Where did we get the idea that profits are bad?
Are we just confused about the role of profit in business?
I think somehow we have gotten profits confused with greed. One viewpoint thinks even when we pursue profit, we are somehow greedy.
The fact is, profits are good. Profits pay for things. Profits help everyone.
Profits pay for wages, salaries, taxes, investments in new products. Profits pay for research into ways to better our lives. Profits pay for the constructive things a company can do for the community. Profits pay for scholarships and ball fields. Profits help companies serve their customers and communities in a larger way.
The opposite of profit is loss. Losses cause reductions in economic activity, job reductions and layoffs and if extended, they create the end of a business enterprise. If a business has enough continuous losses, there will be no future for the employees who work there or the things that business provided for the communities it served. Anyone who is opposed to profits is therefore opposed to the future of the people and communities who can benefit from that business’ existence.
For instance, people are excited about lower oil prices and lower gas prices. That also means lower business profits in the oil industry. What are the negative effects of these lower to non-existent profits?
It’s simple: Profits help everyone. Losses hurt everyone.
Without profits, companies can not pay for things. Profits pay for things. In the oil industry, companies like Kinder-Morgan and Conoco Phillips have experienced greatly reduced profits due to the lower prices of crude oil so they must slash their dividends paid out to shareholders. These include pension funds and retirees which depend on these profits and generated dividends for income. Unlike the Federal Government, which continues to pay things like Social Security with no apparent means to do so, in the real world, companies can not do that. Therefore, while some people celebrate the cheap prices, others suffer from the lack of profits.
In the Wall Street Journal, I was reading a recent article about the current low oil prices and the effects. The article was focusing on how the lower oil prices were putting the squeeze on states which rely on profitable oil companies for much of their economy. These states are draining much of their reserve funds because of the loss of tax dollars generated by the oil company profits. Oklahoma has a projected 900 million dollar shortfall which is causing many school districts to consider going to a four-day school week and reduced bus service for kids. In another Oklahoma town, every other lightbulb has been disconnected in the hallways of schools to lower power bills. Texas believes it will face a 1.1 billion dollar drop in money set aside for reserves and road projects. Louisiana believes it is the worst financial crisis is a long time and are considering raising the state sales tax from 4% to 5% and some states are considering instituting or raising personal income tax.
Profits are the cost of the future.
Profits pay for things. When there are no profits, we all suffer.
Taking this thought on an even wider scale, when countries like the United States has lot of profitable companies, it can create lots of profitable jobs and great opportunities. When it loses those companies which are producing profits, it also loses those opportunities which accompany profits.
Profits are good. Profits pay for things. Profits help everyone.