Profits

Stephen Carter is a law professor at Yale and his Washington Post column was run in Saturday's local paper. The subject is profits and why they're good for the country.

Nearly every argument Carter makes is one that I agree with in theory, but somehow I'm not completely convinced that unrestrained profit-taking is always good for everybody in every situation. As a rule, I'm a believer in and advocate for the free-market capitalist system, particularly in the area of non-essential goods and services. I'm less enthusiastic about reliance on free market principles in providing what I consider essential goods and services.

For example, I consider cell phones a non-essential product. I don't own one, and don't feel an urgent need to buy one. I can imagine situations in which one would come in handy, but frankly I get tired of watching cell phone-related advertising on TV and listening to people yak on them in public places. When it comes to cell phones, let the free market reign. Let the manufacturers sell as many as possible for as high a price as the market will bear. Eventually, the costs of purchasing and operating a cell phone will be driven down, and I might decide to get one. That's what's generally happened with all the other high-tech toys of the 21st century, like flat panel plasma television sets, DVD players, and digital cameras.

Gasoline is a product that falls into a borderline area between essential and non-essential. When gas prices shot up to four dollars per gallon last year, I modified my driving habits to some extent and reduced my personal demand level. Unfortunately though, soaring gasoline prices had an impact on the costs of a lot of other goods, food for example, that were more essential than gasoline.

In January 2007, I was buying Exxon gasoline at the neighborhood station for two dollars per gallon. By January 2008, the per gallon price had increased to three dollars, and by July it had reached four dollars. That's a 100 percent increase in roughly 18 months, and I was one of those people Stephen Carter criticizes who chafed at news reports that oil companies were posting record-setting quarterly profits.

The free market generally works when it comes to essential goods like food and clothing. In America, there's no need for anyone with even a little cash to go naked or hungry. And we do a reasonably good job in the public sector of supplying food, clothing, and shelter to people who don't have any cash. Last night I watched the classic film The Grapes of Wrath on TCM. I'd never seen the movie, but I'd seen lots of pictures in books and old newsreels of the Okies, the Dust Bowl, and other images from the Great Depression. I was stunned by how accurately John Ford's movie captured those images; from a visual standpoint, seeing The Grapes of Wrath was like viewing a documentary. I thought as I watched that America has come a long way in 80 years in terms of caring for its poor folks.

Okay, so profits are a wonderful thing and enterprises that deal in non-essential goods and services should be encouraged to haul in as much profit as they can. The market system seems to be competitive enough that essential goods remain accessible to virtually everyone. I'm definitely in favor of my retirement system raking in huge returns on its investments, and I like the way market forces eventually make a variety of non-essential goods available to people in my income bracket.

For discussion's sake, I'll assume the dominant requirement of every private sector organization engaged in providing goods and services is to maximize profits, and that none of them are guided by altruistic motives. Never having worked in the private sector, I can't swear the assumption is accurate.

As I recall, an organization can increase profits by (a) raising the price of its product, or (b) reducing the cost of production, or (c) both. If the market for the product is highly competitive, jacking up the price isn't feasible. Lowering production costs by cutting back on quality might work in the short run, but probably not over the long haul. So what we typically see are organizations inflating profits by reducing the costs of labor involved in production. If highly profitable companies are expanding their labor forces and increasing employee benefits, as Carter suggests, that's one thing. If they're unloading workers and adding millions to the compensation packages of a few selected top executives, that's something else again.

There are people like Bill Gates who operate highly profitable businesses and use their wealth to do good things for mankind. I wish every organization whose central reason for existence was to make a profit would do good things with the profits it earned. Some do.

In modern American society, the essentials include food, clothing, shelter, security, education and transportation, all of which are broadly available under the system in place. The current debate concerns whether health care belongs on the list of essential goods and services or not. My opinion is that in a country that claims to represent the peak of civilized order, it does.

One of my philosophical beliefs is that an important purpose of any government should be to ensure that all people living under its authority have access to essential goods and services. No conservative believes that, which is the fundamental reason I'll never be a conservative. Preserving public access to essentials means the government has a responsibility to regulate some activities in the private sector, and provide certain essential services itself on a non-profit basis. On the other hand, conservatives oppose regulation and practically all public service activities. Their preference is the transfer of government services to private sector organizations that are (a) in it for profit, (b) willing to cut corners to increase profits, and (c) unregulated to the greatest possible extent. This kind of conservative thinking is how we wound up pissing away billions in a privatized war in Iraq, with 43 dollar cans of soda pop.

I don't know how the health care mess will ultimately be resolved. Like my bro in Houston, I have a feeling that three years from now, we'll be looking at pretty much the same thing we have now.