Profit, The Evil Demon

Since many on the left try to paint Profit as inherently evil and for-profit corporations as evil incarnate, I thought I would try to illustrate what profit really is.

To get a sense of the evil being done by profit-seeking corporations, let’s go back in time before corporations existed and imagine the simplest of economies.  Imagine a small village operating under a barter economy with many individuals providing goods and services to others in the village.  Let’s focus on just three of these individuals.  One individual, Farmer Bob, grows corn and raises pigs.  The other two individuals, Farrier Fast Freddy and Farrier Slow Joe shoe horses.

The going rate in this village to shoe a horse is 5 ears of corn and 1 pound of pork.  How did that become the going rate?  Well, Farmer Bob has the skill to shoe his horses himself, but it takes him about 4 hours to do it.  He estimates all of the work involved in gathering up 5 ears of corn and producing a pound of pork comes to about 2 hours, so he figures he would be getting a pretty good deal by exchanging something that costs him 2 hours for something that would cost him 4 hours.

Farrier Fast Freddy is similarly situated.  He can shoe a horse in 2 hours, but doesn’t like messing with corn and pigs.  He figures all of that corn and pig work would end up taking him about 4 hours to complete, so he, too, likes the 2-hour time-saving deal he is getting.

Both parties spend 2 hours to get 4 hours worth of value.  Both parties benefit by saving 2 hours, and those 2 hours saved are the exact equivalent of what we now call Profit.

Meanwhile, it takes Farrier Slow Joe 3 hours to shoe a horse, which means he earns a profit of only 1 hour.  Over the course of 12 hours, Fast Freddy can earn 30 ears of corn and 6 pounds of pork while Slow Joe earns only 20 ears of corn and 4 pounds of pork.  So between Fast Freddy and Slow Joe, who enjoys a higher standard of living?  Fast Freddy does because he was more productive, or, in modern day terms, he earned a greater Profit.

What applies to Fast Freddy and Slow Joe also applies to villages, towns, cities, states, and nations as a whole.  Those who are the most productive, that is, those able to produce the greatest profit, are those who will enjoy the highest standard of living.  The United States enjoys the highest standard of living in the world for one and only one reason – we are the most productive.  Period.  That also means we make the highest profits.

As it turns out, Profit is simply the difference in the cost of doing something versus the price we would be willing to pay someone else to do it.  Put another way, profit, which is counted out in our modern world in the form of cash or wealth, is simply a measure of productivity.  He who is the most productive earns the greatest profit and the greatest standard of living.  We see that clearly with Farrier Fast Freddy versus Farrier Slow Joe; it is no less true in any other situation.

Finally, we should note that, as individuals, by continuing to develop our skills and learn new ones and by deftly managing our responsibilities and taking on new ones, we are able to produce more for our employers and thereby earn a higher salary.  In other words, we make ourselves more profitable.  Each day each of us, individually, actively seeks a higher standard of living by seeking a higher personal profit.

Individually, we are just as “guilty” of profit-seeking as those evil corporations.

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