In Praise of Profit

In this blog I will address what is perhaps the greatest misunderstanding of contemporary politics – the role of profit in society.

It has often been assumed by many of those in on the left, and plenty in the National Party too for that matter, that the attainment of profit is somehow both dishonest and at odds with the public interest. This over-riding assumption recurred throughout the respomses to my last blog. One commentator put it into a simple equation: ‘Health objective= betterment of the people. Firm= profit max.’

However, this belief is based – whether known by the holder or not – on a Marxist conception of commerce that is both outdated and largely discredited. The ideology behind the assumption profit vs. people argument rests on several fallacies.

First it is assumed that the process of attaining profit is somehow separate from the public betterment. That is, that my attaining wealth is not a product of public betterment.

Furthermore, it is assumed by such an argument that the amount of wealth around us is fixed. If there is X wealth, then for every winner there must be a loser. To the Marxist, if I engage in a profit-making exercise I do so by exploiting another for the difference between cost and sale price – I give to them my good or service only at a higher value than that which it cost me to produce. In taking profit I have sacrificed the public interest for my own.

The reality is considerably removed from this proposal however. Prosperity rests upon us each maximising our potential, and profit is the foremost driver and reward of achievement. I quote Jeffrey Sachs, who says:

"the world is not a zero-sum struggle in which on country’s gain is another’s loss, but is rather a positive-sum opportunity in which improving technologies and skills can raise living standards around the world." ('The End of Poverty, p.16)

The question I pose to the holder of the profit vs. people argument is: What if the public betterment, far from resting in conflict with profit, was in fact a product of that profit? That is, no profit = no public betterment.

It is my argument that the primary requirement of profit is the betterment of others. I argue that capitalism is, ironically by its competitive nature, a state of affairs conducive to the maximization of co-operation and thus achievement.

How? You see, when I receive profitable payment I do it not because I have exploited someone or used them just for my gain. I receive it because I have helped them. I have provided them with a good or service requiring my co-operation that they could either not provide for themselves or could not do so as well as me. That they took greater pleasure in the acquisition of that good or service, or at least expected to, than they did in having the resources forgone to pay me is certain because otherwise they would not have bought it. Thus, when I make a capitalist transaction I am both helping people and expanding wealth. There is nothing wrong with doing something purely for profit, because regardless of intent I am helping others. Far from exploiting my customer for the difference between cost and sale price, I have offered a good or to service to them at a price equal or less than the satisfaction they gained from its consumption. A good or service that without the incentive of profit to produce, I would not first have created!

This reality is brought about by the competitive nature of capitalism. When I compete with someone else I must outdo or at least equal them. I must be equally or more efficient than them. I must offer an equal or better quality than them, in the same or less time. The necessary consequence of being uncompetitive is failure. And herein lays the beauty of it. In the market, it is the consumer, not the producer – the profiteer – that is king. The profiteer must offer the consumer the greatest help for the smallest relative price, or the consumer will not allow them profit.