What is “Profit”?
In my poem “Profit” I defined profit as “getting more out of an investment than you put into it.” This definition elicited some debate. Basically the model transaction that many like to use as an example is one where “you” are producing a tangible product that requires raw materials, infrastructure and labor, each of which has a cost to you, the initiative-taker. When you sell the product, you expect to recover your costs and a little extra for you efforts. That last bit is usually what people like to call “profit”, and it seems fair enough.
However…
I prefer to include it in the category of labor. After all, your business doesn’t run itself. You took the risk, you made the investment in the infrastructure and you spend many hours making it all work. This also seems fair, but should you be the sole judge of how much “extra” your work and initiative are worth, relative to (for instance) the hours invested by your employees?
A significant fraction of all human discourse centers around this issue: whose labor of which kind is worth how much? There will never be a time when all parties are satisfied with a fair deal, but there is one category of “labor” that is particularly unresolved: the “boss” set the price of the product as high as the market will bear, equating the resultant difference between itemized costs and gross revenue, divided by the number of hours spent by the boss, as the value of an hour of his or her labor and initiative. This is complex, but I feel that here is where the idea of “profit” makes its transition from a logical, fair scheme to an exercise in selfish opportunism and oppression.
“What about rewarding initiative and innovation?” shout the capitalists in the room. Well, that’s a fair question too, but there is no negotiation between the consumer and the business, or between the employees and the owner, regarding what level of compensation is “fair”. It’s left completely up the “The Invisible Hand of the Free Market” — i.e. whatever the market will bear.
As a result, those who succeed in this gamble can make obscene amounts of money while their employees scrape by on minimum wage, and those “winners” receive the accolades of an envious society. This, I think, is not a good situation.
Marx suggested a solution. It’s been tried, and it didn’t work out in the long run. Perhaps it went a bit too far. People do like to improve their own lot, even if they are dedicated to improving everyone’s.
Perhaps there’s a happy medium?
Jess, I offer your note is perhaps a little bleak and dated, so some alternative thoughts. Profit can be the just reward for management of RISK and resources – there is no profit for failure. Various models are available to balance the distribution of wealth via labor and capital. Pay poorly and no one shows up. Unions can bargain effectively, and profit share schemes are common. Individuals may be offered share purchase options on favorable terms, and the workforce become part owners. “Excess” profit can be heavily taxed and funds redistributed through Government priorities. The discussion can get more complicated trying to account for environmental degradation and workforce
health exposures. Supplementary thought – profits from currency manipulation, where no value is added should be taxed to stop it.
Yes. Jed suggests that someone should write a book analogous to David Graeber’s “Debt: the first 5,000 years” called “Profit: the first 5,000 years” explaining the tangled semantics that obscures the meaning of that word. Ditto for “Progress: the first 10,000 years”. I’m too old to start such an endeavour (and probably always was).
There are intrinsic rewards in doing work that one believes in, even if the pecuniary return is small or non-existent.
Call it altruism if you will.
I’ve been an entrepreneur in the name of creating and sharing Canadian content stories on the stage and in five years of national television…..at great expense, I might add! All grist to the mill, though and stemming from a certain personal pride in my adopted ‘home’ country.
That being said, I am looking for appreciative patrons for ‘Island Lad’- a long time invested creation of a full lengths stage musical that celebrates through the classic story ‘Rockbound’- the struggles and joys of East Coast fishermen and women in the early 19th century..a vital part of our vibrant history in the country.
I think “altruism” implies gifting your efforts to others for their benefit. That’s good, but there’s a third category (at least): doing things for the sheer personal joy of it. Like writing a slightly-less-mediocre-than-usual poem, or running a slightly-faster-than-usual hurdle race, or delivering a slightly-more-moving-than-usual line in a stage production or writing a slightly-more-understandable-than-usual physics paper. What’s a good word for that kind of aneconomic reward?