Profits are the enemy, we are lately told. They are a demon possessing the national soul, to be exorcised by the high priests of government.
Perhaps this all began with Hillary Clinton, back in late 2007, clomping toward her inevitable ascension to the Presidency. She noted the record profit of 39 billion dollars by Exxon and targeted it for redistribution to causes she deemed worthier. The man who supplanted her at the helm, Barack Obama, has been no less derisory of profit and its misguided seekers. Beyond campaign rhetoric in this vein, Obama besmirched profit in a commencement address at Notre Dame. He recommended graduates consider employment at nonprofits or in government.
Yesterday this trend reached a peak when the President announced a proposal to tax heavily banking profits and executive compensation he declared obscene. Despite the notorious legal difficulty in identifying behaviors eligible for this adjective, our chief executive apparently knows it when he sees it. People thus afflicted by moral blindness must have their money confiscated by the visionaries who occupy our capital.
Before even examining the premise of the unworthiness of profit, we should roundly reject the idea of expressing disapproval via taxation. It is one thing to levy a fine for a violation. To tax the proceeds of legal commerce punitively is to turn the revenue collector into a prosecutor. If a legislature deems an activity to be illicit, it has the power to forbid. By taking extra money for the Treasury while allowing this activity, it is practicing extortion and facilitating a bribe from citizen to government.
Back to profit, a much-maligned end, pursued eagerly from below, pursued angrily from above. What is profit exactly? It is a portion of price designed to exceed the amount of expense incurred in the production and marketing of an item. If it costs me $1 for the ingredients of the pizza, $1 for the electricity for the oven, $1 in employee working hours and $1 in storefront rent, I can charge $5 for the pizza and make $1 profit. This dollar then goes to me, the owner, the person who brought the ingredients, the location, the equipment and the staff together to make the pizza come into being.
In that scenario, I not only get all the profit, I take all the risk. I have to sign the leases for the store and equipment, do boatloads of bookkeeping for various governmental bodies and sign contracts accepting responsibility for worker compensation. If the business flops, as may well occur, I am left holding the bag, often broke and with shattered credit. The landlord gets his space back, the manufacturer repossesses his equipment and my cashiers wise up and get jobs at Wal-Mart. Under what theory of ethical behavior is my risk-to-profit transition illegitimate?
And what if I take on fifty times the risk by opening fifty such outlets and take responsibility for fifty times as many employees and in return I want fifty times the upside? That is obscenity to Mister Obama but to me that is leadership, that is courage, that is greatness..
Furthermore, the necessity to achieve profit is the best discipline known to mankind for maintaining reasonable fiscal models. If the landlord wants to double the rent, I move out of the store. If the wholesaler wants to double the price, I go to his competitor. Contrast this with the nonprofit and government models Obama so extols. Because they don't need to come out ahead, they see no need on imposing sane limits on the lower rungs of the ladder. The result is toilet seats sold to the Pentagon for $600.
Right now, in the heart of a severe economic downturn, Federal employees are averaging salaries of $71,000 compared to $41,000 in private industry. That figure is measurable. Less measurable is the productivity gap. Go into private offices at 7 p.m. and you are likely to find a few conscientious individuals still scrambling to complete projects. Go into a government office at 5:20 p.m. and you will find it dark and silent as a tomb.
Why do they get thirty thousand dollars a year more for less work? Not because they are such a superior class of accomplished experts. It is because they have sold us on the contrary notion that our industriousness is vice and their imperiousness is virtue. There is no profit in such a view and certainly no morality. It is the "profiteers" who benefit society far more than these quasi-regulators. One might even say the words of the profit are written on the subway walls and in tenement halls…