AS of this writing the “Occupy Wall Street” movement continues, even though many of the protestors have been moved, or removed from public parks. For the sake of future historians (who may wish to use this as original source material) I shall explain the movement, as much as it can be explained. One newsman described its goals and purposes as “somewhat vague.” I wonder if he will be able to be more specific when the movement evolves into “definite and distinct vagueness.” I am not totally mocking the man. Perhaps his description is the best one, so far.
I shall supply a movement goal, simply so I may analyze it. The protestors object to the profit realized by the more successful corporations. At first this may seem to be a potentially valid point. Why does some company need “all that extra money?” Recall that a profit, by definition, is what is left over after expenses are met. The concept of profit is interesting; so let me try to examine different aspects of it. To do this let me theorize what the protestors would say, if they had the intelligence or articulative ability, on the matter.
PROTESTOR: “A for-profit company should exist for two primary reasons. One is to give employment to workers. The second is to supply a needed good or service. We are not against any company making enough income to sustain its existence as it continues to employ and produce. When it makes a profit the following situation has occurred. Either the company is charging a price higher than it needs to do and/or it is not paying its workers as much as it could.”
REPLY: A profit occurs when any, or all, of several factors occur. For example, if a company introduces a new product line, and it sells well, then a profit occurs. However, while the product was being developed the company paid expenses on its design, development, rights, etc. This yielded no profit. In essence the company had to go into debt to produce the new product. The new level of profit therefore can be understood as “catching up.” It can be understood as a debt owed by the company to itself. A company that does not attempt to recover expenses in this way will be forced to increase prices and/or cut salaries to employees, or cease to exist. Thus profits insure that the company continues to improve, to please the consumer, and to introduce better products to the market.
Let me add two more points. One, even if the company does not try to develop new products then it may well cease to exist. This will happen when its competitors, and/or changing fashions, needs, laws, etc, remove parts of its old market. Two, by building up a profit, in advance, companies have a ready reserve by which they may more readily seize opportunities to develop new products. I repeat: the profit leads, directly, to benefits for the average consumer.
It is not an absolute that business growth by means of profits is always necessary for existence. However, it is almost absolutely true. A non-profitable private company, which is the presumed desire of the protestors, will no longer be able to provide the tents, clothing and cell phones for the protestors. So this can not be what they really want, can it?
I hope to add more points in praise of profits in the next few installments.
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