time to persecute it.  That is what the Senate did this past week with regard to the oil companies.

Let me be blunt.  Where the hell does the Senate get off berating and slandering American businessmen just because they are profitably running their companies?  Such economic ignorance, sad to say, is quite prevalent today and is a serious threat to the well being of us all.  Folks, without profit and the profit motive, we'd live the same brutal, primitive, and short  lives humans did 10,000 years ago. Let me explain.

Suppose there was a magic potion that improved communication, encouraged cooperation, conserved resources while reducing pollution, spurred economic progress, rewarded ethical conduct, and put smiles on peoples faces.  Wouldnt that be great?  Well, we dont have to resort to magic, because profit-seeking already does all of the above and more.

At its most basic, profit is a tool of communication.  How does Bill Gates or any business person know what we want them to do?  If a person can get rich within the confines of law, then that person can be sure he is doing good for others.  The very fact that a person earns more revenues than expenses is of itself proof that the profit-maker is doing what others want.  And if you are doing what others want, then how can you be anything except ethical?  What the demagogues fail to realize is that profit is a great motivator for all of us to serve others.  Take away such motivation and service goes with it.

Profit encourages cooperation. In the first Gulf War, a million soldiers had to be transported, clothed, fed, armed, and sheltered.  It was a massive logistical operation carried off in magnificent fashion and the general who gave the orders surely deserved his promotion.  But every day in the U.S. 300 million people are fed, clothed, sheltered, transported and provided the tools to make a living without an order being given.  Such coordination is only possible because of the motivation and price signals produced by profit-seekers.

Profit conserves resources and reduces pollution.  Each dollar of waste for a business is a dollar less in profit.  Each incident of pollution is a liability that threatens future profit.  I remember being at a party once and the host was extolling the importance of nuclear energy, but he cautioned, it has to be produced without profit or corners will be cut and unsafe plants will be the result.  Oh, I asked, so you are advocating that we have Chernobyl style nuclear plants?  Funny, how I never get invited back to parties.

Profit-seeking spurs innovation by bringing together the 3 cs of economic progress: creativity, capital, and courage.  To improve our economic well-being, we need ideas, resources, and the willingness to take risk.  It very seldom happens that those three things are possessed by the same person or business.  Profit is what brings them together.  Someone with an idea needs to find someone with the capital to finance that idea and they both need someone to bear the risk of the undertaking.  Our financial markets do all of that, but only so long as they promise a profit to those who have good projects (and losses to those with bad projects). 

Still, you might say that profit-seeking just is unseemly or ungodly behavior.  Matthew 25 has a different perspective.  In the parable of the talents, a master gives each of 3 servants a portion of his wealth to manage.  The first servant doubles the wealth under his management as does the second servant and the master is pleased.  But the third servant merely buried the money given him and returned it without even a penny of interest.  The master rebukes this servant and the concluding verse of this parable is, Cast the unprofitable servant out into the darkness where theyll be weeping and gnashing of teeth.  The religious lesson here?  Make a profit or GO TO HELL!

Profit-seeking puts smiles on peoples faces.  Last December I was out at the mall Christmas shopping and after buying an item I asked the proprietor how things were going.  He replied happily, Busiest weve every been, best day ever.  When I got home I noticed the mailman coming up the street so I waited for him.  As he handed me my mail, I asked how things were going.  Glumly he responded, Busiest weve ever been, worst day ever.  Whats the difference between these two people?  Both work hard and both provide value for the world, but one embraces profits while the other works for an institution that scorns them.  No wonder the phrase going postal has become a part of our lexicon.

There is a belief that pearls form around a single grain of sand.  I dont think this holds up to scientific scrutiny, but I like the metaphor.  Our civilization and its wonderful variety of goods and services have been formed around profit.  You might not like that, but the alternative has been tried and found disastrous.  And whats also nice is that the profit seekers want neither our thanks nor our admiration.  Their profit is thanks enough. (If they do want our admiration they become philanthropists and give back the money they earned.)  But we, and our elected representatives, especially those grandstanding senators, should at least be appreciative of what profit does for us and know that when we denigrate profit and persecute profit-makers, we are, quite literally, being suicidal.