People Before Profits
If he gets all that right he earns income. If he doesn’t, he suffers losses. Profits not only reward him for his work but signal to others that the product is worth making.
Written by: James Peron
One of the major problems in political or economic debates is the use of undefined – sometimes undefinable – words and slogans. Often such terms can be used by the same individual in contradictory ways.
In the absurd culture war I’ve seen some partisans insisting anyone protesting a speaker’s positions – no matter how peacefully – is “cancel culture.” Yet the same people turn around and demand books be banned from libraries in the name of “protecting the children.” It’s only “cancel culture” when other people do it.
Other times they change the definition or broaden it to mean anything they want. In American black culture “woke” was used for almost the last century to mean aware of racial prejudice. Social authoritarians appropriated the word to mean any comment, book, film, discussion, etc. about any social freedom they don’t like. What was a descriptive term morphed into an insult.
The term I want to dissect is one where different people use the phase as if it has an objective meaning but in ways that contradict one another. The term’s meaning is rarely stated, which helps it gain popularity. Any word or phrase left undefined is useful to those who throw about slogans to rally support. Winston Churchill noted this in reference to private markets: “Some see private enterprise as a predatory target to be shot, others as a cow to be milked, but few see it as a sturdy horse pulling the wagon.”
In the case here it’s the slogan “People Before Profits.”
The only somewhat objective definition that comes to mind, for me at least, is the idea that profits and people are somehow in conflict and that would imply an open attack on all voluntary economic exchanges. This presents some real problems as in any purely voluntary economic exchange, even one that is pure barter, means the participants profit.
If you have more green beans than you need, and I lack them, but have more bread than I can use, we might exchange them. But in the typical sense of the word “profit” it applies to both of us. I profited by having the beans and you profited by having the bread.
But this is true of all exchanges, even if I were to give you some cash in exchange. I would only make the exchange if I thought I profited by doing so, and the same is true for you.
Others tend to use the word profit only to mean monetary gain after an exchange is made. Apparently, some think businesses shouldn’t make money selling goods. But what do they assume motivates production if only the consumer gains? Would they apply this to workers? Should they also labour with no economic profit to themselves?
They assume only monetary profit is evil. But what is actually happening – at least in depoliticised markets that aren’t skewed in favour of special interests – when profits are made?
An entrepreneur or business owner has to take all the factors of production and pay for them up front. If resources are needed, he has to purchase them; if labour is required he has to pay them. At every step he has to invest his resources to combine all these factors together to produce something he hopes customers will purchase. More importantly, those customers have to value what he produced more than what he spent to create it.
If he gets all that right he earns income. If he doesn’t, he suffers losses. Profits not only reward him for his work but signal to others that the product is worth making.
Assume the entrepreneur takes the “People Before Profits” slogan literally. He sells the product, so he breaks even. No profit signal to other producers comes into play meaning less production which will push up prices even without a profit. Even if he is a kind-hearted ideologue committed to putting people first without profit, he will be making all of us worse off unintentionally.
He will take resources worth X amount, add to it the labour costs, production costs and the rest and sell the result for less than it cost to produce. He would be destroying wealth which means fewer resources for things people need.
In simple terms the only way this concept of putting people first can happen is political control, but there are other kinds or “profit-seeking” at work when that happens. Often political connections are quite profitable. The world’s richest man, Elon Musk, has always relied on government contracts and corporate welfare – not on free markets – to gain his wealth.
In spite of the rhetoric market-based systems around the world have resulted in greater individual wealth which means better health, longer lives, and greater comfort. Those systems that tried to implement people before profits, routinely collapsed. They destroyed wealth instead of creating it and only benefitted the political class.
James Peron has written for multiple publications and author of several books, including Exploding Population Myths and The Liberal Tide. James is an associate of the Free Market Foundation.