The Profit Motive-Gain 2

For what shall it profit a man, if he shall gain the whole world, and lose his own soul? – Mark 8:36

Tullius: The last time we talked, you made a case for cooperation and questioned the pursuit of gain. Do you have anything to add to what you said?

Marcus: Yes, I do. Quite a lot. Even as we speak, the world is in the grip of a pandemic. It seems to me this is an excellent time to pause and reflect on many of our assumptions and values. I’d like to focus on the profit motive, which proposes that people act based on self-interest and won’t work at something unless they might make a profit from it. The profit motive compels people to look for the highest paying job or an opportunity to buy for the lowest price and sell for the highest price. The more extreme advocates of this view claim that without the opportunity for profit, nobody would invent or build, nobody would take a risk, nobody would put their time or resources into anything. And the more money to be made, the more a person would be motivated to work. The profit motive has been said to be responsible for the success of individuals, businesses, and nations.

Tullius: What’s wrong with that? Why shouldn’t someone want to make money? Why shouldn’t we want to maximize profits?

Marcus: On the surface, there is nothing wrong with wanting to be rewarded for good use of resources. There’s even a parable in the Bible about three people who were entrusted with money. Two invested it wisely, while the third just buried it in the ground and was chastised for his foolishness. As I suggested in our last conversation, there’s nothing wrong with a reasonable amount of gain.

Tullius: So, what’s the problem, then? Shouldn’t businesses be interested in making a profit? Shouldn’t I be interested in investing in companies that make a profit? Shouldn’t I be interested in working for more pay? Shouldn’t I be interested in earning enough that I can put money aside for a rainy day?

Marcus: There’s nothing wrong with being interested in getting more return on your investments; better pay, better hours, and so on, in return for your time and effort. If a person follows Franklin’s advice – remember, “early to bed, early to rise” – it seems fair that he or she should receive more than the person who squanders their time and talents.

Tullius: It seems we’re on the same page with all that. If a person invents something that makes life better for millions of others, wouldn’t you say they should be paid very generously?

Marcus: Obviously. But we need to define the word, “generously.” Does this mean the person should become a millionaire? A multi-millionaire? A billionaire? Or does this mean they should be paid much better than the average person? Keep in mind a billionaire is 1000 times as rich as a millionaire, and a millionaire is already 100 times as rich as the average person, at least in the US. How much would you say is enough?

Tullius: Some would say “whatever the market will bear.” We have professional sports stars with 400 million-dollar contracts. Movie stars and CEOs can be guaranteed millions for their efforts. Some corporate boards believe their CEO has failed if he doesn’t bring in double-digit profits. Honestly, I don’t know. How can we place a fair value on what people contribute?

Marcus: That’s the problem, isn’t it? Many people might say we can’t place limits on what a person can make. If the amount can be supported by their employer, or society in general, and the person has worked hard and contributed enough, the sky’s the limit, isn’t it?

Tullius: I can tell you’re not comfortable with that notion.

Marcus: Are you? Some can get 30-40 million dollars a year for playing with a ball, while others working in a lab can only get a fraction of that. It seems to me in a time of pandemic some scientists are worth more to society than sports or movie stars.

Tullius: I’ll grant you that point. However, we’re getting off track. You started out with some comments about the profit motive. I’d like you to know where you were going with those comments. What’s wrong with the profit motive?

Marcus: Again, there’s nothing wrong with wanting to earn more money, or get a larger return on an investment. If a business can increase its profit margin by one, two, or a few points, this is considered a good thing. Businesses are not charities, and profit is necessary to reinvest in improvements to the business as well as return to investors in the form of dividends or higher stock prices. Growth is good. Many economists have pointed out that everyone benefits if there are more or better goods and services today than there were yesterday. But there is a dark side to the profit motive.

Tullius: I knew you would get to this sooner or later. You might as well continue.

Marcus: Not all businesses are created equal and not all profits are either. Suppose I set up a carpentry business in my garage and use my neighbor’s trees, electricity, and water to supply it. Suppose further that I dump the waste from my business in his backyard. Then, my profit increases enough that I’m able to buy a new car. But part of my profit was based on dodging externalities – costs I chose not to pay, or rather chose to have someone else pay for me. A large corporation might count on publicly-funded infrastructure – roads, bridges, water lines, electrical service, waste disposal, and so on. Or a business could simply dump waste into a lake or river, or pollute the air, and externalize the costs of cleanup, or more importantly the long-term costs of people getting sick. Another business could decide to pay its workers so little they need to rely on government assistance to feed and provide health care for their children. Externalizing the cost of such things improves the “bottom line,” yet I would call this part of the profit motive. While the business can be said to be motivated by profit, the way they achieved profit matters. An unbridled profit motive isn’t necessarily beneficial to everyone.

Tullius: Are you about to say, “But wait, there’s more?”

Marcus: Unfortunately, profit can also motivate people to make money at the direct expense of others. It’s one thing to sell paper clips for a 10% profit. It’s another thing to sell stolen car parts, fake remedies, illegal drugs, sex slaves, children, or exotic animals or their meat.

Tullius: Stop! These are all clearly illegal. You can’t use illegal businesses to support your argument!

Marcus: Why not? These are all clearly examples of people acting on the profit motive. People wouldn’t engage in these kinds of businesses if they couldn’t make money, would they? And what’s the difference, other than degree, between these kinds of businesses and the fracking company that spills chemicals into a river or a utility causing wildfires? They can always say, “Sorry about the mess. We’re now bankrupt. The government will just have to cover the cost of cleanup.” There are countless examples of innocent people in effect paying the difference between a reasonable profit and a profit based on externalizing costs. In all cases, people suffer, physically or monetarily, so the business can claim to be following the almighty profit motive.

Tullius: So, your objection to the profit motive involves the unregulated pursuit of profit, regardless of how the activity affects others?

Marcus: Now you’re getting it. People act like…well…people. Many will do whatever they can get away with, especially if it can make them more money.

Tullius: So, do you believe the profit can motivate people to take advantage of others?

Marcus: Absolutely. The profit motive can lead to many kinds of exploitation. Inferior or unsafe products. Price-gouging. Shoddy workmanship. Underpaid workers. Slavery. There’s nothing one can’t accomplish and practically no limit to the profit one can make with a large enough supply of slave labor!

Tullius: I see what you mean. What about renters who tend to damage or destroy property? Some people hoard goods in times like these. How do you explain these things?

Marcus: I think they have something to do with the profit motive as well. Some people seem to feel entitled to abuse what they rent, to get more than they paid for. However, ownership does tend to motivate people to take better care of houses and cars as well as businesses. The profit motive plays out as people try to protect the value of what they own. Obviously, a well-maintained house can generate more profit than a poorly maintained house. In the case of hoarding, getting more than the next person – a form of profiteering – takes precedence over common sense. Price-gouging is clearly motivated by profit, not consideration for others.

Tullius: I can see how profit can motivate good and bad actions. But what does the profit motive have to do with the current pandemic?

Marcus: Earlier, I mentioned selling exotic animals. Suppose a person were to gather together many different species of animals that never lived together in the wild and that a virus specific to one of them crossed over to another, and then to humans. This kind of thing is just another day in the life of a business that is only motivated by making a profit. I’m arguing that the pursuit of profit, unchecked by ethics or duly enforced regulations, has in fact led to human suffering and death. The hubris of unquestioningly worshiping the profit motive has become evident. Humans who were motivated by profit may have caused this pandemic, and ironically it will be catastrophic to many legitimate businesses.

Tullius: Speaking of legitimate businesses, what do you have to say about corruption? Is this an example of the profit motive at work?

Marcus: I assume you mean corruption as individuals or organizations that skirt the law, or illegally accumulate large amounts of money because they can get away with it. Is that right?

Tullius: That describes it pretty well.

Marcus: Corruption is certainly related to the profit motive, but that relationship has turned to the dark side – to piracy. Those who profit this way often are no better than common thieves. The drive to make money has turned them into criminals. What better way to make money than to trade ethics and morality for whatever the traffic will bear? Human trafficking, money laundering, drug cartels, illegal arms deals, phony real estate transactions, insider trading, shell corporations, graft, bribery, extortion, embezzlement, and even ‘crony capitalism’ fall under this description.

Tullius: You just mentioned a list of crimes often related to government connections – judges, law enforcement, political officials – paid to ‘look the other way.’ It seems to me corruption often requires accomplices or enablers, does it not?

Marcus: Oh my, yes. It seldom can be accomplished by one person acting alone. Show me a corrupt businessman and I’ll show you others who made his dealings possible, either by facilitating them or doing nothing to stop them. Big banks come to mind. Sometimes these enablers can become accessories to murder, genocide, or other human rights violations. And often laws need not be broken. The political class knows how to write laws in such a way as to make corruption easier, or less costly. It becomes more difficult to stop corruption if the perpetrator can slide through a few loopholes. In a weak government, the temptation to corruption can be irresistible. But even in strong governments, a person can find a way. Bernie Madoff comes to mind.

Tullius: Talk about skirting the law! But, won’t we always have corruption? It seems to me there is no way to stop this kind of thing. We’ll always have criminals, and some will always find a way to game the system, right?

Marcus: Stopping corruption is a lot like picking up dog poop. You carefully pick it all up, dispose of it, put your tools away, and head for the door, only to spot one more pile. But there are ways to minimize it, if we are determined to do so.

Tullius: How?

Marcus: Patrick Henry said, “The price of liberty is eternal vigilance.” Remember the Barbary Coast Pirates? It took many decades and a couple of wars to get their activities under control. The US Navy was established in part to deal with them. We need good laws. Strong law enforcement. Coordinated efforts. Severe consequences for breaking the law. This is one area in which strong governments with ethical leaders can be very effective.

Tullius: Don’t give up the ship. Anything else?

Marcus: As a society, we must learn the difference between profit as a well-regulated activity and profit as an attempt to gain whatever we can by whatever means we can. If we don’t, we will continue to risk our lives and our souls.

Tullius: That’s all we have time for today. Farewell, Marcus.

Marcus: Stay well, Tullius.

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