Profit, is it a Bad Thing?

Is Profit a Bad Thing?

The View from the Middle

The incentive for profit is what makes the USA the best country in the world.  Through the 2010 campaigns I heard politicians struggle to explain how jobs are created when that is actually a simple concept in my mind.  The incentive for profit is what creates jobs.  Ingenious people come up with ideas for a product or a service that they can sell to other people and make a profit.  With the revenue from that product or service they employ people who have to produce that product or supply that service to the public. 

These employees will make salaries and pay taxes to our local, state and federal government.  In fact, these salaries paid out will often exceed the profit taken.  For example, Procter & Gamble, the company I used to work for, pays out significantly more in salaries and benefits to its employees than it makes in profit.  For many small businesses, that ratio can be even higher.  In addition, P&G has to cover all of the manufacturing and marketing costs associated with its products, which, of course, provides an income for thousands of others in their supplier network.  Without the profit incentive, however, there would be no Procter & Gamble, no salaries, no taxes paid by its employees and, of course, none of the products that they produce

Then I started thinking about what else profit does besides giving people the incentive to create jobs, and it hit me that profit is what delivers efficiency and innovation in the free market system.  If a business can’t make a profit, it will eventually cease to exist.  Every business must deliver its product as efficiently as possible so as to keep its price down and yet deliver profit for the owners or its shareholders.

Every business also has to make its products competitive.  They must constantly consider ways to improve their products so that they can compete in the market.  So, it is the desire for profit that drives both efficiency and innovation.  It is a simple but powerful concept and driving force in capitalism. 

But there is one thing that throws a monkey wrench into this beautiful system – a monopoly.  A monopoly eliminates competition and suppresses the need for both efficiency and innovation.  If you only have one source for a particular product, that company can charge whatever they want for it.  They don’t need to be efficient and don’t need to improve their product, and the eventual loser is the consumer.  That is why our government is supposed to protect us from monopolies.  So, just to be sure we are all following the message here, profit is a good thing, delivering efficiency and innovation, and monopolies are bad things, destroying competition and punishing consumers.

So, what do you think a government take over of health care will deliver to the people of the United States – a monopoly (a bad thing) that doesn’t have to make a profit (a good thing)?  It is the worst of both worlds, and a recipe for outrageous cost increases, poor service and the death of innovation in this critically important industry?  And isn’t this exactly what the federal government is famous for delivering?

For evidence, look no further than the Post Office, our public education system or go to your local Department of Motor Vehicles office.  While there are a couple of places where this set up makes sense (like the military and law enforcement), government takeover of any industry spells disaster for it, and if anything, we should be moving in the opposite direction.  Health Care definitely needs to improve, but in my opinion, the last thing we need is a government take over of the entire industry.