Condemning the Profit Motive: Part 2

In a previous post, I outlined ten objections to the profit motive, and I tried to counter each in turn. In this post, I offer ten more complaints that allegedly result from the pursuit of profits.

See what you think of these, and let me know in the comments!

11- Reduced job satisfaction

This was Marx’s complaint – factory workers were alienated because they produced only a single component of the final product and were therefore denied the satisfaction enjoyed by craftsmen who fashioned the whole article. However, factories exist in non-capitalist countries as well, so this problem isn’t confined to companies driven by the profit motive.

Moreover, American factories are producing more goods than ever with fewer people. Automation has taken over much boring and repetitive work. Since the late 1950s, the service sector has employed more workers than the manufacturing and agricultural sectors combined. Service work – sales, legal services, healthcare, information technology, management, financial services, architecture, real estate – offer interesting and fulfilling employment for millions of Americans.

12- Depletion of natural resources

Back in the 1970s, I took an environmental engineering course. The textbook pinpointed the date on which the U.S. would run out of oil: in mid-1979. The book was wrong for a variety of reasons. First, reserves aren’t static. People with the freedom to explore are continually discovering more. Second, free people find substitutes for existing resources. Natural gas, for example, has replaced coal as the country’s primary fuel for electrical power plants. Third, as natural resources become harder and more expensive to find and produce, rising prices encourage people to reduce consumption.

Finally, it’s a mistake to confuse a resource with the service it provides. We don’t care, for example, whether our phone conversations go over hundreds of thousands of tons of copper wire, through fiber optics, or over the airwaves. We just want our calls to go through.

As economist Julian Simon observed, the “ultimate resource” is human ingenuity and that is far from depleted. Regulations and laws, however, can and do stifle human creativity.

13- Hindering of technological progress

Most technological progress comes from the private sector. Most “hindering” comes from government regulations and dysfunctional intellectual property laws.

14- Decreasing ethical standards

That is hardly confined to companies. We’re seeing declining ethical standards throughout society. Much of that stems from government’s adopted role as the ameliorator of all pain. Disconnecting actions from consequences destroys morality and, ultimately, society.

15- Increased risk of financial losses

Risk is inherent in any activity. In a free market, risk is diffuse and uncorrelated. In a regulated market, however, risk is often concentrated and coordinated by regulatory “herding” that can quickly become regulatory stampedes. The recent bank failures, for example, were made all but inevitable by regulations that herded banks into “safe” investments such as government bonds. When the Fed started quickly raising interest rates, the value of those bonds plummeted.

16- Monopolization of markets

While monopolies do occur, especially when new products or services are first introduced, it’s a mystery to me that so many believe that monopoly by corporations – which must satisfy their customers to survive – is bad, while monopoly by government – which can use deadly force to survive – is good. Moreover, private monopolies rarely last unless government restricts market entry.

17- Reduction in customer service

Driven, at least in part, by minimum wage laws, employer mandates (benefits such as insurance, paid leave, parental leave, retirement plans) and payroll taxes for Social Security and Medicare. Increasing the cost of employing workers leads companies to automate and to switch to self-serve formats.

18- Abuse of social responsibility

Companies are morally and contractually responsible to their shareholders, customers, and employees. They are not responsible for catering to the Left’s latest “social justice” fads, nor are they competent to deal with social issues.

19- Promotion of unsustainable practices

Firms have a vested interest in practices that are sustainable over the long term. Politicians, by contrast, often look no further than the next election. For example, the current political tactic of claiming that an election was lost to fraud – a tactic that is, unfortunately, popular with both political parties – erodes trust in the democratic process and is destructive to the nation. Similarly unsustainable is the common tactic of setting groups against each other to create special-interest voting blocs.

20- Misleading advertising tactics

As William Bernbach, the “father of modern advertising” once observed, “A great ad campaign will make a bad product fail faster.” A misleading advertisement might get me to try an inferior product once, but not twice.

Richard Fulmer worked as a mechanical engineer and a systems analyst in industry. He is now retired and does free-lance writing. He has published some fifty articles and book reviews in free market magazines and blogs. With Robert L. Bradley Jr., Richard wrote the book, Energy: The Master Resource.