White House press secretary Karine Jean-Pierre recently reiterated a point Biden has been making for the past year. Inflation remains high not because of Mr. Biden’s $6 trillion spending, but because of the “high profit margins” he earned during the COVID-19 pandemic. Pandemic pushes up consumer prices.
We were then told that the White House’s grand strategy to drive down store prices even further would be to lower business margins on everything from pharmaceuticals and computers to food and gasoline.
How low should those evil interests go? to zero?
Wait, when did profits become bad? A company’s ability to make a profit is the very engine of growth, and it is also the engine of innovation, job creation and entrepreneurship.
The only people who believe the profits to be heinous are those who have never actually made them. It’s not that easy. (Related: Alfredo Ortiz: Rosy job forecasts come back to life)
As the late great economist Walter Williams of George Mason University often explained in his Econo 100 course, North Dakota farmers don’t keep cattle, they grow an acre of wheat and grow 14 pounds a day. I work the hours because I want to provide people with juicy steak meals. Wall street fat cat. Those farmers and ranchers don’t care about New Yorkers. They want to make a profit, so they’re letting people in Manhattan raise cattle and send steaks to feed the people. If there is no profit, New Yorkers will either starve or wait in line for soup.
Nearly every life-saving drug known to mankind was developed in the laboratories of private pharmaceutical or biotechnology companies. Governments rarely invent new life-saving drugs that are used by millions of people. No, former Vice President Al Gore did not invent the Internet. Profit seekers did so, and then built a $10 trillion industry that revolutionized the way we live, work and play.
Steve Jobs and his colleagues virtually invented the personal computer and Apple’s relentless pursuit of profit. He perfected the mobile phone and lowered its price so that today many of Africa’s poorest people can afford it. Fifty years ago, even a royal ransom could not buy what was in the pockets of poor Indonesian farmers. why? Because Apple found a way to sell him and make a profit. Today, Apple has grown into a $3 trillion company by selling people around the world what they desperately want.
I’m not saying that altruism and philanthropy aren’t important. It certainly is, and it is divine inspiration. But we have evidence over hundreds of years to show that this is not as powerful a motive as the mundane, relentless pursuit of making a profit. Even Bono of U2, a great philanthropist, with his tens of millions of dollars donated to worthy causes, discovered that philanthropy will never solve the problem of poverty. Only free enterprise system and profit.
The motive of profit is perhaps the noblest pursuit in human history. Profits save more lives, produce a higher standard of living, produce more inventions, lift more people out of poverty and more than all government programs and all “non-profit” activities combined. It has created many jobs.
Fighting profit is fighting prosperity. Fox Business economist Larry Kudrow said: “High profit margins are the milk of the stock market, so if profits fall (even if Biden’s target is zero profits), there will be a wave of corporate bankruptcies.” Job cuts and a stock market crash. Without profit there would be no business, without employers there would be no jobs, without jobs there would be no consumer spending. (EJ Antoni: “Nidenomics” can be summed up in one word)
And in this country of shrinking profits, you can say goodbye to 401(k) plans.
So why would the Biden faction be against profit? Why don’t they understand how the world really works? Perhaps that’s because, as we revealed in last year’s Prosperity and Emancipation Commission survey, most of the people appointed to the Biden administration have never worked in the private sector. They don’t understand one of the most basic truisms of economics. It is the unprofitable businesses that hurt the economy, not the profitable ones.
If the goal of the Biden administration is to drive down profits, then eventually we will all get poorer and poorer over time. We will achieve their goals of fairness and equality.
Stephen Moore is a Senior Fellow at the Heritage Foundation and co-founder of the Commission for Unleashing Prosperity. His most recent book is “Govzilla: How the Relentless Growth of Government Is Embroidered Our Economy.”
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